Apple and Epic Games are revealing a ton of industry secrets in court filings - from untold billions in 'Fortnite' profits to private email exchanges, these are the 5 juiciest bits
Tim Cook, CEO of Apple, left, and Tim Sweeney, CEO of Epic Games, right. Apple / Rachel Luna / Stringer
Fortnite maker Epic Games is suing Apple, and the bank attempt began this week in California.
According to Epic, Apple's App Store is a monopoly. According to Apple, Epic broke its developer contract.
Court records revealed important secrets from Apple, Epic, Microsoft, and others.
You can find more stories in Insider's business section.
Apple and the maker of "Fortnite" are currently at war in a California courtroom - the culmination of a year-long spat between the two American business giants.
Epic Games filed a lawsuit against Apple last summer after the hit game Fortnite was pulled from Apple's App Store.
Apple stopped the game because Epic violated the terms of its developer agreement when Epic implemented a payment system in the game that allowed players to bypass Apple's App Store. According to Epic, the App Store is a monopoly, arguing that iPhones and iPads are no different from computers.
The personal trial began Monday in the US District Court for the Northern District of California in Oakland, California. Judge Yvonne Gonzalez Rogers is said to be overseeing the hearings for about three weeks, according to court records, before a verdict is passed.
After just one week, we've already learned a lot: Between important financial details, company secrets and private emails between executives that have been published, evidence in the study is a treasure trove of information.
1. Xbox console sales are not, and never have been, profitable, according to Microsoft.
Xbox Series X on the left and Xbox Series S on the right. Microsoft
After nearly two decades of sales, Xbox consoles have never been a profitable product for Microsoft.
The Washington-based tech giant sells every Xbox at a loss, according to an affidavit from Lori Wright, vice president of Xbox Business Development at Microsoft.
"Has Microsoft ever made a profit on the sale of an Xbox console?" She was asked on Wednesday, May 5th. "No," she said.
Wright appeared as a witness in the ongoing trial answering various questions about Microsoft, Xbox, and digital storefronts. Microsoft openly supported Epic's lawsuit against Apple.
The Xbox profitability issue has been questioned because of the way Microsoft's console business works: instead of making money from the console itself, the company makes money selling games through its digital storefront, subscription services like Xbox Game Pass, and selling them of accessories such as gamepads.
Microsoft, like other console manufacturers, cuts every sale in its digital business. This cut is typically around 30%, which has become the standard in the video game distribution market. Apple takes a similar cut from games sold on the iOS App Store. This is part of what Epic denies in its lawsuit against Apple.
2. Apple reportedly has huge margins on the App Store.
Apple CEO Tim Cook. Apple
One of Epic's experts, Berkeley Research Group's executive director Ned Barnes, said Apple has been making huge margins on the App Store: at least in the high 70s for at least two years, according to Barnes.
"In my expert report dated February 16, 2021," writes Barnes, "using the Apple statements and financial information available to me at the time, I calculated the percentage of the App Store's operating margin for fiscal 2009 and fiscal year 2008 calculated at 79.6%. "
He also said that Apple produced "additional documents" for the study showing slightly lower percentages for the two years, but that the figures "are consistent with and confirm the reasonableness of the calculations presented in my expert report."
However, Apple denies Barnes' report. "The expert calculations by Epic on the operating margins for the App Store are simply wrong," an Apple representative told The Verge.
At the heart of Epic's argument in the study is that Apple has a monopoly on the App Store by refusing to allow competing app stores on the iOS platform and by not allowing third-party payment systems. According to Epic, high profit margins from the App Store are one reason Apple is not allowing this to happen either.
3. Fortnite makes epic billions of dollars every year, especially on the PlayStation 4.
In one of the less surprising secrets revealed from the evidence presented during the trial, "Fortnite" is making a huge amount of money - billions of dollars a year over the past few years.
In 2020 alone, Epic had sales of over $ 5 billion, according to affidavits from Epic Games CEO Tim Sweeney. Between 2018 and 2019, Fortnite brought in over $ 9 billion.
Epic does more than "Fortnite" - the gaming giant produces the Unreal Engine, operates the Epic Games Store, and owns and publishes several other major games ("Rocket League" and "Fall Guys"). Data from Epic unveiled during the trial shows that while these projects are making hundreds of millions, they are not generating nearly as much revenue as Fortnite.
4. Epic CEO Tim Sweeney emailed Apple CEO Tim Cook at 2am declaring war.
Tim Sweeney, Epic Games Co-Founder and CEO. Mike Coppola / Getty Images
At 2:00 a.m. on August 13, 2020, Epic Games CEO Tim Sweeney emailed Apple CEO Tim Cook and several other Apple executives setting out Epic's plan on Apple in "Fortnite." Exclude iPhone and iPad from payments.
It was intended as a declaration of war.
"I am writing to inform you that Epic will no longer comply with Apple's payment processing restrictions," wrote Sweeney. "Today, Epic is introducing Epic Direct Payments in 'Fortnite' on iOS, offering customers the ability to make in-app payments through Epic Direct Payments or Apple Payments and the savings from Epic Direct Payments in the form of lower payments to customers to pass on. " Prices."
In response, Apple pulled "Fortnite" from its iPhone and iPad stores, and the game has since been unplayable on both. Epic sued Apple the same day, and that email was one of many private messages between the companies that was exposed as evidence.
5. "Fortnite" was such a big deal on PlayStation 4 that Epic forced Sony to overturn a long-standing precedent in gaming.
BARTOSZ SIEDLIK / AFP via Getty Images
In September 2018, after months of fighting in front of the court, Sony announced that "Fortnite", according to the company, could be played with friends on other platforms on the PlayStation 4.
"Fortnite" was the first game in which players on all platforms could play together. "This represents a major change in policy for Sony Interactive Entertainment," Sony said in its announcement. At that time it was clear that Sony would almost certainly give in with the game that can be played on all other platforms: tens of millions of people played "Fortnite" and, according to Sony, earned the most money with players on Sony's PlayStation 4 on Epic documents presented as evidence at the trial.
Between January 2019 and July 2020, shortly before "Fortnite" was removed from the App Store, Epic earned an average of just under $ 150 million per month with PlayStation players, according to Epic. By comparison, the company was making an average of $ 23 million per month playing iOS players, Epic said.
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