Witnesses Emphasize the Inferiority of Web Versus Native Apps on iOS in Epic v. Apple Case – The Esports Observer

At the antitrust trial between Apple and Epic Games Wednesday, the Fortnite maker called several witnesses to explain the differences between having a native app on iOS and using a web-based app; and the difference between a console game and mobile app development. The trust of Wednesday’s testimony was to highlight that the alternate solution of providing gaming content through a web browser or a game streaming on iOS is an inelegant option that is inferior to a native iOS app offering.

At the heart of Epic’s case against Apple is its claim that Apple charges developers a premium to sell apps, in-game content, and enhancements on its Apple App stores, the sole marketplace controlled by the platform owner for its mobile devices such as the iPhone and iPad. In Wednesday’s proceedings, Epic’s witnesses continued to lay the foundation that alternative or secondary entry points into iOS devices such as web-based apps are inferior offerings compared to native apps that have access to the full range of iOS APIs.

Witnesses for the day included Aashish Patel, director of product management at Nvidia (who mainly returned to finish being cross-examined by Apple from the previous day); Lori Wright, Microsoft’s VP of business development for gaming media and entertainment; and Andrew Grant, engineering fellow at Epic Games.

At the end of the day, attorneys for Epic outlined its cadre of upcoming witnesses and when it expects to complete its side of the case.

Microsoft’s Lori Wright

Lori Wright, Microsoft VP of business development for gaming media and entertainment, delivered testimony on a number of topics including the difference between Xbox and PC (most notably Windows) and other platforms, Microsoft’s negotiations with Apple on an iOS native Xbox Cloud app, and cross-platform games. Epic attorney Wes Earnhardt from Cravath, Swaine & Moore took the lead on questioning. 

Wright opened by saying that Sony’s Playstation was Xbox’s main competition, and to a lesser degree, Nintendo’s Switch, but not iPhone or other mobile devices. Later she added that Microsoft sells its console at a loss and charges a 30% commission on games to recoup costs, in addition to selling its Xbox-related game services.  She also said that Xbox games are generally large (hundreds of GBs) and would be difficult to download on a mobile device due to storage limitations, which is why mobile games are typically 3 – 4 GB.

Judge Yvonne Gonzalez Rogers interjected, asking Wright how many games are developed in-house versus developed by third-party developers. She said that there are roughly 3,500 games on Xbox, with around 100 or so developed by Microsoft, noting that there are some games available on multiple platforms.

Moving on to PC, Wright said that Microsoft’s Windows Store charges a 30% commission on apps but plans to lower that percentage to 12% in August in order for it to compete.  

Wright went through some numbers that Microsoft prepared in 2019 which highlight that 83% of consumers buy games directly from game publishers, while platforms only account for about 15% of sales. On PC, Microsoft notes that developers retain 95% of the profit as opposed to mobile where they retain significantly less – 61%.

“An open ecosystem is much more profitable for developers and publishers,” Wright said.

Speaking about the Xbox Cloud gaming service, Wright said that the service is available on Android devices, but not on iOS. It can be accessed through a web browser on the platform. 

“We tried very hard to get it onto iOS but were not able,” she said, pointing out that Microsoft spent three to four months negotiating with Apple to offer the service as a native app. Wright said that Apple seemed to be willing to do that at first, along the same lines it lets Netflix operate on iOS, but later told Microsoft that it would have to make each game available on the service as an individual offering.

“We were seeking to understand why that was the case, why there was a special carve-out for all other types of media and entertainment other than gaming, but we didn’t get an answer,” she said.

Wright described offering each game as an individual download as a “really inelegant solution” for users that would make it difficult for Microsoft to remove games from its catalog because it would create a “dead app” on the user’s phone if removed.

Finally, she said that people don’t typically play games through a browser on their iPhones, but said, “it was our only outcome in order to reach mobile users on iOS.”

On cross-examination from Apple attorney Jay P. Srinivasan of law firm Gibson Dunn & Crutcher, Wright said that Microsoft earns roughly “$300-400M from Epic,” contradicting what she said in an earlier deposition (“net revenue in the $600-700M range”) from Epic each year. It was a lead-in to an attempt to challenge her credibility, with Srinivasan asking her if she “was called to testify on behalf of Epic,” to which she responded that she wasn’t aware of that.

In response to questions about Apple’s App Store rule that requires a gaming catalog to individually separate games, she said that it “fundamentally breaks down the service we were trying to deliver.” This led to Microsoft through the  Safari browser. 

“When we realized that after the attempts we had made and proposing many different ways to comply with the spirit of what [Apple] were asking us to do, that we could not, we saw no alternative to reach the iOS mobile base of customers” other than through a browser, she said.

When asked by Srinivasan if Microsoft objected to Apple’s commission fee, she responded that the company did not.

The questioning ultimately led to a discussion about cross-platform games. Wright said that you don’t just port a game from one platform to another without rebuilding some aspects of it.  

“It’s like asking Steven Spielberg to reshoot Jurassic Park,” she said concerning a question about moving a game from a console to iOS. “It’s no small effort.”

On redirect, Earnhardt asked Wright about Xbox Cloud and Apple’s request to make each game on the service an individual download. She called it “untenable and would fundamentally break the service.”

Gonzalez Rogers interjected saying that a native app like Netflix uses a subscription model to provide content, and asked if Microsoft wanted to use such a model. Wright said that this was what Microsoft wanted, but Apple rejected the idea.

Epic’s Andrew Grant

Andrew Grant, engineering fellow at Epic Games, was up next with Epic attorney Katherine Forrest from Cravath, Swaine & Moore leading the questioning. 

Grant, a video game veteran who has been in game development since 1998, was there to provide a detailed account of Epic’s business model and to explain how game development works to the court 

Grant said that software has to be tailored to each platform and is a big part of “the upfront cost” to get the app on multiple platforms.

In response to a question from the judge about the differences in code for Fortnite on PC compared to mobile platforms like iOS,  Grant said that they share business logic but have very distinct code.

Grant would go on to describe the differences between console and mobile games, noting that a game on iOS might have inferior graphics, audio, latency, player controls, etc.

On the difference between a native app and an offering through a browser, Grant said native apps are better because they have access to all the APIs provided on the platform. Web apps also have to be a lot smaller than native apps, he said. When asked about Fortnite on mobile devices compared to console, Grant said the game is simply better on consoles.

Grant talked about the inconsistency of the app updated approval process by Apple, describing it as “very variable. It could be under an hour, it could be multiple business days” before it was approved. This was particularly problematic because the game is cross-platform compatible, meaning that it needed to be updated across all platforms to avoid interruption to users.  

He also said that server-side hotfixes were “a weekly occasion” and that Apple never informed Epic that these changes violated Apple rules, referring to the Aug. 13, 2020, hotfix that led to Forntie being banned on iOS devices.

On cross-examination from Apple attorney Richard Doren of law firm Gibson, Dunn & Crutcher, Grant acknowledged that in 2008 the iPhone ould not have run a game as sophisticated as Fornite and would not have been capable of doing so until about 2014.

On questions about the “Unreal Engine End License User Agreement,” Grant acknowledged that Epic requires users to pay royalties of 5% after the first $3K in gross revenue per quarter but noted that he was not involved in its creation.

On hotfixes, Grant responded to a line of questions by saying that he doesn’t know whether the hotfix breached Epic’s contract with Apple, to which Doren responded: “You knew you were doing something dishonest.”

“I knew we were doing something Apple would be unhappy about,” Grant said. “I don’t think it was dishonest.”

Scheduling

Attorneys for Apple and Epic gave an update to the court at the end of the day, Epic said that it will call  Thomas Ko of Epic, Apple’s Matt Fischer, and Apple employee Trystan Kosmynka on Thursday, and on Thursday or Friday, Epic’s Steve Allison and  Matthew Weissinger. Epic will then move to experts including Dr. David Evans and  Susan Athe. Epic expects to finish by the end of next week, with Apple completing its portion of the case by May 25.

Editor’s note: Quotes provided by pool reporters Josh Cisco from The Information and  Leah Nylen from Politico, who were in attendance on Wednesday.

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