Today’s Topic: Apple Counter’s Epic Claims

When the Fortnite news first dropped that they were trying to circumvent the App Store, I really felt it was a quick ploy and would get resolved. I even said Apple was not likely to pull the app. Boy, was I wrong. All along, Epic was playing the game, knowing what Apple would do and preparing a tactical attack that included lawsuits with claims of anticompetitive behavior. Yesterday, Apple fired back in this fascinating game of cat and mouse.

Apple Counter’s Epic
Apple filed a counter to Epic’s complaint yesterday with what included an extremely useful answer and defense to Epic that sheds even more light on how Apple thinks about the App Store. For anyone wanting to get deep in the weeds, it is an interesting read, but I’ll summarize some highlights.

The most insightful part of Apple’s response, for me, is more clarity on how they think about the App Store and the elements they feel they bring to the table that is worth 30% of revenue derived from their platform. Here are some choice quotes (bold emphasis mine):

” Although Epic portrays itself as a modern corporate Robin Hood, in reality, it is a multi-billion dollar enterprise that simply
wants to pay nothing for the tremendous value it derives from the App Store. ”

“For years, Epic took advantage of everything the App Store had to offer. It availed itself of the tools, technology, software, marketing opportunities, and customer reach that Apple provided so that it could bring games like Infinity Blade and Fortnite to Apple customers all over the world. It enjoyed the tremendous resources that Apple pours into its App Store to constantly innovate and create new opportunities for developers and experiences for customers, as well as to review and approve every app, keeping the App Store safe and secure for customers and developers alike.

As a direct result of Apple’s investments, the App Store has grown into a diverse marketplace with a community of 27 million app developers worldwide, with about 1 billion customers across 175 countries. And, by all accounts, Epic has taken advantage of Apple’s support and services more than any other app developer for the past two years.”

Right there in the opening paragraphs, we see the crux of Apple’s perspective on the value of the App Store. We also see quite clearly, that for Apple, the App Store is a service Apple provides. Apple is making a statement that the App Store is not stagnant or a stale marketplace. It is a market place enabled by their tools, technology, and software. And deemed trustworthy by consumers because of the effort they go to for human review. Said trusted environment is why consumers choose to engage and spend money on the App Store and, therefore, a key reason why their app store is unique in their mind. Apple also is pointing out their marketing assistance, customer reach, and breadth and depth of access to apps as well.

Apple also stated with clarity, some things that had already stuck out to me in prior public language. One is that Apple is not simply a payment processor. A point I’ve made countless times. Second, Apple’s 30% (%15 on subscriptions after a year) is not a fee nor a tax but a commission for being an integral part of the economics for developers. This section seems to quite clearly make those points. Again, bold emphasis mine:

“Under the current model, developers (like Epic) contractually agree to pay Apple a commission for its services. In this context, Apple’s In-App Purchase (IAP) function is not a “payment processor[]” within some imagined “iOS In-App Payment Processing Market” (Compl. ΒΆΒΆ 10, 12); it is simply the practical, efficient, hardware-integrated, and consumer-friendly way by which Apple collects its contractually agreed-upon commission on paid transactions.

That commission reflects the immense value of the App Store, which is more than the sum of its parts and includes Apple’s technology, tools, software for app development and testing, marketing efforts, platinum-level customer service, and distribution of developers’ apps and digital content.”

The last part I want to mention is the element of customer service and the app store. I’ve again stated many times, the hill I will die on in this debate is the one that puts the customer first. How the current app store process is the only environment where we can nearly guarantee consumers can’t be taken advantage of. For all the arguments stating the benefits of the open web and the potential innovation that brings, it also forgets to handle the opinion that the open web is one of the largest sources of fraud and customer pain (via malicious intent, viruses, spam, tracking, scams, etc.)

Buried deep in Apple’s response is this interesting nugget: ” (Apple) specifically denies that Apple has “little incentive to compete through customer service.” Apple provides peerless customer service through AppleCare, addressing more than 25 million customer support cases and handling almost $500 million in refunds per year.”

If I read this right, Apple is defending its handling of the transactions as an element of customer service. If they did not sit in the middle as the trusted transactor between the developer and the customer, there is a much greater risk of fraud. Even if some of those reimbursements are accidental purchases or consumers not happy, etc., there is certainly no guarantee if the developer was in control that they would give customers their money back. This is where the element of customer service comes in as if customers constantly got ripped off in the App Store, word would spread, doubt would be cast, and the everyone Apple, customers, developers, etc., would pay the price.

The other interesting angle that hit me here lies with a common complaint that developers have will Apple regarding their payouts. Apple doesn’t pay developers right away but sometimes takes a month or longer, and often not until the next quarter. What hits me about this process is how Apple holding onto those funds ensures they can refund customers in a timely fashion and guarantee those customers will be refunded when justified. Again, if we put the developer as the one who decides, we can’t have such confidence. While I know developers want and sometimes need their money right away, my belief is this policy exists for best in class customer service.

For Apple, the customer ultimately sits at the center. This formula works, and Apple’s wording throughout their defense emphasizes this point of view as the reason many of the policies and practices of the App store exist. You may agree with Apple or with Epic, but what is not in dispute is anything that could erode customer trust, security, privacy, customer support, and the overall customer experience can not enter the app store of it will be a loss for everyone.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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