Apple and Epic Games are still battling it out in court. The hearing produced a lot of fascinating (Fortnite-related profits) and worthless (naked bananas) information. In this crucial trial over competing tactics, separating what counts from what doesn’t might be difficult.
Today, the Apple Maven takes a look at three major events in the Apple vs. Epic Games storey over the last few weeks, with an eye toward how Apple stock investors may be affected.
1. Is Fortnite a game?
During the first few days of the trial, much of the courtroom discussion revolved around one simple question: what is a game? Fortnite, according to Epic, is a virtual hangout. Apple, on the other hand, maintains that Fortnite is similar to games played on the PlayStation or Xbox.
The major distinction between the two arguments is that the larger definition portrays Apple as the gatekeeper of a “metaverse,” and that such power should not be placed in the hands of a single corporation. The restricted definition supports the notion that Apple is simply one of many gaming platforms, and that the Cupertino business is a minor player in the industry.
This strange discussion gets to the heart of the matter: does Apple have a monopoly on the App Store? The judge’s interpretation of the situation may eventually influence the court battle’s outcome.
2. Is the App Store more secure and curated?
Another point of contention is whether Apple’s function as App Store management is significant enough to justify the fees charged to developers by the Cupertino business. Apple’s case has focused on problems of security (such as payment processing and user privacy) as well as content curation.
Apple has even wounded itself in the foot by claiming that MacOS is significantly more vulnerable to malware than iOS. The premise is that Apple’s gatekeeper fees are justified since the App Store helps to keep the mobile operating system clean through its restrictive restrictions.
3. The possibility of a compromise
The consensus appears to be that the trial’s outcome (1) is still difficult to predict, (1) will not be known for several days, and (3) is likely to be appealed by the losing party. However, even if neither Apple nor Epic Games agrees right immediately, a “middle of the road” option may be in the works.
Judge Yvonne Gonzales Rogers “appears to be pondering if there is a less restrictive alternative to how Apple is currently conducting its App Store,” according to Game Industry. Maintaining the App Store’s walled garden while providing customers with information on how to make in-app purchases and process payments elsewhere could be one potential approach.
First thoughts from the Apple Maven
In my opinion, the Apple vs. Epic Games case would not pose a significant risk to the Cupertino business on its own. Legal conflicts are nothing new for tech behemoths, which often result in the payment of substantial damages or fines.
However, this specific battle may create a precedent for a crucial element of Apple’s bottom line. App Store accounts for roughly one-third of service revenues and maybe one-fifth of the company’s operational earnings, according to my estimates.
The optimum outcome for Apple would be to maintain the status quo, which would mean keeping the App Store and its revenues as they are. However, some form of compromise is certain to emerge, putting a dent in Apple’s revenue-generating engine — though to what amount remains to be seen.
For the time being, I continue to believe there are sufficient reasons to remain bullish on Apple shares. Nonetheless, I acknowledge that the App Store continues to be a significant risk to the investment thesis.