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Epic Games Inc. Squares Off In Court With Apple Over App Store Fees

NOEL KING, HOST:

There are more than a billion Apple iPhones in use right now, and to make in-app purchases on any one of those phones, you have to use Apple's App Store. Epic Games, the maker of Fortnite, is suing in federal court over this. And NPR tech reporter Bobby Allyn has been in the courtroom in Oakland. Good morning, Bobby.

BOBBY ALLYN, BYLINE: Good morning.

KING: Let me start with the standard disclaimer that Apple is a financial supporter of NPR. Why is Epic suing them?

ALLYN: Well, because they're mad at Apple simply; specifically because, you know, every time someone tries to make a purchase in the game, Fortnite, on an iPhone, Apple is pocketing 30%. You know, and this is a widespread commission that's become known as the Apple tax. And Epic just says it's not fair. Now, Epic didn't exactly go after Apple quietly here when they unveiled their lawsuit last year. It came along with the dramatic video making fun of Apple and, of course, a hashtag, #freefortnite, rallying, you know, millions of people around the world against Apple. Now, internal documents that have emerged over the course of this trial revealed that Epic actually dubbed this big publicity stunt Project Liberty, and they were seeking liberty from Apple's 30% fee.

KING: OK, so what does Apple say about the Apple tax?

ALLYN: Well, Apple says, you know, when it launched its App Store in 2008, a 30% commission on digital goods was an industry standard. And they say that remains so. In fact, you know, game consoles like Microsoft's Xbox and Sony PlayStation, they have this same 30% fee. And Apple argues, you know, the reason why, you know, iPhone apps are so safe and secure, the reason why, you know, you're not getting hacked and that they're not buggy is because they have, like, this team that reviews every single app before it is available on the App Store. You know, how are those salaries paid? Through this 30%. So Apple says it really needs to charge this.

KING: What is at stake here for the billion or so of us who have iPhones?

ALLYN: Yeah, look, this trial is about one video game company, Epic, as we mentioned. But it's really a window into a multibillion-dollar mobile economy. I mean, Epic says, you know, Apple has too much control over this mobile economy, basically that it has monopoly power and it's abusing it. And Epic says who's stuck in the middle but people like you and I, Noel, consumers and that prices are higher as a result. So if Epic wins in this trial, you know, they say the price of buying a subscription to your favorite app could go down because baked into those prices is Apple's take.

KING: And what is it like in the courtroom? Is it high drama?

ALLYN: Well (laughter) not exactly. I mean, this is an antitrust trial, so it's not exactly, you know, stadium fireworks. It's been a lot of dry and technical testimony. But remember, one of the litigants here is a video game maker. So that has made for some very fun moments, like when the trial turned to a discussion of a banana character wearing a tuxedo. And a witness literally had to tell the court, yes, judge, that's a Fortnite outfit known officially as Agent Peely.

KING: Agent Peely - my goodness. Too bad he won't take the stand. So what happens next in this trial?

ALLYN: So eventually Epic will rest its case and then Apple will pick up its defense. And look, Apple has a lot to defend here. You know, ever since iPhone sales peaked some years ago, Apple's been looking for new ways to make money, and a big cash cow for them are services. That is, you know, these fees, you know, that are tacked onto subscriptions. This makes a lot of money for Apple. And Apple is a $2 trillion company. This is the most valuable company in the world. So you better bet they have a lot on the line here. Lots of anticipation ahead for Apple CEO Tim Cook. He's actually expected to take the witness stand as soon as next week.

KING: NPR tech reporter Bobby Allyn. Thanks, Bobby.

ALLYN: Thanks, Noel.

(SOUNDBITE OF FRAMEWORKS' "THE DARK") Transcript provided by NPR, Copyright NPR.