Epic-backed expert says Apple’s app store profit is a whopping 78 percent

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An expert witness for Epic Games testified that Apple’s App Store had operating margins of more than 70 percent in fiscal years 2018 and 2019, show new court documents. Eric Barnes testified that information from Apple’s Corporate Financial Planning and Analysis group shows that the App Store had an operating margin of 77.8 percent in 2019 and 74.9 percent in 2018.

The numbers come close to Barnes’ calculations of the App Store’s earnings, he testified, and “also refutes the criticism of my report from certain Apple expert witnesses that it is not possible to reliably measure the operating margins of the App Store. or useful to calculate. ” Barnes also testified that Apple has been tracking App Store earnings for several years now.

Apple has vehemently contested that interpretation of the data. As Bloomberg notesApple’s Chief Compliance Officer said at a congressional hearing last month that “we do not have a separate income statement for the App Store” and that Cook has made similar statements about the App Store and how it is structured.

An Apple spokesman said in an email The edge On Saturday, Barnes ‘numbers were incorrect: “Epic’s experts’ calculations of operating margins for the App Store are simply wrong and we look forward to refuting them in court.”

The question of how much profit Apple makes from the app store is central to the ongoing lawsuit between Apple and Epic Games. Epic argues that the App Store does not provide a real service, but simply serves as a way for Apple to get money from developers. Epic is suing Apple for antitrust violations on those grounds, after launching an unauthorized in-app payment system for Fortnite earlier this year. But Apple emphasizes that the App Store review process is a critical part of the wider platform security efforts surrounding iOS.

Court documents show Apple’s expert witness Richard Schmalensee also disputed Barnes / Epic’s figures. “Mr. Barnes’ estimate of the App Store operating margin is unreliable because it looks in isolation at one segment of the iOS ecosystem in a way that artificially increases the apparent operating margin of that segment,” said Schmalensee in his written direct testimony. “When you look at Apple’s ecosystem of devices and services as a whole, the operating margin drops to an unremarkable level.”

Schmalensee further testified that “it makes no sense” to try to measure the profitability of the App Store separately, as it is part of the iOS platform and relies on all of Apple’s intellectual property. “As Apple executives will attest, Apple doesn’t calculate P & Ls based on products and services because they see it as an unproductive exercise,” Schmalensee said.

Legal proceedings for the trial begin Monday.