Is an iPhone more of a PC or an Xbox?
That question was asked – implicitly and explicitly – over and over again on the third day of Epic vs Apple testimony. The antitrust case started Monday with some heady statements about it Fortnite, the game and / or metaverse at the heart of the matter. Yesterday, both parties argued over whether iPhones and iPads were really locked. And today, Apple and Epic have delved into one of the biggest questions of the trial: Whether to say iOS is violating antitrust law would also turn any major game console into an illegal monopoly.
Apple’s attorneys gave Sony, Nintendo and Microsoft a stern warning during the opening statement, saying their business models were all fundamentally similar. “If Epic is victorious, other ecosystems will fall,” they warned. But today, Epic called on Microsoft’s Xbox Business Development Head Lori Wright as a sympathetic witness. In response to a series of questions, Wright divided computer equipment into “special-purpose” devices and “general-purpose” devices – in a way that clearly defined iPhones as the latter.
The Xbox, as Wright describes it, is a special purpose device. “You’re basically building a piece of hardware to do a specific thing,” she told a judge. “The Xbox is designed to give you a gaming experience. People buy an Xbox because they want to play games. As a result, Microsoft retains control over the content that users can access – it’s a “curated, custom hardware / software experience.” The market is also much smaller: tens or hundreds of millions have been sold, compared to “Billions” of Windows Devices. Later in the day, Andrew Grant, an Epic engineer, gave his own, similar definition of game consoles in general, calling a console “a one-purpose device for entertainment.”
Windows computers are “general purpose” devices, according to Wright. “You buy it to do a wide variety of things, and that changes every day as new ideas are created,” she said. “He can do a lot of things already, and he has the aperture to do a lot more things.” These platforms can support unexpected emerging applications in more aspects of people’s lives, especially when it is convenient to get an app on them in the first place.
Wright discussed all the different ways users could get apps on Windows. That includes Microsoft’s own app store, as well as Steam, the Epic Games Store, and direct downloads from a website. Microsoft recently lowered its commission on Windows apps to 12 percent to compete with Epic, while the Xbox still charges a 30 percent commission. Wright says there is no plan to change that discrepancy. That despite the fact that under the hood there is not a huge hardware difference between an Xbox and a desktop PC.
It’s hard to call the iPhone anything other than a general purpose device by Wright’s definition. (She described a “special” Apple product as something like an iPod.) Intentional or not, Wright also tied the distinction to one of Epic’s main topics of conversation: profit.
Epic describes profit as one of the biggest differences between iPhones and consoles. It states that console makers should treat app makers better as they lose money on hardware, unlike Apple, so they need to make plans to draw developers to the platform. And from Microsoft’s point of view, Wright stressed in his testimonial that no Xbox console has been sold for a profit, even late in the life of a generation after production costs have fallen. So part of that curated hardware / software experience includes planning around a specific app genre and attracting the developers who will build it, rather than simply letting go and see what happens.
Microsoft later stated in a statement that “profits are generated in the sale of games and subscriptions to online services,” but it didn’t really contradict the claim – it just made it clear, as Wright did, that the overall operation is profitable.
Will these awards convince the court? It’s hard to tell, and Judge Yvonne Gonzalez Rogers has asked questions that seem mildly skeptical about Epic’s harsh lines between consoles and iPhones and Wright’s strict demarcation of “general” and “specific” devices.
Apple’s attorney didn’t spend that much time discussing precise definitions. Apple’s strategy was based more on questioning Wright’s credibility by noting that it had not provided any documents that Apple had requested. Later, a lawyer similarly accused Grant of working on the hotfix that secretly introduced a new payment system Fortnite, insisting that “you knew you were being dishonest, didn’t you?”
But Apple did press Wright to explain in detail how Xbox is much more locked-down than Windows, asking if it did things like supporting rival game stores or streaming services. (This question was clouded by the fact that Microsoft is referring to both consoles and general gaming department as ‘Xbox’ so you can have an ‘Xbox store’ on PC – a fact that led to some confusion during the cross-examination.)
Why is this useful to Apple? Well, Epic started the trial by saying iOS should work more like macOS. Both operating systems are known for their relative security and seamlessness, but only the latter allows to install software from outside the App Store. Epic’s opening statement questioned why Apple had to lock the iPhone when it had already created a perfectly workable but more open system. But with Wright and Microsoft, Apple has a perfect point of comparison: a large computer company that offers two very different versions of a big black box.