Epic witness claims Apple's App Store profit reaches 78 percent

Apple takes issue with the conclusion.

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This illustration picture shows Epic Games' Fortnite loading on a smartphone in Los Angeles on August 14, 2020. - Apple and Google on August 13, 2020 pulled video game sensation Fortnite from their mobile app shops after its maker Epic Games released an update that dodges revenue sharing with the tech giants. (Photo by Chris DELMAS / AFP) (Photo by CHRIS DELMAS/AFP via Getty Images)
CHRIS DELMAS/AFP via Getty Images

Epic Games is using its lawsuit against Apple to accuse the iPhone maker of being particularly greedy. As The Verge reports, expert witness Eric Barns testified that Apple supposedly had an App Store operating margin of 77.8 percent in 2019, itself a hike from 74.9 percent in 2018. He also rejected Apple witness' claims that you couldn't practically calculate profit, pointing to info from the company's Corporate Financial Planning and Analysis group as evidence.

Apple unsurprisingly disagreed. The tech firm told The Verge the margin calculations are "simply" wrong and that it planned to fight the allegations at trial. The firm's own witness, Richard Schmalensee, claimed that Barnes was looking at one iOS ecosystem element that distorted the apparent operating margin. The real figure was "unremarkable," he said, adding that you couldn't study App Store profit without looking at the broader context of devices and services.

The company doesn't calculate profits and losses based on products and services, Schmalensee said.

There's no guarantee the court will accept Barnes' take. Apple's overall gross profit margin has typically been high relative to much of the industry, but never that high — it was 42.5 percent during the company's latest winter quarter. Apple has also tended to portray the App Store as a way to drive hardware sales rather than a money-maker in its own right.

The testimony nonetheless does more to explain how Epic will pursue its case against Apple as the court battle begins on May 3rd. The Fortnite creator not only wants to portray Apple as anti-competitive, but abusing its lock on iOS app distribution to reap massive profits.

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