Cook takes stand in Epic case

The Epic vs Apple case approached its climax on Friday, with Tim Cook taking the stand as the star witness. The Apple chief’s testimony is ongoing, but Twitter has been abuzz with some of his comments. “I’m not a gamer,” he’s admitted and there has been derision over his claims that it has become a lot easier if users want to switch from an iPhone to an Android device.

Patrick McGee in San Francisco reports he testified that the iPhone was one product in a “fiercely competitive” market, as he sought to bat away allegations that the company was operating an illegal monopoly.

Epic Games, the maker of Fortnite, is arguing that Apple abuses its position by forcing developers to distribute applications through its App Store, where it takes a commission of 15-30 per cent.

Cook reeled off a list of rival handset makers to illustrate the competitive marketplace, and said that iPhone customers valued the curated experience that came from having a single app store. “For us, the customer is everything,” he said. “We’re trying to give the customer an integrated solution of hardware, software and services.”

Epic has drawn on economists, fellow app developers and the words of Apple’s own executives to make its case that Apple deliberately lured developers in with one set of expectations — an App Store that didn’t seek to make profits, as Steve Jobs said in 2008 — before introducing a series of mechanisms to lock consumers into its ecosystem and make it difficult to switch.

Lawyers for Epic on Friday grilled Cook on whether the App Store boasts margins of close to 80 per cent — a figure that Epic’s expert witness introduced “from the files of Apple CEO Tim Cook”. Epic views this figure as a clear reflection of unduly high margins, reflecting its stranglehold on developers.

Cook did not dispute the authenticity of the report but called it a “one-off” that did not accurately reflect all the investments Apple puts into the App Store. He said Apple does not break out profits and losses for the App Store. Apple has complained about “trial by anecdotes”. Its lawyers maintain Epic has failed to show that the App Store rules are unusual and that its 30 per cent fee is excessive. Read more

The Internet of (Five) Things

1. WeWork quadruples losses, SoftBank makes changes
WeWork’s losses almost quadrupled to $2.1bn in the first quarter of 2021, as the co-working company haemorrhaged more than a quarter of its members over the past year and shelled out hundreds of millions of dollars to restructure its property portfolio. A settlement with ousted co-founder Adam Neumann also counted for about $500m of the loss, a person close to the company told us. Separately, two SoftBank directors, one its first female board member and the other an advocate of its disastrous WeWork investment, are leaving the Japanese company’s board in a major management shake-up.

2. Ireland tries to beat ransomware hackers
Ireland is examining a decryption tool that could end a week-long shutdown of its healthcare service’s hacked IT system and has also secured a court injunction preventing the sharing and publishing of stolen data. Hackers have warned that patient and other confidential data will be published online and sold unless a $20m ransom is paid by Monday. Also read our analysis on how a push to digitise critical infrastructure such as the Colonial pipeline has created new opportunities for cyber criminals.

3. It’s a crypto crapshoot
Cryptocurrency transfers of more than $10,000 will have to be reported to US tax authorities, under new Biden administration proposals that come amid a tightening of the regulatory environment for digital coins. Fed chair Jay Powell is accelerating the central bank’s consideration of a possible digital version of the dollar. Lex says he is still behind the curve. Katie Martin comments that if central banks and regulators assume control, it will probably bite a chunk out of the value of cryptocurrencies and leave some holders with substantial losses. Two Canadian bitcoin ETFs issued “market disruption” warnings during this week’s crypto turmoil, highlighting the risks faced by the vehicles. Alphaville puts this week’s price drop in perspective.

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4. Snap buys UK’s WaveOptics
Snap is buying WaveOptics, a UK-based maker of optical systems for augmented-reality headsets, for more than $500m, as it deepens its push into the next generation of hardware. The move comes after it pipped its larger rivals Facebook and Apple to become the first big technology company to unveil AR smart glasses (see Tech Tools).

5. Tech weekend reading
Richard Waters explains the significance of Google’s disclosure this week that it had leapt forward into the world of exascale supercomputing. John Thornhill looks at the upsurge in entrepreneurship during the pandemic. Discovery chief David Zaslav is our Person in the News after his group’s merger with WarnerMedia.

Tech tools — Snap’s AR Spectacles

Snap has become the first leading US tech company to unveil augmented-reality (AR) glasses, beating rivals such as Facebook and Apple to what many see as the next big computing platform, report Hannah Murphy and Tim Bradshaw.

Spectacles allow wearers to overlay Snap’s playful filters, known as Lenses, on to the real world. The glasses, which have been made available initially only to a group of app developers and creators who use the Snapchat social media app, have two small cameras and four microphones embedded in them so that users can take short video clips of what they see to save or send to others. The device weighs 134 grammes and has a battery life of about 30 minutes of continuous use. No pricing details have been disclosed. Initially launched in 2016, the original version of Spectacles — sunglasses with a built-in camera to capture and share video — failed to gain traction among Snap’s teenage and millennial users. Read more