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Microsoft Spars With Apple in Epic Antitrust Trial

A Microsoft executive detailed its frustrations with Apple’s inflexible standards for native apps on day three of testimony.

OAKLAND, Calif. (CN) --- As a trial over whether Apple exerts monopolistic control over its App Store continues to unfold, Microsoft’s feud with Apple over a stalled effort to bring its cloud gaming service to the iPhone spilled over into U.S. District Judge Yvonne Gonzalez Rogers' Oakland courtroom Wednesday.

Lori Wright, Microsoft’s vice president of business development for Xbox, testified Wednesday that Apple was uncooperative during months of negotiations to bring xCloud, Microsoft’s name for its Xbox game streaming service, to iOS users.

xCloud is currently available on Android phones, but not Apple iOS, though it can be accessed through the Apple web browser Safari.

Wright said Microsoft vastly preferred that Apple make xCloud available as a native iOS app, which would give it more functionality and a better user experience.

Microsoft executives spent three to four months trying to figure out why Apple would not allow it to have a single iOS app with many games, the way Netflix is allowed to have a single app with many movies available to users.

“We were seeking to understand why that was the case, why there was a special carve-out for all other types of media and entertainment other than gaming, but we didn’t get an answer,” Wright said. Apple was initially open to the idea, then changed its mind and said Microsoft would need to offer each game as an individual downloadable app.

Apple wanted something that would make it hard for Microsoft to remove games from its catalogue and lead to “dead apps” on user’s phones. For Microsoft, it was simply unworkable. “It was a really inelegant solution” for users, she said.

Microsoft went public with its outrage, with President Brad Smith slamming not only Apple’s obstruction over xCloud, but its App Store rules in general.

Apple attorney Jay Srinivasan portrayed Microsoft’s spat with Apple, along with the money it makes from offering Epic's popular game Fortnite on Xbox, as biased motivations for Wright’s testimony.

“Microsoft is a vocal critic of Apple's App Store, right?” he asked Wright on cross examination.

“We were critical of the policies and the unfair treatment relative to what we were seeing elsewhere,” Wright said.

When Srinivasan raised Smith’s public statements about Apple’s anticompetitive App Store policies, Wright said the criticisms were based on Microsoft’s experience trying to get an app into the App Store.

“So they relate to the xCloud streaming service and that's it?” Srinivasan asked.

Wright responded that she was not familiar with her boss’s statements about Apple.

Srinivasan also asked Wright about the amount of money Microsoft makes off of its relationship with the developer.

Wright initially said between $300 and $400 million. Srinivasan pointed to her deposition testimony, in which Wright said $600-$700 million was her “ballpark” estimate of the net revenue Microsoft made off of Epic.

Microsoft’s lawyer David Chiappetta objected to the disclosure of those figures, saying they weren’t public.

Gonzalez Rogers overruled him. ”She just made it public,” the judge said.

Getting to the point, Srinivasan asked Wright if Microsoft “has a financial incentive to keep Epic happy.”

“We try to keep all of our publishers and developers happy, yes,” Wright said.

Srinivasan also noted that Microsoft collects a 30% commission from its developers, and imposes rules and restrictions on them similar to the ones Apple is accused of inflicting in a monopolistic way.

When asked about whether Microsoft violates antitrust laws, Wright hedged. "I'm not an antitrust expert," she said.

Epic sued Apple after it was banned from the App Store in August 2020 for going rogue and circumventing Apple’s rules in order to launch its own game store and alternative system for processing payments for in-app purchases by iPhone users.

Epic attorney Wes Earnhardt spent a good deal of his direct examination Wednesday asking Wright about the differences between gaming on consoles versus mobile devices in an effort to show that the two are not comparable and that an Xbox is not a substitute for playing Fortnite on an iPhone.

“We certainly don’t view the iPhone as a competing device,” Wright said, adding that consoles differ because they have to be plugged in to a power source, don’t have screens, and require peripheral equipment like controllers.

But Apple intends to establish a broader definition of the market that would include consoles, phones and even computers.

It’s also trying to convince Gonzalez Rogers that there are viable alternatives to the App Store that give consumers plenty of choice in how to enjoy Fortnite — including playing through a streaming service like xCloud on a web browser.

Wright also differentiated the types of games that are usually made exclusively to run on consoles versus mobile devices. The stories are more immersive, and importantly, they are often too large to be downloaded on an iPhone.

Later in the day, Epic engineer Andrew Grant testified about the differences between playing Fortnite on a mobile device over a console. Though console play generally has a better audio and graphics quality, mobile devices, are well, mobile.

“When I played on an iOS device it was a much more portable experience,” he said. “On a console it was much more going and sitting down.”

He also discussed his experience as a developer dealing directly with Apple’s App Review process, which frequently means having to meet Apple’s stringent standards. Rejections, he said, are common and cause delays. One particularly onerous example, he said, was when Apple required developers to offer Apple ID as a sign-in option for their apps.

"We had no control over the process,” Grant said, which was “problematic” because it would force Epic to change the release date for new versions of Fortnite on iOS.

“Why do you want to use Apple if it's so terrible?” Gonzalez Rogers asked.

Grant conceded that Apple’s imperfections are really no different than other platforms, including Google's mobile operating system Android.

The trial will continue Thursday with testimony from Epic’s head of business strategy Thomas Ko, and Matt Fischer, vice president of Apple’s App Store.

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