Techcrunch doesn’t buy Tim Cook’s deaf-and-dumb act

From Devin Coldeway’s “Tim Cook plays innocent in Epic vs. Apple’s culminating testimony” posted Friday:

The façade of innocent ignorance began when he was asked about Apple’s R&D numbers — $15-20 billion annually for the last three years. Specifically, he said that Apple couldn’t estimate how much of that money was directed toward the App Store, because “we don’t allocate like that,” i.e. research budgets for individual products aren’t broken out from the rest.

Now, that doesn’t sound right, does it? A company like Apple knows down to the penny how much it spends on its products and research. Even if it can’t be perfectly broken down — an advance in MacOS code may play into a feature on the App Store — the company must know to some extent how its resources are being deployed and to what effect. The differences between a conservative and liberal estimation of the App Store’s R&D allocation might be large, in the hundreds of millions perhaps, but make no mistake, those estimations are almost certainly being made internally. To do otherwise would be folly…

Not having a hard number removes a potential foothold for Epic, which could use it either way: If it’s big, they’re protecting their golden goose (enforcing market power). If it’s small, they’re just collecting the eggs (collecting rent via market power). Apple’s only winning move is not to play, so Cook plays dumb and consequently Epic’s argument looks like speculation (and, as Apple would argue, fabulation).

He then deployed a similar strategy of starving the competition with a preemptive shrug about profits. He only addressed total net sales, which were about $275 billion at a 21% profit margin, saying Apple does not evaluate the App Store’s income as a standalone business.

This was further demonstrated when Cook was asked about Apple’s deal with Google that keeps the search engine as the default on iOS. Cook said he didn’t remember the specific numbers.

If the CEO of one of the biggest tech companies in the world told you they forgot the specifics of a multibillion-dollar, decade-long deal with one of the other biggest tech companies in the world, would you believe them?

My take: Tip toeing to the edge of incredulity.

13 Comments

  1. John Konopka said:
    From what I understand this is how Apple runs their business. Everything contributes to everything else. If hard pressed I suppose Tim could come up with an estimate, but if that is not how they run the business there is no reason to help the lawyer with a guess. Similarly, I wouldn’t be surprised if Tim didn’t know the Google number exactly. Maybe Luca would. And if he doesn’t know it exactly he shouldn’t guess in these circumstances. I’m guessing the Apple lawyers coached him well.

    5
    May 21, 2021
    • Timothy Smith said:
      Furthermore, why wouldn’t Epic know the answer to the Google question. They did discovery. If it’s relevant, they have the exact figure.

      6
      May 21, 2021
    • Gregg Thurman said:
      It doesn’t matter if TechCrunch doesn’t buy Cook’s explanation, or not. Their opinion has no bearing on the outcome.

      2
      May 21, 2021
  2. Michael Goldfeder said:
    Much ado about nothing. These specific numbers aren’t broken down in any more detail than contained in their SEC 10 K report. This entire case has always been about Epic grandstanding for the media. There is no antitrust case. It’s an orchestrated effort to get around a very blatant breach of context by Epic who wants a free ride on the App Store.

    Just like the comment this morning from Barry Diller, who said Apple should charge 2.5 % like a credit card fee on their App Store. What that had to do with him opening up a park today in NYC is further fodder for this entire PR campaign. He has a bone to pick with both Apple and Google. Even recommended that both companies be regulated. That helps bolster his profits at Expedia.

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    May 21, 2021
  3. Fred Stein said:
    Just my non-legal mind… On YGR’s questions on why not allow other stores, Tim should have pointed out that Apple is still on the hook for safety/privacy/security on the iPhone. Car and airplane makers are accountable ($B’s in judgements here) for safety after the product sale. Hotels, shopping malls, theme parks are liable for safety and security.

    The logical follow up would be “What are a fair fees and policies for 3rd parties App Stores?” That’s not for the courts to determine.

    1
    May 21, 2021
    • Jonathan Haulenbeek said:
      When you go shopping at the Mall and find a product in a store that you want, you go to the checkout counter, hand your charge card to complete the transaction. Was it the credit card company that sold you on the product you paid for? Should the retail establishment pay the credit card company a commission for privilege of using the payment service? Does your credit card have marketing power? Of course not. There are close to 1billion iPhone users worldwide today. To say that is an immense market for developers to hawk their wares is an equally immense understatement, unless you’re Google Play that has a market three times that of Apple’s App Store. So Barry Diller, please explain again the correlation between an Apple App Store transaction and a credit card transaction. Absurd.

      2
      May 21, 2021
  4. Though I have no law degree I have the perspective of 40y as a tech writer with DC lawyers as my bread & butter. Last 5 years with 3 expert witnesses as clients, plus the raft of maturing lawyers. Tech invaded their fax and typewriter realm with Word Perfect & I am still the crutch. I prefer the company of apis melliflera.
    CEO Cook was a stellar performer before T. rex & a very alert judge. Tim gets an A- , judge gets an A, opposing attorney gets a B+. At one point the judge literally reminded counsel of the fact that lawyers must also follow the rules. Epic’s already friable case went to sand today. Easy to see.
    DISCLOSURE: Mom’s family are all Cook’s from Miss.

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    May 21, 2021
    • David Emery said:
      Can you provide context for “lawyers follow the rules”? What happened to trigger that remark?

      0
      May 21, 2021
      • At one point counsel started badgering Mr. Cook regarding the business reasons behind Google’s decision to pay to be the default search engine. Tim, as he did all day, refused to speculate, advising counsel pose that question to GOOG execs. I think Apple’s attorney objected and the judge concurred.
        I was doubtful Tim did not know the $ amount Google pays but I suspect there’s far more complexity in Google’s financial arrangements with Apple than the general public is aware of. Note: Audio was poor & I suffer from significant hearing loss.

        1
        May 22, 2021
        • David Emery said:
          Thanks… Reading the various summaries, there are lines of questioning from Epic’s lawyers that I’m surprised were allowed without objection. Or did Apple’s lawyers object, and that wasn’t reported?

          0
          May 22, 2021
  5. Bart Yee said:
    Too bad. Tech Crunch isn’t trying to win a lawsuit unfairly brought against it. Apple runs their business as it see fit and provides sufficient information in its SEC filings according to GAAP. How Apple internally views its numbers is proprietary. Besides, the CEO sees thing from 30,000 ft. And literally gets hundreds of potential numbers proposed and discussed with him. So why isn’t Epic calling Luca or the App Store VP? Probably because Sweeney’s ego would like to see Cook sweat rather than any other C-suite or underling.

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    May 21, 2021
  6. Daniel Epstein said:
    As people said before. If a lawyer asks a question of a witness they should know the answer already. I would be more concerned if I were Apple about the judges questions which asked for speculation about changing Apple’s business practices to seemingly appease the complaints Epic have brought. Did anyone else catch the PBS Newshour piece tonight which interviewed a Reuters reporter who is following the trial. The reporter garbled up all the financial info about the size of the issue and the issues at stake. Very difficult to talk about this issue accurately apparently.

    0
    May 21, 2021

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