An expert from Epic Games testified that Apple’s App Store had an operating margin of over 70 percent in the financial years 2018 and 2019, new court documents show. Eric Barnes testified that information from Apple’s corporate financial planning and analysis group showed that the App Store had a 77.8% operating margin in 2019 and 74.9% in 2018.
The figures are close to Barnes’s calculations for the App Store’s profits, he testified, and “also refutes the criticism of my report suggested by some Apple experts that it is not possible to reliably or usefully calculate the App Store̵
Apple has vehemently challenged this interpretation of the data. Like Bloomberg notes, Apple’s chief compliance officer told a congressional hearing last month that “we do not have a separate profit and loss statement for the App Store” and that Cook has made similar statements about the App Store and how it is structured.
An Apple spokesman said in an email to On the edge on Saturday that Barnes ‘data was incorrect: “Epic experts’ calculations of operating margins for the App Store are simply wrong and we look forward to disproving them in court.”
The question of how much profit Apple makes from the app store is at the heart of the ongoing lawsuit between Apple and Epic Games. Epic claims that the App Store does not provide a real service, but simply serves as a way for Apple to extract money from developers. Epic is suing Apple for antitrust violations on these grounds after launching an unauthorized payment system in applications for Fortnite earlier this year. But Apple insists that the process of reviewing the App Store is a major part of the broader security efforts of the platform around iOS.
Court documents show that Apple expert Richard Schmalenze also disputes the data of Barnes / Epic. “Mr Barnes’s assessment of the App Store’s operating margin is unreliable because it looks at one segment of the iOS ecosystem in a way that artificially increases the apparent operating margin of that segment,” Schmalensee said in his direct testimony. “When you look at the ecosystem of Apple devices and services in general, the operating margin drops to an inconspicuous level.”
In addition, Schmalensee testifies that it “makes no sense” to try to measure the profitability of the App Store in isolation, as it is part of the iOS platform and relies on all of Apple’s intellectual property. “As Apple’s top executives will testify, Apple does not calculate P&L for products and services because they consider it an unproductive exercise,” according to Schmalensee.
The trial is set to begin on Monday.