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20 issues we discovered from the Epic v. Google trial

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I’ve spent 15 days reporting dwell from the Epic v. Google trial: an antitrust dispute over whether or not Google’s Android app retailer is an unfair monopoly. I’ve watched a parade of witnesses go by, together with Epic CEO Tim Sweeney and Google CEO Sundar Pichai. We’re now in a weeklong break earlier than each events return on December eleventh to make their closing arguments, after which a jury will resolve who’s proper. I’ve chronicled each main thrust, parry, and riposte main as much as that in our Verge StoryStream, writing almost 600 dispatches from the courtroom thus far.

However who’s obtained the time to dig by all that, am I proper?

So listed here are easy variations of the 20 most attention-grabbing issues we’ve discovered — beginning with the truth that Epic may win the entire thing.

1. Epic may win.

I assumed Epic was tilting at a windmill by difficult Google after losing so thoroughly to Apple. If Epic couldn’t show Apple’s walled backyard is an unlawful monopoly, how may it beat the corporate that made Android an open-source undertaking from the beginning?

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After simply over a fortnight’s price of cumulative proof — loosely talking — the reply has develop into clear. A decade after Skyhook, Google nonetheless makes use of a tangled internet of contracts and offers to make companions fall in line — incentivizing cellphone makers and the most important app builders to share, fairly than compete for, an ever-growing pile of app retailer money.

Decide James Donato, who’s presiding over this jury trial, thinks Epic completely has an opportunity of profitable. On Friday, he declined at hand Google a default victory, saying there’s “greater than sufficient proof for the jury to search out for plaintiff on every of their claims.”

Thoughts you, it could nonetheless be a excessive bar to clear! A jury would have to decide not solely that Google has an unlawful monopoly on “Android app distribution” or “in-app billing companies on Android gadgets,” but additionally that the harms outweighed any aggressive advantages.

So let’s begin with one thing simpler. Was Google scared for its income?

2. Google was working scared — of Epic particularly.

I had some doubts on day two, however not anymore: Google internally noticed Epic Video games as a “contagion” that might infect Android’s largest sport and app builders, turning them into “agitators” that might demand decrease charges and in the end defect from the Play Retailer. Google’s “biggest Play priority” for Q1 2019 was to address agitators like Epic, and Epic’s identify seems many instances in inner Google technique paperwork we noticed.

Google feared as many as 100% of high sport builders would observe Fortnite’s lead by launching outdoors of Google Play, denying Google a 30 % lower of income, and that concern doesn’t appear to have been misplaced. Not solely have been different “agitators” in direct contact with Epic, however many both launched or have been internally planning to launch a competing sport retailer on Android — earlier than Google approached them with a deal.

Google referred to as this the “contagion effect” and forecast it would lose $2 billion in income by the top of 2022 — perhaps even $3.6 billion. The corporate estimated it could miss out on $250 million from Fortnite alone, and $243 million a yr if Activision Blizzard King (ABK) removed its games like Sweet Crush from Google Play.

And so, Google formulated a plan. It might lower your expenses by spending fewer billions — perhaps $1.78 billion? — on “Play Danger Mitigation.” It got here up with a number of methods it could pursue in parallel, together with “Undertaking Hug,” “Undertaking Banyan,” and “Undertaking Elektra.”

3. Undertaking Hug focused a who’s who of cell sport builders — and 20 of them signed.

Undertaking Hug was a plan to speculate cash in sport builders that have been prone to “contagion,” we discovered in court docket. Google approached 22 of them in total, together with Activision, Aniplex, Bandai Namco, Bethesda, Blizzard, Com2uS, EA, King, Mixi, Niantic, NCSoft, Netmarble, NetEase, Nexon, Nintendo, Pearl Abyss, The Pokémon Firm, Riot, Sq. Enix, Supercell, Tencent, and Ubisoft.

At one level, the Google Play biz dev staff asked for $575 million through 2022 to make these offers, although it’s probably the ultimate numbers are far greater — Activision alone was provided over $360 million in a deal that’s now apparently worth billions.

Twenty sport builders signed. However not Supercell — and never Epic, which obtained a special $147 million offer designed to persuade the corporate to launch Fortnite on Google Play.

Undertaking Hug was formalized because the Google Video games Velocity Program.

4. Epic failed to point out Undertaking Hug was a direct “block” or “bribe.”

In Epic’s opening arguments, it promised to point out the jury that Google literally pays competitors not to compete — and it appeared like Undertaking Hug could be the best way.

However over the course of the trial, we discovered that each one however one among Google’s “bribes” weren’t direct funds. (It does have a long-standing deal to pay Motorola and should have paid LG.)

As an alternative, as you possibly can see in this breakdown of a $90 million Project Hug deal with Riot Games, the corporate typically guarantees hundreds of thousands upon hundreds of thousands of {dollars} in assist, credit, reward card packages, promotions, and devoted entry to Google workers. And in alternate, it doesn’t block a game developer from delivery on a special retailer, so long as it arrives on Google Play the identical day and on the identical high quality.

Epic’s financial specialists urged that Google’s offers are successfully the identical as giving out cash, however Google’s specialists recommend it’s extra like a reduction.

5. Undertaking Banyan would have made Samsung’s Galaxy Retailer a false selection, nevertheless it by no means occurred.

The proposed 2019 deal would have seen Google Play and the Galaxy Retailer aspect by aspect on the default homescreen on Samsung, identical to at the moment, solely Google would host the video games, present the billing, safety, and updates within the Galaxy Retailer, too. But it surely by no means occurred.

Epic tried to recommend that Google pushed Samsung into nerfing the Galaxy Retailer anyhow, elevating the specter of handshake deals, however Epic by no means actually offered sufficient proof of both to be convincing. All I do know is that Samsung did sign three deals valued at $8 billion in 2020, and the Galaxy Retailer apparently accounts for just 1 percent of Android downloads regardless of being on an estimated 39.5 percent of Android phones (as of mid-2021).

5. Undertaking Elektra would have seen Google buy a controlling stake in Epic — nevertheless it didn’t occur both.

Over two days in July 2018, Google cooked up a enterprise justification for buying sufficient of Epic Video games to “sway them on Epic’s strategy to Android.” Nonetheless, it’s not solely clear whether or not a few Google execs significantly needed to prop up a monopoly or have been simply casually brainstorming a possibility.

The language definitely does appear suspect, e.g. “funding was the one means folks may realistically consider to sway them on Epic’s strategy to Android — as a result of it’s simple to think about us investing billions at some ridiculous valuation.” However there have been certainly other reasons Google might need been within the Fortnite maker, as the one who wrote that electronic mail suggested in court.

Both means, I’m guessing Google rapidly deserted the concept when it came upon Epic CEO Tim Sweeney is also the controlling shareholder.

6. Google execs clearly needed to dam different app shops.

Whereas a number of Google executives testified they solely cared whether or not video games made it to Google Play — not rival app shops — inner paperwork instructed a special story.

7. And on some telephones, Google arguably did.

In the course of the trial, we discovered that Google’s RSA 3.0 — these Income Sharing Agreements it signed with key Chinese language OEMs amongst others — have a “Premier Tier” that does in reality hold cellphone makers from preinstalling alternate app shops with out getting a particular exemption from Google.

OnePlus, for example, gets:

  • 20 % of “web fundamental advert income”
  • 10 % of “web optimized advert income”
  • 5 % of “web optimized Play transaction income”
  • 15 % of “web premier advert income”
  • 20 % of “web Play transaction income”

Epic was not capable of show this was a “block,” as a result of we discovered that cellphone makers like OnePlus are completely free to decide what number of of its telephones fall into every “tier” of the settlement. One Google exec urged fewer than 25 percent of latest Android telephones are RSA 3.0 Premier, and only 0.4 percent of Fortnite-capable phones were RSA 3.0 Premier as of November 2021, in keeping with a Google skilled witness.

However Epic astutely urged that an alternate app retailer must supply comparable {dollars} to cellphone makers to get traction — and Google’s expert conceded that point.

8. Google’s contracts arguably had some pro-competitive advantages.

We at The Verge have lengthy decried Android fragmentation and longed for closer-to-stock Android experiences. It’s traditionally been simpler for OEMs and carriers to get their telephones up to date and patched in the event that they’re not making an attempt to reinvent the wheel with their very own platforms and apps.

Google identified that its contracts do things like that, serving to Android telephones compete with the iPhone, and a Motorola exec highlighted its “Pure Android strategy” as a competitive strength and differentiator from different Android telephones. Google CEO Sundar Pichai himself pointed out there’s not a single OEM promoting telephones with out MADA contracts (outdoors of China, presumably) as a result of folks need Google apps and companies. I can not disagree; I am one among them!

9. This trial destroyed any notion that Google treats builders pretty and equally.

I’ll simply go away these headlines proper right here.

The primary one is especially necessary: Spotify will pay 0 % (sure, zero) to get all the advantages of Google’s Play Retailer save funds.

Not solely did Epic present Google cuts sweetheart offers with the most important app and sport builders, Google itself revealed that it needed to maintain issues unfair to maintain income excessive. Whereas the truth that Spotify had a cope with Google was public, Google’s legal professionals fought laborious to maintain the numbers concerned secret as a result of they’d be “very, very detrimental for the negotiation we’d be having with […] different events.”

And when a Google lawyer requested why it is likely to be unhealthy to compete on value outdoors of “strategic companions” extra typically, VP Paul Gennai responded: “If that have been to develop into recognized, different builders would come to us to do the identical, and … negotiate it down, and that might play out badly for us.”

Oh, and that’s earlier than we even get to the truth that Google didn’t force its own YouTube app to use Google Play Billing at instances it was encouraging (and later, forcing) different app builders to take action.

The very best defenses Google has been capable of muster is that Spotify was so necessary that people wouldn’t buy Android phones without it, and that corporations like Spotify qualify as “companions” as a result of they help invest in new hardware platforms.

“A small variety of builders that make investments extra straight in Android and Play could have totally different service charges as a part of a broader partnership that features substantial monetary investments and product integrations throughout totally different kind elements,” Google spokesperson Dan Jackson instructed The Verge.

What Google doesn’t say, and I weirdly didn’t hear Epic recommend both: if some corporations get sweetheart offers, everybody else successfully has to pay extra to compete. Are you able to think about making an attempt to compete with Spotify along with your new music app whereas paying Google 11 %, on the identical time Spotify is paying zero?

Apple is just as self-serving, of course — if no more.

10. Google’s “Person Selection Billing” is all however a pretend selection.

This one leaves a nasty style in my mouth, too. Spotify is successfully getting a 15 share level low cost to make use of its personal billing system (paying Google nothing for any buyer that picks Spotify funds). Bizarre builders solely get 4 share factors off — although Google is aware of full effectively that 4 share factors isn’t sufficient of a reduction to make that an actual selection, since you nonetheless need to pay your various cost processor.

Epic found the receipts and even an internal graph exhibiting that Google is aware of this: “A key aspect of this optionality proposal is we don’t wish to give any synthetic causes to incent devs to modify off Play Billing,” a Googler wrote.

It is not solely a false selection. Courting app Bumble appears to have tried Person Selection Billing as a result of it discovered customers want one-day subscriptions, one thing Google Play did not supply by itself.

11. Epic misplaced the sideloading and safety arguments IMO.

Epic has repeatedly tried to recommend it’s not true that apps can merely bypass the Google Play Retailer, due to all of the friction concerned in putting in an app downloaded straight from the net. It additionally received some factors when it revealed inner paperwork exhibiting that Google believed the friction might “drastically limit” the reach of Fortnite.

However that was 2018. In court docket, Google confirmed us it literally takes 25 seconds to put in the Epic Video games Retailer on a contemporary Android cellphone, and Epic was by no means capable of present that Google deliberately designed earlier friction to maintain rival app shops down. In actual fact, Amazon’s failure with the Amazon Appstore increasingly looks like a self-own. However I assume it does flip a tiny (for Amazon) profit.

Whereas Epic received some factors IMO for mentioning that Google’s “Unknown Sources” scare screens may and must be less scary and fewer discriminatory, Google made Epic appear to be a bit of a hypocrite, too. Google’s head of Android safety repeatedly made it look like sensible, frequent sense that Google would have a far simpler time protecting against threats within its app store rather than without, and drove residence that the threats do exist.

I did like this Epic argument that Google’s broader ecosystem stacks the deck in opposition to sideloading, however Epic didn’t spend a variety of time on that.

12. Google had a hell of a time justifying its as much as 30 % charge.

It’s not simple to justify one thing publicly when your personal staff are questioning it internally. Epic confirmed that repeatedly — beginning in 2008 when Google promised it wouldn’t take a percentage at all whereas quietly taking 5 %, then in 2009 when it decided to pocket the additional 25 % it had publicly earmarked for carriers at any time when it may.

A decade later, Google internally estimated many app devs overpaid as much as $1.43 billion per year in comparison with the worth they acquired. Although Google argued that was just one way of doing the math, these figures appear to have influenced enterprise selections.

After concluding that “Tinder is now deriving only 10 percent of the revenue share value versus the 30 percent they pay,” one exec urged Google ought to offer a special 15 percent rev share deal to Tinder’s father or mother firm.

And whereas Google calculated that the worth of Google Play to builders was in discovery, cost processing, and mass distribution, that discovery bit is in query: “Our price prop is proscribed to that of a knowledge pipe,” wrote one Play bizdev lead, including, “Play Retailer provides little worth for app discovery.” Google by no means wound up meaningfully difficult that in court docket.

13. Google’s revenue margins sound unreal.

One more reason it’s robust for Google to justify 30 %: it seems that Google Play has develop into precisely the “revenue middle” it promised not to be. Within the first half of 2020, the corporate internally bragged that it was “one of the most profitable businesses” in the world, and “very close to being a Fortune 100 company all by itself.”

Epic’s skilled calculated the Google Play Retailer grew from 26 % working revenue margins to 71 percent in 2021, producing north of $12 billion in working revenue that yr.

Whereas Google means that doesn’t account for the $40 billion R&D costs of developing the Android operating system, amongst different issues, we noticed that Android’s prices are seemingly accounted for in its personal revenue and loss assertion (P&L).

14. Google did efficiently argue it deserves one thing for Play.

If not 30 % or 15 %, how a lot? That’s not precisely a query earlier than the court docket — however Google did repeatedly and efficiently level out that its Google Play service charge is the first means it will get paid for downloads.

Whereas Google does promote adverts on Google Play, and adverts in Google Search (the default search engine on most telephones), one among Epic’s economists conceded Google would get paid nothing to distribute apps across the world if a developer selected another cost processor. Sweeney himself agreed that “a cost processor doesn’t make it potential to distribute a sport to 60 million customers,” to use Google’s words, and that “there’s nothing wrong with making your revenue off a limited number of customers.”

And whereas Epic tried to point out that Google’s actual cost of payment processing is 6 percent and builders may get the identical by ditching the intermediary, Google efficiently identified that you’d pay more than 6 percent for the most common microtransactions at rivals as a result of they typically cost a per-transaction charge along with their lower.

Google concedes it could have figured out a different way to charge for its many companies however felt this was the only.

15. Epic’s try to point out Google and Apple getting cozy appears to be like like a nothingburger.

Epic talked a giant sport about how Apple and Google’s imaginative and prescient was “that we work as if we’re one firm,” primarily based on a direct assembly in 2018 between Apple CEO Tim {Cook} and Google’s Pichai.

However after we obtained all the way down to brass tacks, it turned out that Epic only had secondhand notes from that meeting — and that the “quote” was merely a paraphrase. Google explained away the CEO meetup as a one-time factor and pointed on the market’s no file of the assembly having something to do with Google Play or app shops.

Pichai did admit that Google pays Apple a 36 % income share for search outcomes, in alternate for Google being the default search engine on the iPhone, nonetheless.

16. Each Google and Epic planted unfair tales within the press to advance their agendas.

We noticed the receipts proving that Google determined to single out Epic by embarrassing the company with news stories a few (probably nasty) bug within the Fortnite Launcher although Epic mounted that bug in a single day — and although Google by no means publicized the same kind of vulnerability in apps of its own. Right here’s how Google seemingly justified it internally.

Epic accused Google of planting a second story, too.

However Epic’s fingers aren’t clear: the company’s Coalition for App Fairness was actually solely created by Epic to foyer for its desired outcomes, and we discovered in court docket that Spotify, Basecamp, Match, Tile, Blix, Deezer, and others weren’t really founding members regardless of what it instructed press.

17. Google tried and failed to determine the situations for a simple victory.

Google’s core argument didn’t land. “You can not separate the standard of a cellphone from the standard of the apps in its app retailer, and which means Google and Apple compete in opposition to one another,” stated Google lead legal professional Glenn Pomerantz in his opening argument.

However Epic confirmed that Google had an “existential question” that had nothing to do with Apple — and that again and again and again, Google wasn’t fascinated about Apple when it was fascinated about securing the way forward for Google Play. The court docket docs we noticed nearly at all times confirmed it fascinated about the potential contagion of rival app shops on Android as a substitute.

Google did discover a couple oblique mentions of Apple in the long run and spent fairly a while explaining all of the methods it does compete with the iPhone maker on pricing, options, and security. Execs insisted that a lot of Google’s actions have been pro-competitive as a result of they helped Android telephones compete with the iPhone at a time when Google was involved that Android could also be weak — “losing users it really doesn’t want to be losing” like teenagers and wealthier customers, Google’s economist Catherine Tucker identified.

However Decide Donato wasn’t buying her arguments that Apple directly participates within the markets we’re involved with — and has stated he wasn’t keen to apply aftermarket theories that Apple is likely to be a participant as a result of folks purchase their telephones for apps. He stated we hadn’t seen proof of that.

That’s robust for Google as a result of Tucker’s proposed market definition — “the facilitation of digital content material transactions” — is close to the one that helped Apple win a number of years in the past. As an alternative, the jury will probably resolve whether or not Google has monopoly energy inside the Android ecosystem.

18. Epic will probably pay Google $398,000 even when it wins.

Epic didn’t even try to suggest it didn’t breach its contract with Google, which suggests Epic most likely owes Google cash for the brief time frame that Epic managed to sneak its personal billing system into Fortnite earlier than it obtained booted off the Play Retailer. Epic owes $398,931, in keeping with Google’s calculations.

Epic didn’t substantively challenge that amount, both — merely asking if it elements in cost processing charges.

However in court docket paperwork filed Monday, we discovered that Epic does need the court docket to resolve whether or not the contract was even legitimate earlier than Epic pays up.

19. Epic didn’t sue simply out of the goodness of Sweeney’s coronary heart.

“Epic determined to face up as a result of that’s what you do to a bully,” claimed Epic lead legal professional Gary Bornstein in his opening arguments — and it’s true that Epic isn’t suing for money. The corporate’s asking for an injunction that stops Google from blocking various app shops and billing techniques, not damages.

However Sweeney deflated among the hero narrative when he took the stand, agreeing that his company stands to make billions of dollars by paying Google nothing. He did flip it round a bit, although, when he identified that’s how PC applications have (largely) worked for ages.

20. Every part may hinge on lacking chats.

On Friday, Decide Donato vowed to investigate Google for intentionally and systematically suppressing evidence, calling the corporate’s habits “a frontal assault on the truthful administration of justice.”

He determined to cease in need of telling the jury on this case that they ought to assume Google deleted damning proof. However he did so partly as a result of Epic has already urged that numerous instances throughout this case. Epic grilled government after government, lawyer after lawyer, about why they didn’t change the default setting that might auto-delete their Google Chats after 24 hours — or worse, intentionally got colleagues to turn off chat history to maintain issues from being preserved — regardless of their authorized obligations to protect any related proof.

The jury shall be instructed that they could assume Google deleted necessary proof, and which will make all of the distinction.

This was maybe probably the most gorgeous alternate in the complete trial:

“You can not assure that the paperwork that have been destroyed will contradict the testimony we’re going to listen to?” Lopez couldn’t.

“We’ll by no means know that,” Moskowitz replied.

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