Apple ‘s legal battle with Epic Games kicked off in earnest on Monday—an event Wedbush analyst Dan Ives likened to “Game of Thrones.” Whether that’s because it’s a high-stakes clash of titans with far-reaching political ramifications or because it’s a much-hyped affair that’s destined to disappoint is not yet clear.
Ives seems to lean toward the former, but he thinks Apple will come out on top. “Apple has successfully defended its App Store moat again and again with this time being no different in our opinion,” Ives wrote in a note on Sunday.
In their opening arguments Monday, Epic’s legal team painted the iOS mobile operating system as a “walled garden” meant to “lock users in and prevent users from switching away from the Apple ecosystem,” according to The Wall Street Journal.
Apple attorney Karen Dunn argued that Apple’s practices to limit iPhone app downloads to the App Store and handle all in-app transactions helps ensure privacy, security and quality for consumers.
Epic Games CEO Tim Sweeney also testified, arguing that Apple, through its App Store, makes more in profits from apps made by others than the developers themselves.
Last summer, Epic Games released an update to the mobile versions of its hugely popular Fortnite videogame. The update attempted to bypass 30% fees imposed by Apple’s App Store and Alphabet ‘s Google Play platforms. Fortnite was promptly removed from the platforms that day. Epic responded with lawsuits and a public relations campaign that focused on antitrust concerns.
Epic’s lawsuit comes as lawmakers and regulators in the U.S. and Europe scrutinize App Store fees for similar reasons. Last month, representatives from Apple (AAPL)and Alphabet defended their platforms, while others from Spotify Technology, Match Group, and Tile criticized the tech giants’ practices.
An October report from the House Antitrust Subcommittee accused both companies, as well as Facebook (FB) and Amazon.com (AMZN) of unfairly crushing competition. It argued Apple had monopoly power over software distribution to iOS devices, to the detriment of competitors, app developers, and consumers. Since then, both Apple and Google have announced programs to lower fees for smaller developers, in apparent efforts to improve public relations.
“While other app makers such as Netflix and Spotify have battled Apple, Epic’s moves are unprecedented and now through its trial will test the waters around Apple’s 30% fee and App Store structure to end Apple’s ‘unreasonable and unlawful practices’ according to the original complaint filed in U.S. District Court in California,” Ives wrote.
The lawsuit itself will focus on whether Apple’s App Store practices violate antitrust laws. For investors, Ives notes that Apple’s services business is among its key segments, which Ives values at $1.3 trillion, noting that it is key to the company’s future monetization efforts.
“This is a high stakes game of poker being played as Apple needs to make sure the Epic challenge, which is very timely in light of anti-trust swirls and growing opposition to Big Tech within the Beltway, does not create a ripple effect which developers and regulators globally are watching carefully,” Ives wrote.
He expects a ruling will likely come in the next three weeks. From there, he’ll be watching for any ripple effects that could impact the App Store’s positioning and its fees. Ives said a negative ruling for Apple would be “a major gut punch to the App Store crown jewel monetization engine.” He still maintained an Outperform rating on the stock with a $185 price target.The trial is set to pick back up around 11:30 a.m. EDT.
Write to Connor Smith at [email protected]