Eddy Cue Takes the Stand in U.S. v. Google ⇥ techemails.com

Internal Tech Emails posted an email exchange between Tim Cook and Eddy Cue, as revealed during the ongoing Google antitrust trial. Cue had just met with Sundar Pichai about renegotiating their Safari deal [sic]:

[…] He tried to say we pay you more than anyone, numbers are increasing and i will pay you for everything so we should keep it at [REDACTED]I told him that him and I need to sit down alone next week and agree to the economic terms or we shouldn’t move forward.

David Pierce, of the Verge, covered Cue’s in-court testimony concerning this email:

Meagan Bellshaw, a Justice Department lawyer, asked Cue if he would have walked away from the deal if the two sides couldn’t agree on a revenue-share figure. Cue said he’d never really considered that an option: “I always felt like it was in Google’s best interest, and our best interest, to get a deal done.” Cue also argued that the deal was about more than economics and that Apple never seriously considered switching to another provider or building its own search product. “Certainly there wasn’t a valid alternative to Google at the time,” Cue said. He said there still isn’t one.

In a sense, I believe Cue that this is about more than a simple exchange of money for power and position. Google is, for most people, the only name in searching the web. The invalid alternatives Cue is referencing are, presumably, existing search engines like Bing, though it is interesting to me that Cue reportedly ruled out a much-rumoured Apple search project as a serious alternative.

One could argue it would be stupid for Apple to leave money on the table for a decision many users would probably make for themselves — and it is probably a lot of money. While the exact numbers have been revealed in court, they were done so in closed discussions and are being kept confidential, but analysts’ estimates have been steadily climbing. Two years ago, Bernstein thought it was $15 billion; now, it is a fair bit more.

Paul Kunert, the Register:

“We believe there is a possibility that federal courts rule against Google and force it to terminate its search deal with Apple,” said Bernstein in the report sent to The Register. “We estimate that the ISA is worth $18B–20B in annual payments from Google to Apple, accounting for 14–16 percent of Apple’s annual operating profits.”

This gets booked as services income and, if this estimate was accurate for Apple’s 2022 fiscal year, it represents up to 25% of its revenue for that category, or up to 36% of its services profits — for setting a single default that is the dictionary definition for searching the web. So, yeah, you get it, right?

But that is obviously the point the government is making. Google does not need to pay Apple because it is worried it will immediately lose an entire audience of iPhone, iPad, and Mac users who do not change their default settings — and, if the number of people I have seen who do not even set a new wallpaper is any indication, that is a lot — it pays Apple so nobody even thinks of another option in search, email, advertising, and video hosting.

But whatever could Cue mean by saying that, if Apple and Google would be unable to come to a deal, that “we shouldn’t move forward”? If there were no other options at the time, as Cue said, this is an empty threat — the kind of negotiating posture that seems unlikely to give Apple an increasingly lucrative contract.