Thursday, September 16, 2021

Apple’s App Store (AAPL) decision could cost the company billions of dollars each year

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Apple Inc. has been ordered to make the most significant change to its App Store business model since launching the platform in 2008, and it could cost the tech giant a few billion dollars annually.

Apple’s commissions from the App Store generated an estimated $6.3 billion last year in the U.S. — with most of it coming from in-app purchases and subscriptions. That money is what’s at stake as games and other apps prepare to steer consumers away from Apple’s payment system.

In a ruling Friday, U.S. District Judge Yvonne Gonzalez Rogers said the company must give developers the option of bypassing its commission on in-app purchases — a cut that runs as high as 30%. That includes letting iOS apps use “buttons, external links or other calls.

Apple depicted the ruling as a victory, signaling that it’s not too worried about the financial impact.

Apple’s adversary in the trial — Epic Games Inc., the maker of Fortnite — also contended that the judge sided with Apple. This “isn’t a win for developers or for consumers,” Epic Chief Executive Officer Tim Sweeney said on Twitter.

The court has affirmed what we’ve known all along: The App Store is not in violation of antitrust law” and “success is not illegal,” Apple said in a statement. Kate Adams, the iPhone maker’s general counsel, called the ruling a “resounding victory” that “underscores the merit” of its business.

Apple said that it’s still too early to determine how or when exactly the changes will be implemented and that it needs to have conversations with the judge. It also said that it would engage in ongoing dialogue with developers about the changes.

Gaming apps account for about 70% of all App Store revenue, and that comes from less than 10% of the platform’s users, according to the ruling. Those big spenders help offset the more than 80% of App Store accounts that generate virtually no revenue.

Apple made about $3.8 billion in U.S. revenue from games in 2020, most of which came from in-app purchases, according to estimates from Sensor Tower. But even if the ruling ends up costing Apple a few billion dollars a year, that’s still a small fraction of its total revenue. In fiscal 2021 alone, the company is estimated to bring in more than $360 billion, meaning the change won’t make or break its overall financial performance. And many developers may choose to stick to Apple’s payment system so they don’t have to build their own web payment platform.

The judge also didn’t force Apple to change its fees or let third-party app stores on its platform, which would have been a far larger blow to the company’s The judge’s decision could ultimately mean Epic’s Fortnite comes back to the App Store. Apple Ups U.S. Investments Over Five Years To $430 Billion Apple’s App Store Grip Loosened as Judge Raps Pricing Power

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