Apple risks billions in losses on court ruling
US COMMISSIONS FROM APP STORE GENERATED $6.3B
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.
In a ruling on Friday, US 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 per cent. That includes letting iOS apps use “buttons, external links or other calls to action that direct customers to purchasing methods” other than Apple’s payment system.
It’s a blow to Apple, but one that the world’s most valuable company can likely absorb. And Apple dodged an even bigger risk — that the judge might determine that it was a monopolist under either federal or state laws. That may have helped some investors take the decision in stride, though they still sent the shares down 3.3 per cent to $148.97 Friday, marking their worst one-day decline since May.
Cash cow
Apple’s commissions from the App Store generated an estimated $6.3 billion last year in the US — 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.
So how much does Apple stand to lose? Loup Venture’s Gene Munster, a longtime Apple watcher, put the range at $1 billion to $4 billion, depending on how many developers take advantage of the new policy.
Apple depicted the ruling as
a victory, signalling 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.
Earlier this month, Apple said it would allow developers of so-called reader apps to point users to outside purchasing methods. That category includes media services such as Netflix and Spotify, plus news and book apps.
But the decision on Friday means that rule will have to apply to games and other categories as well, which have historically generated much more revenue for Apple.