• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Technology

Apple's App Store Change Is Good PR -- And Matters Little Financially

The lion's share of App Store revenue appears to be unaffected by Apple's policy change, which follows a lawsuit from Epic Games and multiple antitrust probes.
By ERIC JHONSA
Nov 18, 2020 | 01:23 PM EST
Stocks quotes in this article: AAPL, NFLX, SPOT, MTCH

Apple (AAPL)  has long been a very PR-sensitive company, and its latest App Store policy change is likely to earn it some goodwill with journalists, regulators and developers alike.

The move is also less costly than what one might think, and could even prove to be a net positive for App Store revenue over the long run.

On Wednesday morning, Apple announced that developers earning less than $1 million in annual App Store revenue will have to pay just a 15% commission on transactions that are required to be processed through the App Store, such as paid downloads and in-app content purchases and subscriptions.

"Comprehensive details" about the initiative, which is known as the App Store Small Business Program, will be shared in December. To date, Apple has typically charged a 30% commission on such transactions to all developers (content subscriptions are a partial exception, with Apple collecting 30% for the first year and 15% for subsequent years).

It's hard to ignore the fact that this policy change is happening just three months after Epic Games -- developer of Fortnite and the popular Unreal gaming engine, and a company generating a lot more than $1 million in annual revenue -- filed an antitrust suit against Apple over Apple's unwillingness to let Epic use its own payments system to handle Fortnite transactions on iOS devices.

One also can't ignore that Apple is now facing antitrust probes from both U.S. and E.U. regulators over its App Store policies. In June, the E.U. said it's concerned about both Apple's insistence on taking a cut of all digital content transactions that occur on iPhones and iPads, as well as restrictions placed on letting developers inform users about alternate payment options, such as the developer's website.

Apple is undoubtedly hoping that its policy change will ease some of the criticism it's getting from both the press and regulators over its App Store rules. And from the looks of things, the top-line impact of the move on App Store revenue won't be all that significant.

App analytics firm Sensor Tower estimates that Apple's policy change will lower commissions for 98% of all developers that are having payments processed via the App Store, but also estimates that those developers collectively accounted for less than 5% of Apple's 2019 App Store revenue.

Likewise, Morgan Stanley's Katy Huberty estimates that the policy change could have a modest $0.03 impact on Apple's fiscal 2021 (ends in Sep. 2021) EPS, and a 0.2% impact on revenue. She adds that the actual fiscal 2021 impact could be smaller, since the change won't go into effect until Apple's fiscal second quarter (March quarter).

For context, Apple appears to have generated more than $50 billion in gross App Store revenue, and perhaps around $15 billion in net revenue, in 2019. And 2020 figures will doubtlessly be higher.

Also: Should Apple's policy change incentivize more developers to create iOS and iPadOS apps, it could serve to boost App Store revenue over the long run -- particularly if a subset of those new developers create hit apps that end up generating much more than $1 million in annual revenue. Ironically, there are some parallels here with Epic's May decision to not charge royalties to game developers using the Unreal Engine until they generate more than $1 million in game revenue.

At the same time, Apple hasn't given any indication yet that it's willing to budge on its current App Store payment rules for larger developers -- whether game developers such as Epic, streaming service providers such as Netflix  (NFLX) and Spotify (SPOT) , online dating service providers such as Match Group (MTCH)  or anyone else looking to conduct content transactions on iPhones and iPads.

Though it's possible that the company eventually offers a compromise or two here as well, for the moment Apple still seems to be digging in for a long fight with regulators and major developers over its current App Store policies.

(Apple is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL? Learn more now.)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Technology

More from Technology

How to Move on MongoDB

Bruce Kamich
May 20, 2022 2:19 PM EDT

Let's take a technical follow-up look at MDB -- and give a word of caution on this software name.

I'm Cautious on Marvell Technology Ahead of Earnings

Bruce Kamich
May 20, 2022 11:52 AM EDT

Let's review the charts and indicators.

If You're Looking for a Hero in This Market, Don't Look to Apple, ARKK

Ed Ponsi
May 20, 2022 10:30 AM EDT

Folks are asking if it's finally time to buy the ARK Innovation exchange-traded fund or Apple. Let's check the charts.

Don't Be in a Rush to Invest in Cisco

Stephen Guilfoyle
May 19, 2022 11:00 AM EDT

Someone already long this stock, who has taken a hit, doesn't need to liquidate unless...

Alteryx Has Yet to Bottom Based on Its Charts

Bruce Kamich
May 19, 2022 9:04 AM EDT

The technical signs indicate that the stock of the data analytics company still needs to build a base.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:10 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "Market Timing for Dummies"
  • 01:44 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10 Portfolio

    We're making a series of trades here.
  • 03:07 PM EDT PAUL PRICE

    Why Is Walmart Down Big Today?

    Besides its poor earnings report Walmart was way...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login