Apple could lose billions of dollars in revenue and earnings if it’s forced to cut the commissions it charges on sales through its app store, said analysts who cover the company.
App-store fees charged by Apple, Google, and others like Steam have come under increasing pressure.
Some developers have routed around them, and Spotify filed a competition complaint against Apple in Europe that focused in part on the iPhone maker’s app-store fees.
Should Apple have to cut its average overall commission rate from the 27% it gets now to around 15%, it would lose out on about $8 billion in revenue next year and $1.25 a share in earnings, Nomura Instinet analyst Mark Kelley said.
Spotify’s complaint against Apple over unfair competition could end up costing the iPhone maker billions of dollars.
The streaming music maker’s allegations against Apple focus on the way Apple manages the App Store and the fees it charges developers who sell their apps and related items there. The complaint it filed with the European Commission on Wednesday increases the chances that Apple will have to lower its commission rates on app sales, warned financial analysts who cover the company.
If Apple is forced to reduce its rates, it’s likely it would only have to cut them by a little, a move the company could easily swallow, said Mark Kelley, an analyst who covers the electronics giant for Nomura Instinet, in a research note on Thursday. But if Apple has to put in place a particularly large cut in its rates — which would require a “structural change” to its commission policies — the move could cost the company more than $8 billion in lost sales next year and about $1.25 a share in lost earnings, Kelley estimated.
“A structural change in Apple’s take rate seems unlikely, but would prove more damaging” than a slight change in rates, he said.
App-store fees are coming under increasing scrutiny and pressure
Apple charges a 30% commission on most sales through its app store. For subscriptions charged through its store, Apple lowers its cut to 15% after the first year. Combining those two rates, the company on average gets a commission of about 27% on all the sales through the App Store, Kelley said. Google charges similar rates in its Google Play store and sees about the same overall commission rate, he said.
But the fees charged by Apple, Google, and other app store operators like Steam …read more
Source:: Business Insider