Rival App Stores on iPhone Estimated to Have Limited Impact on Apple's Revenue

Bloomberg's Mark Gurman this week reported that Apple is preparing to allow alternative app stores on the iPhone and iPad in the European Union, as part of an effort to comply with the Digital Markets Act, which goes into full effect in 2024. The report said Apple is aiming for the changes to be introduced as part of iOS 17.

app store blue banner epic 1
In a research note this week, a trio of analysts at investment bank Morgan Stanley argued that third-party app stores and sideloading would pose a "limited risk" to both App Store revenue and Apple's overall revenue given that iPhone users have "long prioritized the security, centralization, and convenience that the App Store brings."

Importantly, the proposed changes in the Digital Markets Act (DMA) are regulator-driven, not consumer-driven. From the consumer perspective, we see very little demand for alternatives to the App Store given the unmatched security, ease of use (centralization), and reliability the App Store provides. According to our Fall 2022 Smartphone survey, less than 30% of iPhone owners are extremely likely to purchase a mobile app directly from a developer website vs. the App Store.

In an implausible worst case scenario where Apple somehow lost the entirety of its App Store revenue in Europe as a result of competition from third-party app stores, the analysts estimated this would equate to just a 4% hit to Apple's services revenue and a 1% hit to Apple's total revenue. If third-party app stores are allowed globally, the analysts forecast around a 9% hit to services revenue and around a 2% hit to total revenue.

In reality, the impact on Apple's revenue could be far less, as the analysts believe it's likely Apple would still receive a commission on purchases made through third-party app stores. In the Netherlands, for example, Apple's standard 30% commission is reduced by only 3% for dating apps using third-party payment systems.

While there are still a lot of question marks surrounding third-party app stores and sideloading, Morgan Stanley believes that the reported changes do not present material risk to App Store revenue/growth or the long-term performance of Apple's stock.

Popular Stories

iPhone 16 Pro Sizes Feature

iPhone 16 Series Is Just Two Months Away: Everything We Know

Monday July 15, 2024 4:44 am PDT by
Apple typically releases its new iPhone series around mid-September, which means we are about two months out from the launch of the iPhone 16. Like the iPhone 15 series, this year's lineup is expected to stick with four models – iPhone 16, iPhone 16 Plus, iPhone 16 Pro, and iPhone 16 Pro Max – although there are plenty of design differences and new features to take into account. To bring ...
maxresdefault

Apple's AirPods Pro 2 vs. Samsung's Galaxy Buds3 Pro

Saturday July 13, 2024 8:00 am PDT by
Samsung this week introduced its latest earbuds, the Galaxy Buds3 Pro, which look quite a bit like Apple's AirPods Pro 2. Given the similarities, we thought we'd compare Samsung's new earbuds to the AirPods Pro. Subscribe to the MacRumors YouTube channel for more videos. Design wise, you could potentially mistake Samsung's Galaxy Buds3 Pro for the AirPods Pro. The Buds3 Pro have the same...
iPhone 15 Pro Cameras

iPhone 17 Pro Max Will Be First Model to Feature Three 48MP Cameras

Thursday July 11, 2024 12:20 am PDT by
Next year's iPhone 17 Pro Max will feature an upgraded 48-megapixel Tetraprism camera for enhanced photo quality and zoom functionality, according to Apple analyst Ming-Chi Kuo. In his n-iphone-tetraprism-upgrade-ca62dd37e364">latest investor note published to Medium, Kuo said the key specification change would be a 1/2.6" 48MP CIS sensor, up from the 1/3.1" 12MP sensor expected to be used...
Beyond iPhone 13 Better Blue Face ID Single Camera Hole

10 Reasons to Wait for Next Year's iPhone 17

Monday July 8, 2024 5:00 am PDT by
Apple's iPhone development roadmap runs several years into the future and the company is continually working with suppliers on several successive iPhone models simultaneously, which is why we sometimes get rumored feature leaks so far ahead of launch. The iPhone 17 series is no different – already we have some idea of what to expect from Apple's 2025 smartphone lineup. If you plan to skip...
primeday2020 feature3

The Best Early Prime Day Deals on Apple Products

Saturday July 13, 2024 6:23 am PDT by
Amazon is soon to be back with its annual summertime Prime Day event, lasting for just two days from July 16-17. As it does every year, Prime Day offers shoppers a huge selection of deals across Amazon's storefront, and there are already many deals you can get on sale ahead of the event. Note: MacRumors is an affiliate partner with Amazon. When you click a link and make a purchase, we may...
macbook pro january

Best Buy's Black Friday in July Sale Takes Up to $700 Off M3 MacBook Pro for Members

Monday July 15, 2024 11:05 am PDT by
Best Buy's "Black Friday in July" sale is in full swing today, and in addition to a few iPad Air discounts we shared earlier, there are also some steep markdowns on the M3 MacBook Pro. You will need a My Best Buy Plus or Total membership in order to get some of these deals. Note: MacRumors is an affiliate partner with Best Buy. When you click a link and make a purchase, we may receive a small...

Top Rated Comments

Analog Kid Avatar
21 months ago

If these changes have no impact on Apple revenue, why is Apple fighting these changes so hard ? If they have to implement them for the EU, why not implement them for the rest of the world ?
Because it breaks the tight system integration. It’s been obvious the direct revenue wasn’t the driving factor here, its about customer experience.
Score: 24 Votes (Like | Disagree)
Zakn Avatar
21 months ago
If these changes have no impact on Apple revenue, why is Apple fighting these changes so hard ? If they have to implement them for the EU, why not implement them for the rest of the world ?
Score: 19 Votes (Like | Disagree)
Razor_Crest Avatar
21 months ago

If these changes have no impact on Apple revenue, why is Apple fighting these changes so hard ? If they are willing to implement them only on EU, why not implement them for the rest of the world ?
Because the one thing Apple cares more about than profit is control.
Apple without control is nothing.
Score: 19 Votes (Like | Disagree)
Scipster Avatar
21 months ago
Totally agree with Morgan Stanley. Even if Apple were to allow alternative app stores and side-loading of apps, I will always stick with the App Store. Just my choice!
Score: 19 Votes (Like | Disagree)
BurgDog Avatar
21 months ago
If Apple sells it, I'd prefer to buy it from them. I expect most people feel that way. Still there is stuff I want that Apple won't sell and having the option to get if from somewhere, such as the developer directly, is nice.
Score: 18 Votes (Like | Disagree)
BenGoren Avatar
21 months ago
For me, there is zero chance I’ll install an app unless it either comes from the Apple-curated app store unless it’s a small niche app from a developer I’ve personally known for some time. About the only example of the latter that comes to mind is ArgyllCMS (which will never be ported to iOS).

Yank something from the Apple app store, and it’s getting yanked from my phone.

Period.

b&
Score: 15 Votes (Like | Disagree)