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.

Top Rated Comments

Analog Kid Avatar
23 weeks 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
23 weeks 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)
Scipster Avatar
23 weeks 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
23 weeks 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)
Razor_Crest Avatar
23 weeks 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: 18 Votes (Like | Disagree)
BenGoren Avatar
23 weeks 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)

Popular Stories

iOS 17 Icon Mock Feature Feature

iOS 17 Lock Screen Interface to Turn iPhone Into Smart Home Display

Wednesday May 24, 2023 9:47 am PDT by
An updated Lock Screen interface in iOS 17 will turn the iPhone into a "smart-home display," according to Bloomberg's Mark Gurman. When not in use and positioned in a horizontal orientation, the iPhone will show information that includes calendar appointments, weather data, notifications, and more, allowing it to serve as a home data hub. With the iPhone attached to a MagSafe charging stand...
iOS 17 on Phone Feature

iOS 17 Said to Feature Wallet, Find My, SharePlay, and AirPlay Upgrades

Wednesday May 24, 2023 9:59 am PDT by
Apple's upcoming iOS 17 update for the iPhone will include improvements across several apps and features, including Wallet, Find My, SharePlay, and AirPlay, according to Bloomberg's Mark Gurman. Apple is expected to preview iOS 17 during its WWDC keynote on June 5, and the update should be released to all users in September. In a report today, Gurman said the Wallet app in particular will...
wwdc 2023

Apple Announces WWDC 2023 Schedule, Including Keynote Time

Tuesday May 23, 2023 9:03 am PDT by
Apple today announced the schedule for its annual developers conference WWDC, which runs from June 5 through June 9. The schedule confirms that Apple's keynote will begin on June 5 at 10 a.m. Pacific Time, with the company expected to announce iOS 17, macOS 14, watchOS 10, its long-awaited AR/VR headset, a 15-inch MacBook Air, and more. Apple's keynote will be followed by the Platforms State ...
iOS 17 Mock Health Feature Blue

iOS 17 to Include Dedicated Journaling App and Mood Tracking

Wednesday May 24, 2023 10:05 am PDT by
The iOS 17 update that Apple plans to announce in June will include a dedicated journaling app, reports Bloomberg's Mark Gurman. The Wall Street Journal in April highlighted Apple's work on a Day One-style journaling app, but at the time, it was not clear if it would come in iOS 17. According to Gurman, the app is indeed slated for inclusion in iOS 17, and it will introduce "note taking and...
icloud photos

Apple's 'My Photo Stream' Service Shutting Down in July 2023

Friday May 26, 2023 11:51 am PDT by
Apple's "My Photo Stream" service is set to shut down on July 26, 2023, which means customers who are still using that feature will need to transition to using iCloud Photos prior to that date. My Photo Stream is a free service that uploads the last 30 days of images (up to 1,000) to iCloud, making them accessible on the iPhone, iPad, iPod touch, Mac, and PC. It predates iCloud Photos and...
mac mini green

Apple Now Selling Refurbished 2023 M2 Mac Mini Models

Wednesday May 24, 2023 12:34 pm PDT by
Apple today added refurbished M2 Mac mini models to its online store in the United States, offering the latest 2023 version of the desktop machine at a discounted price for the first time. Refurbished M2 Mac mini models are priced starting at $509 for the version with an 8-core CPU, 10-core GPU, 8GB RAM, and 256GB SSD. That's a $90 discount off of the original $599 price tag for that...
chatgpt for iphone feature

OpenAI's Official ChatGPT App for iPhone Expands to 40+ Countries

Thursday May 25, 2023 1:43 pm PDT by
OpenAI this week announced that its official ChatGPT app for the iPhone and the iPad is now available in more than 40 countries in addition to the United States. The app first launched in the United States last week, and OpenAI promised that it would expand to more countries in the coming weeks. As of today, the app can be used in Albania, Algeria, Argentina, Azerbaijan, Bolivia, Brazil,...
iOS 16

iOS 16.5 Now Available for Your iPhone With These New Features

Monday May 22, 2023 12:12 pm PDT by
Following around seven weeks of beta testing, iOS 16.5 was released to the public last week. The software update is a minor one, but includes a few new features and changes for the iPhone. To install an iOS update, open the Settings app on the ‌iPhone‌, tap General → Software Update, and follow the on-screen instructions. Below, we have recapped new features and changes in iOS 16.5,...