Tim Cook, CEO of Apple Inc. Center, arrives in the U.S. District Court in Oakland, California on Friday, May 21, 2021.
Nina Riggio | Bloomberg | Getty Images
Apple prevailed Friday in nine of the ten cases in its lawsuit against Epic Games, but federal Judge Yvonne Gonzalez Rogers issued a court order banning Apple from preventing developers from connecting to its apps to charge payments directly and cut Apple and their 30% purchases from the app.
Shares of Apple fell more than 3% in Friday’s news. But Wall Street analysts and former Apple fans believe the financial impact on the company will be limited.
One person familiar with Apple’s thinking said developers will only be able to link and will not be allowed to incorporate their own alternative payment mechanism into their apps. This limits the effect, as payments built into Apple’s app will be even easier for a consumer than inserting their credit card into a website.
JPMorgan analyst Samik Chatterjee said the ruling did not change the bank’s outlook for Apple services or app store companies, noting that the decision did not recommend changes in the 30 % of Apple and that only initiates the first stage of a process of several steps.
“Our view remains that consumers will take advantage of payment alternatives in the event of expensive subscriptions and in-app purchases, limiting headwinds for App Store revenue and revenue from an app base otherwise very broad, ”Chatterjee wrote.
Founder of Loup Ventures and longtime Apple analyst Gene Munster He told CNBC’s Josh Lipton that the worst-case scenario for Apple could lower Apple’s earnings by 4% over the next year, but the effect is more likely to approach a 1% decline.
“The two silver lines for investors: first, 12-18 months after the implementation of the changes, growth rates will return to normal,” Munster said. he tweeted. “Second, Apple’s long-term potential is not affected by the change.”
Apple sees the verdict as a victory because it did not challenge Apple’s right to determine what software is allowed in its store and because it did not find Apple to be a monopoly under federal or state law.
“We are very pleased with the court’s ruling and consider it a great victory for Apple,” Apple’s attorney general Kate Adams said in a statement.
But investors are looking closely at Apple’s services business, which has grown strongly in recent years, and includes Apple’s App Store sales revenue, as well as online subscriptions, licensing revenue from Google searches and AppleCare warranties.
Services account for about 20% of Apple’s revenue, but it’s a profit engine for Apple, with significantly higher margins than its hardware business. Apple reported $ 53.7 billion in service sales during its 2020 fiscal year with a gross margin of 66%, well above the 31.5% of Apple’s hardware business.
Apple doesn’t break down the amount of service sales coming from the App Store, but it’s an important component. Apple’s App Store grossed more than $ 64 billion in 2020, according to a CNBC analysis. Sensor Tower, an app analytics firm, ranks slightly higher at $ 72 billion.
Worldwide, Apple earned $ 47.6 billion from mobile gaming and charged commissions of about $ 14.3 billion, according to Sensor Tower statistics provided to CNBC.
Friday’s judge’s ruling revealed what part of Apple’s App Store revenue comes from games and, in particular, from large investors. Rogers said in Friday’s resolution that he believed Apple’s fully charged margin on the App Store was more than 72%, based on Apple documents.
Shares of gaming apps rose in the news on Friday. The shares of AppLovin, Zynga, Playtika and Roblox hoped that these gaming companies could reduce costs by directing users to their own payments, bypassing Apple’s cut.
Epic Games is a privately held company and its CEO, Tim Sweeney, said in a statement that Friday’s ruling was not a victory. Epic wants you to be allowed to offer your own app store on iPhones.