Apple must open iPhones to third-party app stores – Morgan Stanley analyst says consequences are limited

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• App installation on iPhone currently only possible via the App Store
• EU wants to bring third-party app stores to iPhones
• Morgan Stanley gives the all-clear

EU law to open up Apple’s iPhones to third-party stores

While other app marketplaces are available on Android devices in addition to Google’s Play Store and APK files can also be downloaded and installed from the Internet, iPhone users are dependent on Apple’s App Store. But that should change soon, at least in Europe. According to the European Union’s Digital Markets Act (DMA), which will come into force on January 11, 2023, before requiring concrete action from 2024, third-party app marketplaces are expected to make their way onto Apple devices. The law is intended to ensure that online platforms with great economic power, many users and a stable market position, so-called “gatekeepers”, conduct their business fairly, according to the European Commission. The obligations of the companies include a transparent range of data, and access to products and applications from other providers should also be simplified. In Apple’s case, that means supporting third-party app stores on iPhones and iPads as well. According to Bloomberg, Apple is currently working on an operating system update that will also allow app installations from other sources.

Criticism of App Store levy

In the past, Apple’s App Store was not only criticized for its monopoly position on iPhones, but mainly because of the 30 percent fee that Apple withholds from app and in-app purchases via the App Store. The Cupertino, California-based tech giant also recently changed the store’s policy on promotional “boosts” and NFTs. With the opening of iOS– or iPadOS systems for the app platforms of other providers, the 30 percent fee could also be avoided, as “Yahoo Finance” suspects. It is conceivable, for example, that app developers charge less money for their applications via other stores than they do directly from Apple, which could drive users away from Apple’s App Store.

Hardly any emigration to be expected

Morgan Stanley expert Erik Woodring, on the other hand, thinks it is unlikely that customers will leave Apple’s own app marketplace. “From a consumer perspective, given the unmatched security, usability (centralization) and reliability that the App Store offers, we see very little demand for alternatives to the App Store,” the strategist said in a customer note shared with the finance portal. Apple’s App Store is a convenient way for many users to buy secure applications, which is not necessarily the case with other providers, as Woodring explained. This is also suggested by the result of a survey conducted by the major bank in autumn 2022. Less than 30 percent of the participants surveyed by Morgan Stanley stated that they were very likely to prefer apps from third-party stores over those from Apple’s native counterparts.

Impact on Apple’s balance sheet should be limited

And even if there were a large-scale migration among Apple customers to third-party apps, Woodring’s assessment should leave the NASDAQ company’s balance sheet largely untouched. While Europe is Apple’s second-largest market globally, the analyst calculates that losing all revenue from the App Store in Europe would equate to a mere 1 percent reduction in the company’s total revenue. And even if other countries where Apple makes money with its app marketplace follow the example of the EU and pass similar laws, the iGroup should only generate two percent less sales. This is due to the fact that Apple achieves most of its income from the sale of iPhones, as the expert emphasizes. The consequences of the DMA should therefore be rather weak for the group managed by Tim Cook, according to Woodring.

Editorial office finanzen.net

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