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Analysts say Apple's second largest business is facing tough times



Although Apple has seen weak demand for the iPhone models of 2018, the company expects it to rely on services for further growth. Companies listed in this category include AppleCare, Apple Pay, the App Store, iTunes, Apple Music, and more. It is the second largest revenue generator for Apple (after the iPhone of course) and is considered the most profitable part of the company. Apple CEO Tim Cook has pointed out that the company's service business benefits from the large installed base of iPhones, which is estimated at 1.5 billion units worldwide. This isolates the service business from weak iPhone sales.

Apple has set a target of $ 50 billion in sales by 2020, compared to $ 30 billion in 201
7. In the fourth quarter of fiscal 2018, the three months from October 2018 to the end Services revenues reached a quarterly record of $ 10 billion. While Apple seems on the way to achieving its goal, one analyst calls the division "another shoe to drop". According to CNBC, Toni Sacconaghi of AB Bernstein fears that companies selling subscriptions in the App Store are beginning to rebel, which has become known as the Apple Tax.
Apple charges companies such as the video streamer Netflix and the music streamer Spotify 15% to 30% of the monthly subscription revenue generated by App Store users. 30% of what a subscriber pays for the first year and 15% of what he pays in the following years. To avoid this, developers like Netflix and Spotify have accepted new subscribers through their iOS apps. For example, Netflix said last month that new members or members who return after leaving service will no longer be able to subscribe to Apple's ecosystem. As subscribers continue to make in-app payments, others must sign in to the Netflix website (or sign in again).

Luca Maestri, Apple's chief financial officer, points out that Netflix is ​​the largest developer on the App Store, contributing less than .3% to total revenue over the past year. In other words, the company does not seem to worry about developers rejecting the Apple Tax. Even if Apple is not worried, Sacconaghi fears a growing "dissatisfaction" and tells customers today that this could become a major revolt of the developers. His main concern, however, is a case before the Supreme Court. If the court issued a ruling that would make the "Apple Tax" a monopoly overstretching developers, service growth in sales could be severely affected. A judgment is not expected because the court has not yet decided whether the plaintiffs have a right of action.

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