With the slowdown of the iPhone, Apple's focus (NASDAQ: AAPL) is increasingly turning to service revenue to support its growth. The recurring revenue that can be earned with subscriptions such as iCloud and Apple Music is a growing concern for the company.
One circumstance that will certainly cause serious discussions in Cupertino is one of the biggest money sellers on the App Store Move itself to exclude Apple from the equation.
Its biggest customer:
Netflix (NASDAQ: NFLX) has always been one of the highest rated apps on iTunes, with Apple scoring between 15% and 30% of apps' monthly subscription for customers who sign in through the iOS App Store and pay through iTunes. Apple charges 30% for the first 12 months, then 15% for each month. This was a costly offer for Netflix. Some estimates totaled up to $ 1.4 billion in total costs paid to Apple and Google, a division of Alphabet (NASDAQ: …) .
A few months ago, Netflix began testing a workaround. In the 33 countries where the test took place, new or expired subscribers were not allowed to use iTunes as a payment method. These customers have been redirected to the Netflix website to sign up or sign up and enter a form of payment.
The results of these tests must have been promising, as Netflix recently announced: "We no longer support iTunes as a means of payment for new members ," a Venture Beat report said. Existing Netflix customers using iTunes as a payment method are currently being held in a grandfather.
A Growing Trend
Netflix is not the only company that is discouraging the payment of the so-called "Apple Tax" and finding a cut Apple is taking over most of the apps downloaded from iTunes. Streaming Music Provider Spotify (NYSE: SPOT) "has also tested ways to prevent Apple from paying for new in-app subscriptions by forcing customers to visit mobile sites for subscription sign-ups "said a well-known analyst and longtime Apple successor Gene Munster of Loup Ventures.
There were other high-profile defects as well. The Financial Times ripped their iPhone and iPad apps from the App Store. Epic Games – the publisher of the video game phenomenon Fortnite – has gone one step further. In December, a separate app store was launched, in which the developers take only 12% in order to pull the business out of the well. pursued competitors.
Some users have also made an exception to Apple's App-Cut. A group of customers sued Apple in 2011 and found that the App Store is a monopoly. At the end of November, the case reached the US Supreme Court to decide if customers or app developers are in the lawsuit, which could take a few more years.
What this means for Apple investors
While this may sound like Apple is in dire straits, this is unlikely to be the case. For most developers, the value proposition is simply too convincing if their apps are to be found and ultimately downloaded. While companies like Netflix and Spotify have a high level of awareness and users' demand not to use Apple, most smaller developers simply do not have that option.
Munster delivered the numbers and believes that the financial impact on Apple will be minimal This represents about 0.07% of revenue and 0.14% of the profit – especially as it applies only to new Netflix subscribers. To put this into perspective, this would translate into $ 44 million in revenue and less than $ 20 million in Apple's last quarter of revenue of nearly $ 63 billion and a gain of $ 63 billion $ 14 billion.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of The Motley Fool. Danny Vena owns shares of Alphabet (A-shares), Apple and Netflix. The Motley Fool owns and recommends shares of Alphabet (A-shares), Alphabet (C-shares), Apple and Netflix. The Motley Fool has the following options: Long January 2020 calls of $ 150 at Apple and short January 2020 – $ 155 calls to Apple. The Motley Fool has a disclosure policy.