Apple and Google will probably have to open up more app stores owned by other companies on their mobile devices in accordance with the Digital Markets Act of the European Union.
It would be an “immaterial risk” to Apple if Microsoft were to succeed in opening its own app store, according to Morgan Stanley analysts, but it would still be a “long-term threat” to keep an eye on.
Since they each contributed less than 1% to the overall revenue from Apple Services in 2022, analysts concluded that Microsoft and Activision Blizzard had a “immaterial impact” on the company-level revenue of Apple.
According to Phil Spencer, head of Microsoft Gaming, a new app store for games could be released by the company as early as next year if regulators approve the $75 billion acquisition of Activision Blizzard by the company.
Apple and Google will probably have to open up more app stores owned by other companies on their mobile devices in accordance with the Digital Markets Act of the European Union. The new regulations are anticipated to take effect in March of 2019; this gives rivals like Microsoft time to enter the race.
“If we took a ‘worst case’ view of the world and said the potential Microsoft app store could take all EU gaming revenue from the Apple App Store, given the focus of the DMA is just in Europe, for now – that would equate to 8% of App Store revenue, 2% of Apple Services revenue, and a 1% hit to Apple company-level revenue and EPS,” the analysts said.
In the first quarter of its 2023 fiscal year, Apple earned $20.77 billion in service revenue. Morgan Stanley analysts do not believe that Microsoft’s successful acquisition of Activision Blizzard and the subsequent launch of an app store will worry Apple, however.
According to analysts, Microsoft and Activision Blizzard contributed less than 1% of the total revenue from Apple Services in 2022, which had an “immaterial impact” on the company’s overall revenue. The biggest potential threat to the App Store today, they wrote in a note on Tuesday, is that “we estimate the impact of a potential Microsoft App Store on the iPhone would be limited to 3% of App Store revenue and 0.5% of EPS.”
The analysts also noted that there are still a lot of questions about whether Microsoft will be able to complete its acquisition. Regulators in the United States, the United Kingdom, and Europe are concerned about the potential effects the acquisition of Activision Blizzard may have on the competition.
Less than 30% of Apple users, according to Morgan Stanley analysts, would be willing to purchase apps from sources other than the company’s App Store. Even so, they claimed that Microsoft’s app store might eventually establish itself as a serious rival.
The analysts stated that Microsoft’s “strong brand” and “tech leadership” continue to represent a potential long-term threat.