The Fruity Cargo Cult Apple has finally hinted that its magic money machine works best when it is an evil monopoly.
For years, the Tame Apple Press has insisted that Apple has been beating its rivals with superior technology and that punters really want an Apple-only App Store.
However, according to the Financial Times, Apple has admitted for the first time that regulatory changes forcing it to loosen its App Store grip are starting to hurt its more-than-$100 billion services business.
The iPhone maker reported services revenue and margins below expectations from the cocaine nose jobs of Wall Street this month. It warned in regulatory filings that it “may not earn a commission at all” on purchases made through alternative payment systems.
That is quite the confession from an outfit that spent years insisting its walled garden was about safety, privacy and other scented candles. Oddly enough, when courts tell developers they can direct users elsewhere, the toll booth starts to look less divine.
The disclosure is the clearest sign yet that antitrust action in the US, Europe and elsewhere is nibbling at Job’s Mob’s fat App Store fees. Those commissions, which can reach 30 per cent, have helped turn services into one of its most profitable rackets.
New research gives the tale a bit more bite. Sensor Tower found US consumer spending through the App Store fell six per cent in the second quarter, compared with nine per cent growth a year earlier. it would appear that faced with a choice, some Apple fans would rather go elsewhere.
Appfigures reckons Job’s Mob’s US commission revenue has shrunk 18 per cent this year.
UBS analyst David Vogt described slowing App Store growth as a “concern”. Bank of America analyst Wamsi Mohan said services revenue of $30.7 billion was a record, but still “somewhat weaker than we expected”.
Job’s Mob blamed several things, including foreign exchange movements, because currency is always handy when reality turns up with a brick. Apple chief financial officer, Kevan Parekh, admitted that recent App Store changes had hit the business.
The company reported June quarter services revenue of $30.7 billion, below analyst expectations of $31.4 billion. The division’s gross margin of 75.6 per cent also missed forecasts, according to Visible Alpha.
Shares in Job’s Mob fell about nine per cent in the days after the results. Investors may have noticed that monopoly margins become less amusing when judges, regulators and developers all start poking the same bruise.
Courts and regulators have forced Job’s Mob to loosen control over app payments and distribution. That weakens the commissions it charges on in-app digital purchases and subscriptions.
A US court injunction won by Epic Games last year forced Job’s Mob to let developers point users to alternative payment methods without charge. That bypasses the traditional App Store cut, which was apparently sacred until a judge became involved.
Sensor Tower said the US slowdown showed consumer spending inside the App Store had been “significantly impacted” by the ruling. Global consumer spending through the App Store grew just three per cent year on year in the June quarter, down from 13 per cent growth a year earlier.
The research group said weaker consumer spending and economic uncertainty may have dragged on demand.
Appfigures found App Store revenue was shrinking in Brazil and Japan after both countries introduced new rules in recent months. Regulators in the EU, South Korea and Brazil have already demanded alternative app stores or payment methods.
Similar changes are being pursued in the UK and Australia. For a company that says competition is thriving, Job’s Mob seems remarkably cross whenever competition is allowed near the gate.
Last year, the EU fined Job’s Mob €500 million for alleged breaches of its Digital Markets Act, a decision the company is appealing. In the US, the Supreme Court has agreed to review parts of the Epic Games case after a judge found Job’s Mob had failed to comply with an earlier injunction on App Store payment rules.
