App Store and the “tax” may be Apple’s lurking shark

By next year, Apple expects to have doubled its services revenue from 2016 level. Most of that money comes from its 30 percent cut out of most purchases and subscriptions made through its massive and massively vaunted App Store for iOS.

Despite an attempt to incentivize publishers to keep subscriptions active and healthy, big companies like Netflix — incidentally the largest cash generator for the App Store — and Spotify have taken their payments off of Apple’s platform and onto their own. More firms are considering doing the same.

But according to AB Berstein analyst Toni Sacconaghi, the emigration from the App Store payment platform may be the least of Apple’s worries when it comes to keeping the growth in services going. After all, Apple CFO Luca Maestri reported that Netflix accounted for “less than 0.3 percent of total services revenue” last year.

The biggest concern down the line may be a Supreme Court decision that may lead to a lawsuit over whether Apple’s control of the iOS ecosystem is anti-competitive to consumers who purchase apps. The justices are still determining if the plaintiffs have ground against Apple, so they may yet have a case to pursue. Still, if Apple is found liable as the distributor and de facto seller of all of its apps, we may see a big change that could bring more app stores to the iPhone and fewer dollars in Cupertino’s pocket.

Sacconaghi’s note, obtained by CNBC, prioritizes his concern of declining iPhone sales over all else at the moment, but it’s not to say that the apps issue won’t become a sleeper snipe.

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About The Author
Jules Wang
Jules Wang is News Editor for Pocketnow and one of the hosts of the Pocketnow Weekly Podcast. He came onto the team in 2014 as an intern editing and producing videos and the podcast while he was studying journalism at Emerson College. He graduated the year after and entered into his current position at Pocketnow, full-time.