Gene Munster: Apple App Store’s profitable economics will stay intact

The U.S. Supreme Court last Wednesday dealt a setback to Epic Games, maker of the popular video game “Fortnite,” in its so-far-quixotic legal battle against Apple, declining to let a federal judge’s injunction take effect that could force Apple’s App Store to let app developers provide links and buttons that direct consumers to other ways to pay for digital content that they use in their apps.
SCOTUS’s ruling keeps the App Store as is while Apple pursues its Supreme Court appeal.

Gene Munster for Deepwater Management:

A Supreme Court win is important because it shuts the door to steering in the near term. While the probability that Apple will make changes to the App Store has declined because of the ruling, the topic will not go away. Apple still makes a lot of money with the App Store, and lawmakers still want to find ways to land a punch on Apple. That motivation will create innovation in Washington to try and find ways to needle at big tech business models, whether Apple with the App Store, Amazon in AWS, Google in search, or Microsoft in AI. The topic of regulation will be a recurring theme.
As for timing, it’s been about once every two years that something big pops up for each tech giant when it comes to regulation. The original Epic Games ruling was two years ago, in 2021, so probably in the next year we’re going to hear something new come out from Washington targeting Apple. Microsoft just wrapped up its battle related to the acquisition of Activision.
The good news is what we learned here: First, it takes a long time to resolve these, and, second, it’s hard for Washington to impact these businesses.
For Apple, the court win is particularly important because early next year they’re going to be launching a new segment to the App Store around spatial computing and Vision Pro. Long-term Vision Pro has a wide range of potential outcomes. Some believe it will have a relatively small impact on revenue and earnings. I believe it will be the platform, which includes both hardware sales and sales of apps, that will be measurable to growth over the next five years, somewhere between the Mac and iPad (10% of revenue) and the iPhone (50% of revenue).
The fact that they now don’t have to allow steering for spatial computing apps is an under-the-radar win for Apple in this decision.

MacDailyNews Take: As we wrote in July:
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Epic is nuts. They want all of the benefits of Apple’s App Store for free. That isn’t how any of this works. Hopefully, SCOTUS will [eventually] correct the 9th Circuit judge’s foolishness which is akin to a judge issuing an injunction that forces Best Buy and Target to place signs next to each product that advertise lower prices for the same items at Walmart.
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Regardless, even if the Supreme Court [ultimately] rules against Apple, if developers like Epic Games want to advertise lower prices using Apple’s App Store, Apple should simply begin charging an In-Store Advertising fee, because that’s exactly what it would be.
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How much did it cost developers to have their apps burned onto CDs, boxed, shipped, displayed on store shelves prior to Apple remaking the world for the better for umpteenth time? Apple incurs costs to store, review, organize, surface, and distribute apps to over one billion users. — MacDailyNews, June 10, 2022
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