By Dan Gallagher
Much remains to be seen about how Europes new Digital Markets Act will actually impact Apples business. But the timing for the iPhone maker could hardly be worse.
The new law, which goes into effect on Thursday ( requires Apple, Google and other operators of digital platforms to allow third-party app stores ( and alternative payment options on those platforms. Its a major change for Apple, which has practiced a closed-ecosystem ( approach since launching its first iPhone in 2007.
Apple announced a series of changes ( in late January to its App Store for the European market to comply with the new rules, though those changes are proving highly controversial in their own righteven sparking a new battle ( with longtime nemesis Epic Games.
Those changes come as Apple is facing worries ( about another weak iPhone cycle ( and the health of its business in China ( And that has weighed on the stock hard, with Apples shares down more than 12% since the start of the year and missing out on what has been a notable uptick for big tech stocks in generalwith the Nasdaq-100 Technology Sector Index up 11% in that time.
Apple was also the only one of the megacap tech stocks to be in the red during Thursday mornings big upswing, with the stock recently looking to end a run of six straight declines. (A seventh daily drop would mark its worst streak in more than two years.)
The changes in Europe would apply to Google as well. But even though the internet giants Android operating system powers two-thirds of the mobile phones in Europeaccording to data from StatcounterApples App Store is a far more lucrative business, now generating more than $26 billion in annual revenue compared to about $13 billion for Googles Play Store, according to estimates from Visible Alpha.
The App Store also figures more heavily into Apples bottom line ( It accounted for nearly one-third of Apples service revenue for its most recent fiscal year, and the companys services business generates nearly twice the gross profit margins as its hardware business.
The new European law is unlikely to kill the App Store business there; a survey by Morgan Stanley in January found that just 27% of iPhone owners said they were extremely likely to buy a mobile app outside of Apples App Store once they were able to do so.
But for Apples investors these days, its one more thing on a growing list of worries.