Apple Watchers are unsure about the future of its lucrative US$85-billion services business due to court cases and regulatory concerns.
Apple’s decision to make Google’s search engine as the default on iPhone, iPad and Mac has caused some concern about the amount of money it will earn. The lawsuit filed by the U.S. Government against Google is causing concern over whether Apple can continue to reap anywhere between $15 billion and $20 billion per year from making Google’s Search Engine the default option.
The U.S. Department of Justice reportedly is preparing a lawsuit that could loosen Apple’s grip on its App Store operation. This was forced upon Apple to a certain extent by the European Union’s Digital Markets Act which stipulates a deadline of March for compliance.
Apple has now agreed to allow iPhone users in the EU to download apps from other sources than the App Store.
Apple’s performance has become increasingly dependent on its services. In the future, it may be a largely services company. Apple’s future is likely to be dominated by services, which are critical now. Rob Enderle explained this. Enderle GroupThe firm is a consulting services company in Bend, Ore.
He told TechNewsWorld: “If Google loses in the antitrust suit, Apple could suffer a significant financial loss, and this may set Apple back substantially on its apparent plan to become more of a service company.”
‘One-Trick Pony’
Mark N. Vena is the president and principal analyst of SmartTech Research San Jose is located in California.
TechNewsWorld reported that “services like Apple Music and iCloud are a significant contributor to revenue diversity.” “The company is putting a greater emphasis on services like Apple TV+, Arcade and Apple Music.”
Apple’s pivot to services will intensify as the technology landscape changes, he said, and become more vital for financial success.
Despite Apple’s financial success — its market capitalization at the turn of the year was $2.89 trillion — the company has been a bit of a “one trick pony,” maintained Charles King, the principal analyst at Pund-ITA technology advisory firm in Hayward, Calif.
TechNewsWorld reported that “while sales of second-level solutions like the Apple Watch continue growing, the iPhone is still the main source of revenue and income for the company.” “Services offerings and revenue have helped round out Apple, for both its investors and customers. With no new ‘killer’ Apple solutions on the horizon, successful services are a crucial part of the company’s portfolio.”
Ross Rubin, principal analyst with Reticle ResearchApple’s service business is relatively small in comparison to iPhone sales, according to, an advisory firm for consumer technology based in New York City. He told TechNewsWorld that the services business is growing, but it’s still a small part of Apple’s business.
DOJ Win, Apple Loss?
Apple’s financial services are affected by the outcome of Google’s antitrust suit.
Rubin explained that “Google accounts for a large portion of Apple’s revenue from services, and it is possible that Apple would be unable to charge the fees it does now to Google if it lost control of its default search engine.”
The ramifications of Google losing in court may extend beyond their financial relationship. Vena stated that if Google loses the antitrust suit, it could have a negative impact on Apple’s practices.
He added that “Apple may have to reevaluate its App Store business policies and practices, which could result in a change in its competitive environment.” It could also affect broader industry dynamics and partnerships, as well as collaborations.
He added, “However.” The specifics will depend on the nature and outcome of the antitrust accusations.
King said that the close monitoring of Apple’s activities by regulators is inevitable because of the connections between Apple and Google. The DOJ could decide to act quickly if it determines that Apple’s actions are warranted, given the political uncertainty of an election year.
Rubin emphasized, however, that Apple could benefit from a DOJ victory against Google. He said that there have been rumors about Apple developing its own search engines for years as a backup in case its relationship with Google soured. Apple would benefit because they could earn their own revenue and enforce their own privacy standards.
App Store Regulation
Rubin said that if regulators forced Apple loosen its grip on the distribution software through the App Store, then consumers would see a wider range of offerings. These include cloud-gaming apps that allow users to play multiple games in a single application, programs that emulate hardware other than Apple products, and greater integration of non-Apple services like Spotify, Peloton and Netflix.
Vena stated that “regulation changes to Apple’s AppStore business model could have a far-reaching effect.” “Implementing policies that encourage fair competition may stimulate innovation, and give users more choices.” More equitable terms may also benefit developers, encouraging a diverse ecosystem of apps.
He continued: “However, alterations could challenge Apple’s ability to control app distribution and potentially impact its revenue model.”
“Striking the right equilibrium will be critical to ensuring that competition is maintained without Apple’s being unable to maintain a safe and user-friendly App Store,” he said.
In the end, however, regulations are likely to have a negative impact on Apple’s revenue in the future. King explained that Apple derives significant financial benefits from its 15% to 30% commission on the majority of App Store in app purchases and paid downloads.
“The company fought against the EU’s Digital Marketing Act and lost, which requires vendors allow customers to download applications from other companies. “If similar regulations are adopted in the U.S. over time, they could significantly reduce Apple’s AppStore commissions,” he said.
Apple services are under threat from regulations Vijay Marolia“Apple’s Services Business is a friggin money tree,” declared, managing director and chief investment office of Regal Point Capital in Orlando, Fla. “Lawyers and regulators are trying their best to shake this tree, while the rest of Apple’s revenues stagnate.”
