Tech heavyweight makes key changes in response to new laws
This giant is forced to make changes to some areas as the company squares off with European regulators.
Apple's (AAPL) - Get Free Report so-called Walled Garden, the computer giant's ecosystem of products, is being rattled by regulators.
The App Store is a key component of that ecosystem.
Launched alongside iPhone 3G in 2008 with 500 apps, Apple's App Store had a total of 2.24 million apps and games as of last year, according to Business of Apps.
The App Store is part of Apple Services, which includes Apple Pay and Apple Card; subscription services such as Apple TV+, Apple Music, Apple Arcade and iCloud; advertising; and payments from Alphabet's Google for search.
The segment posted $85.2 billion of revenue in fiscal 2023, which ended on Sept. 30, as Apple reported total revenue of $383 billion. Apple Services generates more revenue for the company than any other unit except for the iPhone.
Apple is scheduled to report fiscal-first-quarter earnings on Feb. 1. A year earlier, the company reported earnings of $1.88 a share on revenue of $117 billion.
EU names 'gatekeepers'
For the coming report, analysts surveyed by FactSet are calling for earnings of $2.10 a share, on sales of $118 billion.
Over the years, other companies have laid siege to the famed Walled Garden.
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Epic Games, maker of the popular videogame “Fortnite,” in 2020 filed an antitrust lawsuit, claiming that Apple was acting as an illegal monopolist by requiring consumers to get apps through its App Store and buy digital content inside an app using its own system.
A U.S. district judge rejected Epic’s claims in 2021 but found that Apple violated California's unfair-competition law by barring developers from "steering" users to make digital purchases that bypass Apple's in-app system, Reuters reported. Epic contends that its idea could save them money with lower commissions.
An appeals court upheld much of that decision in 2023, finding that Epic had "failed to prove the existence of substantially less restrictive alternatives" to Apple's system.
The judge's injunction requires Apple 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.
On Jan. 16 the U.S. Supreme Court declined to hear Apple’s appeal to the ruling.
Meanwhile, the European Union was busy passing the Digital Markets Act, which takes effect in March and is aimed at stopping anticompetitive practices implemented by big tech companies.
The act identifies 22 services across six companies as "core platform services" and the companies — Apple, Amazon (AMZN) - Get Free Report, Alphabet (GOOGL) - Get Free Report, Microsoft (MSFT) - Get Free Report, Facebook owner Meta Platforms (META) - Get Free Report and TikTok parent ByteDance — are deemed "gatekeepers."
The companies will have to comply with the law by March 6.
The DMA bars platforms from favoring their services over those of rivals, and tech companies will be barred from combining personal data across different services, among other things.
Apple sees 'new avenues for scams'
On Jan. 25, Apple announced changes to iOS, Safari, and the App Store in the EU, marking the first time in the company’s history that non-Apple-affiliated developers will be able to list and distribute apps in Apple’s App Store.
In addition to being able to list their programs, Apple is also slashing the fees it takes from developers.
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“The new options for processing payments and downloading apps on iOS open new avenues for malware, fraud and scams, illicit and harmful content, and other privacy and security threats,” the company said in a statement.
Apple said that users may have to share their payment information with additional parties, "creating more opportunities for bad actors to steal sensitive financial information."
“The DMA will open the gates of the internet to competition so that digital markets are fair and open,” EU industry chief Thierry Breton told Reuters. “Change is already happening. As from 7 March we will assess companies’ proposals, with the feedback of third parties.”
Breton added that “if the proposed solutions are not good enough, we will not hesitate to take strong action.”
Apple did not immediately respond to a request for comment, but in November the Cupertino, Calif., company filed to contest the decision by the European Commission and the Digital Markets Act.
The company challenged EU tech rules designating its five App Stores as a single core platform service subject to onerous obligations, Reuters reported on Jan. 8. Apple claimed aiming that EU regulators have misinterpreted and misapplied the new legislation.
Meta and TikTok had already filed appeals disputing the commission's decision to include their services.
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