Tuesday, June 16, 2020

Apple promotes the App Store while iPhone sales are levelling off - here's why

A month ago, we heard about dipping iPhone sales. Not Apple has released a study that highlights the value of the App Store as a potent window for retail of physical goods, ride-hailing and advertising. During 2019 the store spurred business worth $458 billion (roughly Rs.34.8 lakh crore) in sales from which the tech giant made no commission. 

The study, shared by Apple from its Newsroom, claims that the App Store has had an even broader impact on the business, generating $519 billion (Rs.39.4 lakh crore approximately) in billings and sales during 2019. Conducted by the economic research company Analysis Group, the study says roughly $413 billion came from physical goods and services such as music and video subscriptions as well as in-app purchases for games. 

Who's making money from App Store?

"The study reveals that the direct payments made to developers from Apple are only a fraction of the vast total when sales from other sources, such as physical goods and services, are calculated. Because Apple only receives a commission from billings associated with digital goods and services, more than 85% of the $519 billion total accrues solely to third-party developers and businesses of all sizes," the study says. 

The study backed by Apple also highlights that the highest value categories were mobile commerce apps, digital goods and services apps and in-app advertising. The results bring forth the full impact of the company's app-based economy which spreads across 175 countries. 

App Store infographic for 2019

It also notes that only $61 billion constitutes digital items from which Apple receives a commission of 30% or 15% in case of longer subscriptions. Of this, mobile games and in-app purchases makes up the biggest chunk of approximately $45 billion. From the rest of the apps, be it ride-hailing or food delivery to retailing of mobile phones or simple eCommerce, Apple charges no cut from the business that generated $413 billion in 2019 alone. 

What's prompting this study?

While these figures are generally in sync with what we know on a quarterly basis from the App Store, this is the first time that the company has deemed it necessary to offer a breakdown of the numbers. Maybe because Apple wants not just the developers but also the regulators to consider the App Store as a stand-alone economy beyond that of device sales. 

It is no secret that the iPhone maker is among large tech companies under a regulatory scanner by the US Administration under the anti-competition laws. The Department of Justice and the Federal Trade Commission have initiated closer scrutiny to ascertain whether Apple, Amazon, Facebook, Google, and Microsoft wield too much power over their ecosystems. 

Among the above-named companies, Apple has faced the flak over the 30% cut from apps on its ecosystem, with rivals such as Spotify and some developers who claim that the company runs the App Store in a monopolistic fashion. The European Union is already probing an antitrust complaint from Spotify against Apple, which is probably what prompted some friendly measures such as getting Siri to support the music streaming application of the Swedish company. 

Apple CEO Tim Cook claims in a prepared statement contained in the report that the App Store was a place for innovators to bring their ideas to life and users to take these trusted tools to enhance their own experience. He went on to suggest that in an "unsettled time" the App Store provides opportunities for entrepreneurs to foster innovation, create jobs and propel economic growth. 

Just so we remember, the App Store was launched in 2008 and currently holds more than two million apps with over 500 million visits each week from across 175 countries. 

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