Morgan Stanley analysts have stated that the proposed Microsoft app store for iOS may have a small initial impact on Apple if it is ever launched, but could become a strong competitor in the long term.
Survey reveals challenges for Microsoft app store as Morgan Stanley analysts weigh in on impact on Apple
Morgan Stanley analysts have weighed in on the potential impact of a Microsoft iPhone app store on Apple. According to a note seen by AppleInsider, the announcement made by Microsoft gaming chief Phil Spencer contained very little detail, and the entire Microsoft App Store is reportedly conditional on the company being able to close its Activision Blizzard acquisition, which has been provisionally blocked by UK regulators.
The analysts noted several unknowns related to Apple’s allowance of third-party app stores on iOS devices in Europe. These include whether Apple charges a fee for purchases made on third-party app stores, whether developers would be allowed to price apps lower on third-party app stores, and whether developers would have to choose which app store to sell their app on. Additionally, there is a question of whether Apple will allow third-party payment systems for all applications in the App Store. All of these factors could significantly impact the potential impact on Apple.
Despite this uncertainty, Morgan Stanley believes that Microsoft is a well-known brand and has a good leadership team. They estimate that a potential Microsoft app store would represent only 3% of App Store revenues and would not pose a significant risk to Apple. Even if the Microsoft app store were to take all EU gaming revenue from the Apple App Store, it would equate to 8% of App Store revenue, 2% of Apple Services revenue, and approximately a 1% hit to Apple company-level revenue and EPS.
Morgan Stanley also conducted a survey in the US and China that showed fewer than 30% of Apple users would be willing to purchase apps directly from a developer’s website. The survey also revealed that apps would have to be priced around 35% cheaper to make customers switch from Apple’s App Store.
It is worth noting that Europe’s Digital Markets Act covers more than alternative app stores. Its regulations may also require Apple to open up its Messages service. While it remains to be seen how this will impact Apple, it is clear that competition in the app store market will continue to heat up.
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