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While EU iPhone and iPad users and rival app stores benefit from the changes, Apple could be exposed to a major threat.
iPhone maker Apple (NASDAQ: APPL) is preparing to let rival app stores on its phones and iPads in the European Union. The technology company plans to let other app stores on its smart gadgets in compliance with a new European competition law known as the Digital Markets Act (DMA). Enforcement of the law is expected to begin in mid-2024, and it requires tech giants to open their systems to competitors. This is to reduce monopoly and give more choices to consumers.
If this happens, users of Apple iPhones and iPads will have access to third-party software. Customers can download other software without going through the usual App Store. Also, users will be evading the technology company’s restrictions and the imposed commission on payments, which is as high as 30%.
Apple Faces Major Threat with Rival App Stores
While EU iPhone and iPad users and rival app stores benefit from the changes, Apple could be exposed to a major threat. The development could take a dip in the company’s exploding business as consumers are now presented with the option of not sticking with the App Store. The likes of Meta Platforms Inc(NASDAQ: META), Amazon.com Inc (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT). However, these third parties would need to go big on convincing users to forgo Apple’s own store. This may be a challenging process as many EU iPhone and iPad users are used to the long-existent App Store by Apple. Apart from working on letting customers install other apps without including the App Store, Apple is yet to decide on complying with other aspects of the European competition law. Some of the other law provisions include permitting alternative payment systems to their own.
Furthermore, Apple could be facing losses of billions of dollars in revenue when it finally onboards rival app stores. The company would not receive a commission on installments on the third-party systems. Meanwhile, estimates from Sensor Tower showed that about $10 billion worth of transactions were conducted through the App Store in 2021. According to a stock analyst at CFRA, Angelo Zino, Apple could see less than 0.2% of its total sales affected by competing rival app stores in Europe. Zino added:
“The ultimate impact will be minimal as most consumers are creatures of habit and are very satisfied with the platform. We expect a majority of consumers will keep the status quo by utilizing existing app store.”
At press time, Apple stock is down 0.27% to $145.07 in the pre-market trading session. Except for a 3.21% gain in the last five days, the company has been steadily declining. It has lost almost 19% over the past year and 18.08% since the year started.