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Morgan Stanley analysts say that a potential Microsoft iPhone app store would initially have only a small impact on Apple if it ever launches — but it’s a potentially strong competitor in the longer term.
Microsoft gaming chief Phil Spencer recently announced that Microsoft is planning an App Store that would bring Xbox games to the iPhone. The intention is to launch a rival store as soon as the forthcoming EU Digital Markets Act comes in to force in 2024.
Now in a note to investors seen by AppleInsider, Morgan Stanley notes that the announcement contained very little detail. The whole Microsoft App Store is also reportedly conditional on Microsoft being able to close its Activision Blizzard acquisition, which has been provisionally blocked by UK regulators.
“Additionally, there are several other unknowns as it relates to Apple’s allowance of 3rd party App Stores on iOS devices in Europe,” say Morgan Stanley analysts. Those include whether “Apple charges a fee for purchases made on third party app stores,” and whether |developers would be allowed to price apps lower on third party app stores.”
There is also a question over whether developers “would have to choose which app store to sell their app on,” and “whether Apple will allow third party payment systems for all applications in the App Store.”
“All of these factors could meaningfully change what the potential impact is to Apple,” say the analysts.
Most of this uncertainty could apply to any rival App Store, but Microsoft is a very well known brand, and Morgan Stanley says it has a good leadership team.
“We believe a potential MSFT app store would be an immaterial risk to AAPL at just 3% of App Store revs and
“If we took a ‘worst case’ view of the world and said the potential Microsoft app store could take all EU gaming revenue from the Apple App Store,” they continue, “that would equate to 8% of App Store revenue, 2% of Apple Services revenue, and a ~1% hit to Apple company-level revenue and EPS.”
Morgan Stanley also conducted a survey in the US and China, which says that fewer than 30% of Apple users “would be willing to purchase apps directly from a developer website.” The survey also said that apps would have be priced around 35% cheaper to make customers switch from Apple’s App Store.
Europe’s Digital Markets Act covers more than alternative App Stores. Its regulations may also require Apple to open up its Messages service.
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