The App Store reportedly makes a cool $1 billion a week, but growth appears to be slowing, so what is the future path to success?
Jan. 21, 2020
What is Apple’s App Store?
The App Store is the digital distribution platform owned where customers can download and purchase applications and software for various Apple (NASDAQ: AAPL) products. The App Store is up against other tech giants like Google’s Play Store (NASDAQ: GOOGL), the Amazon Appstore (NASDAQ: AMZN), and Microsoft’s Windows Store (NASDAQ: MSFT).
How much profit does the App store generate?
While Apple doesn’t reveal the total revenue injected by its App store per year, it has published stats that indicate what the company pays to developers. The developers get 70% of the purchase price of an app in the digital platform, increasing to 85% in the second year of subscription.
Based on statistics released by Apple, they made an estimated $50 billion from the App Store in 2019, paying developers $35 billion. But, despite this multi-billion-dollar figure, the growth of the App store is declining. The 2019 statistics were only up 2.9% from 2018, marking a huge decline compared to the 30% payout in 2017. In comparison, Android users on Google Play spent around $29.3 billion and while that figure is lower than Apple’s, it was an increase of 18.1% on the year before.
What is the core of Apple’s success?
While the App Store itself isn’t the core of the company’s earnings, it is a crucial part that links many of its products together. Apple’s fourth-quarter figures for 2019 revealed revenue of $64 billion. Services revenue grew, while earnings from iPhones and Macs fell slightly compared to last year. Here is the breakdown for the fourth quarter:
- $33.362 billion in iPhones.
- Services hit a record of $12.511 billion.
- Its combined “wearables, home, and accessories” sales were $6.52 billion.
But the apple isn’t always delicious, with recent accusations that Apple is responsible for the App “underbelly”. There is an Apple Developer Enterprise Program designed specifically for businesses with hundreds of thousands of staff. By paying $300 a year for a license, you can distribute apps that have not been reviewed by the App Store. Therefore, as they don’t have any part in reviewing the software or checking permissions it might be tapping into, they could violate the iOS policies on user privacy, copyright, adult content, etc.
Other companies that use the App Store have been extremely unhappy with the payment system that imposes a 30% fee on the content-based apps, most famously Spotify. In the past, Apple has threatened to remove Spotify from the App Store, which Spotify says coincides with their promotion campaign season. Last year, the issue was raised with the European Commission to ensure a level playing field.
What’s next for Apple?
Last year, the company launched a gaming subscription service called Apple Arcade, a news platform dubbed Apple News+, an Apple-branded credit card, and its own Apple TV+ service – going up against Netflix (NASDAQ: NFLX) and Walt Disney Co (NYSE: DIS). Apple is anticipated to launch a 5G-enabled iPhone sometime this year, in a bid to revitalize its smartphone sales. For now, its services and revenues will continue to pump in money and possibly grow in the future.
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This article was written by Alsha Coppolina