Apple’s latest financial filings show that the company expects to be forced into allowing third-party App Store across Europe, starting in 2024.
Following the passing into law of its Digital Markets Act, the European Union has previously told Apple that it must open up its App Store to rivals. Apple has tried arguing against the ruling, or at least significant parts of it, but now expects App Store changes to be inevitable.
“The Company expects to make further business changes in the future, including as a result of legislative initiatives impacting the App Store,” says Apple in a Form 10-K, “such as the European Union (“EU”) Digital Markets Act, which the Company is required to comply with by March 2024.”
This notice comes in a section of the 10-K which describes risks to the company and its expected profitability.
“Future changes could also affect what the Company charges developers for access to its platforms, how it manages distribution of apps outside of the App Store,” it continues, “and how and to what extent it allows developers to communicate with consumers inside the App Store regarding alternative purchasing mechanisms.”
Overall, this “could reduce the volume of sales, and the commission that the Company earns on those sales, would decrease.” Apple says that if the commission Apple gets on App Store sales is reduced, “the Company’s business, results of operations and financial condition could be materially adversely affected.”
Apple has not commented since making this filing. However, it has previous strenuously argued against allowing third-party app stores and what’s called sideloading of apps.
As spotted by TechCrunch, analysts Morgan Stanley believe that the new wording in the 10-K form confirms the fact that third-party access is coming. Apple will “likely begin 3rd party app stores on device in Europe,” say the analysts.
“We believe Apple is well positioned to compete should these changes take place,” continued Morgan Stanley, “due to the App Store’s security, centralization, and convenience, limiting the potential user experience and/or P&L impact.
Separately, Morgan Stanley has been taking a longer-term view of Apple’s stock price than some analysts. Nonetheless, in October 2023 it dropped its price target to $210.