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In a week dominated by earnings buzz, a seismic shift in the app economy flew under the radar: a federal court gutted Apple Inc's (NASDAQ:AAPL) 27% commission on alternative in-app payments – handing Epic a big win and developers a rare moment of leverage.
JPMorgan analyst Cory A. Carpenter says the ruling didn't get nearly the attention it deserved.
After a multi-year legal saga, Apple's attempt to cling to commissions on external payments has unraveled. The latest ruling declares that Apple cannot charge a commission on alternative payments, effective immediately. That's already materialized in Spotify Technology SA's (NYSE:SPOT) latest app update, which Carpenter notes was approved without commission fees.
Developers are expected to jump on the opportunity. We expect “developers to flood the app store with similar updates in the coming days," said Carpenter.
Apple is appealing the decision. But unlike before, it must comply in the meantime—developers have at least two months to implement zero-commission alternatives unless the Ninth Circuit grants a stay.
Meanwhile, "Google Play transactions are not impacted by this ruling." That's because Alphabet Inc‘s (NASDAQ:GOOGL) (NASDAQ:GOOG) Google already offers its "User Choice" billing in many countries, with slightly lower fees – 11% for subscriptions and 26% for in-app purchases.
Carpenter points out that "Google's subscription service fee of 15% is already half that of Apple's 30% service fee."
If the ruling holds, developers stand to benefit. Carpenter estimates annual margin boosts of:
AppLovin Corp (NASDAQ:APP) may also gain indirectly as developers redirect savings to user acquisition.
A decision on the stay could take two months. But for now, the power dynamic has shifted – if only temporarily.
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