Sorry, iPhone. Apple has a new favorite. Its services.
iPhone sales, once sure growth bets, have been on the decline. But Apple isn’t as worried as it might have been five or so years ago, as the company’s services side bears a bigger portion of revenue. However, some analysts are concerned that might be the very thing Apple should be worried about.
More companies are pushing back against what’s become known as the “Apple Tax,” where Apple takes up to a 30% cut of in-app purchases made from App Store products. For example, if someone downloads a news publishers app through the App Store and then purchases a subscription through that app, Apple takes a 30% cut of that revenue for the first year and 15% for every year after, as CNBC explains. Additionally, products like ebooks and other one-time purchases also warrant a 30% slice for Apple.
It’s a lucrative deal for Apple whose iPhones and iPads have pervaded the market. Until other companies started pushing back. Netflix and Spotify removed the ability for users to sign up for subscriptions through the app, CNBC reports. Netflix, by the way, is the App Store’s top grossing app, per TechCrunch. Amazon’s made similar moves to protect its movie and TV show rentals. Amazon-owned Kindle has restricted in-app purchasing of Kindle ebooks as well. Epic Games’s Fortnite, another top App Store grossing product, has fought back against Google and Android’s revenue-splitting by launching its Android app outside of the Google Play Store in the first place. It might be ready to take on Apple next.
Apple still has its own products to rely on. Apple Music is bringing in subscribers’ money without any cuts, and iTunes isn’t dead yet. And it’s worth noting that Apple does not survive on the back of Netflix or any other App Store offerings. Even giant Netflix only makes up less than 0.3% of total services revenue, according to CNBC. However, the growing resistance to the “Apple Tax” could serve as a warning for the next Netflix or Fortnite to avoid in-app purchases from the start or evade the App Store altogether.