Here’s How Bad the Supreme Court’s App Store Decision Could Be for Apple
A recent U.S. Supreme Court decision may eventually force Apple to make big changes to its App Store, resulting in lower profits, according to an analyst report.
This week’s court ruling, which opened the door to consumers and app developers filing antitrust lawsuits against Apple over its App Store policies, could cost the company a lot of money, Morgan Stanley[/hotlink] analyst Katy Huberty told investors this week.
In a worst-case scenario, following a future legal defeat, Apple would be forced to change its policies so that it earns less money on each App Store purchase. Or it may be required to let rival sellers of iOS apps into the App Store, creating competition that the company hasn’t been faced with since the App Store’s opening.
The App Store, which opened in 2008, has been a growing source of revenue for Apple, which collects a 30% commission on all app sales. The marketplace features millions of apps for everything from navigation to news to games.
The App Store is also the only app marketplace available to iPhone and iPad users. Because of the lack of competition, some critics argue that Apple has too much control over the revenue that developers earn.
Huberty cautioned that nothing will change for the Apple’s App Store in the near term. And even if Apple faces future lawsuits, it won’t necessarily have to deal with a worst-case scenario.
At best, Huberty said, Apple would win any antitrust lawsuit, leaving current App Store policies intact. A second “bad but not worst-case scenario” would be for Apple to lose a future lawsuit and be required to pay damages to consumers or app developers for violating antitrust laws, but otherwise be free to leave the store’s broader policies intact.
Apple has been silent about the Supreme Court’s ruling and didn’t respond to request by Fortune for comment on the decision.
Huberty said that since the Supreme Court only opened the door to lawsuits, Apple is unlikely to have to change its business practices for at least several years. It’s only after those lawsuits are decided that things could change.
The expected “drawn-out legal battles [could] take years to resolve,” Huberty said, “but the ultimate ramifications could be meaningful.”