Despite Apple widely touting its fast-growing Services division as a future source of growth, not all analysts are convinced. Bernstein analyst Toni Sacconaghi recently expressed the view that increasing resistance against Apple’s 70/30 App Store revenue share system will eventually harm its long-term growth prospects.
Writing to investors, Sacconaghi expressed concerns about a revolt among developers against what is known as the “Apple Tax”. Although the Services division grew by 18% during the final quarter of 2018, they are now increasingly getting feedback from investors who are worried about whether the App Store will be the next casualty.
He continued: “Certainly, the headlines in the last few months haven’t been encouraging. Netflix, Spotify, and Fortnite have all stopped / threatened to stop paying the so-called ‘Apple Tax’ of 15 to 30 percent on App Store revenues.”
Sacconaghi concedes though that the high share that Apple takes from App Store revenue was responsible for pushing the App Store to account for about 40% of total services growth in the first place.
Investors started becoming concerned last month after Netflix decided to drop the in-app billing feature from its iOS app for new clients. Other developers, including Epic Games, have also expressed unhappiness over the 70/30 revenue sharing system.
Although Sacconaghi acknowledges investors’ concerns in this regard, he still believes that the iPhone is the most important thing for Apple investors to be worried about. He added that he was not worried about a possible “disintermediation” of the App Store – though he didn’t examine the likelihood of other major firms following Netflix’s example.
Sacconaghi is, however, deeply concerned about future iPhone sales and is convinced that sales estimates for this device will have to be reduced even further.