Should Apple’s regulatory issues affect investors?

Should Apple's regulatory issues affect investors?

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Brian Withers: Moving on to Apple. I think people now are familiar with a little company called Apple. Its iOS App Store is thriving. It is just been a huge boon. Looking at over the last 12 months of 2020, an independent study showed that sales on the App Store ecosystem grew to $643 billion, up 24 percent despite hardships of COVID around the world. So Apple’s developers are making more than double Apple’s overall revenue.

Small developers have especially thrived on the platform. Those are ones that are defined as have fewer than a million downloads, and less than $1 million of earnings across all apps. This group of small developers makes up 90 percent of all developers on the platform. A quarter of those have grown their earnings for 25 percent each year for the past five years. What’s cool is these developers get earnings typically from more than 40 different countries.

Apple is continuing to fuel the growth with its App Store, with even more powerful application software development kits. Its augmented reality software development kit is now available. It’s super cool. You take a couple of pictures, and then all of a sudden you have a 3D image that you can manipulate on the screen. These are really powerful applications.

I just continue to be amazed at the results that the Apple can bring, and its amazing scale it can bring, and the global reach it has. Brian Stoffel: You didn’t even throw in the heartwarming story-

Brian Withers: Oh I didn’t. Brian Stoffel: -that you said you were going to include about an App designed to help people who are blind or have low vision see things. I mean, truly there’s some pretty neat things going on within this App Store.

But here’s my question. The App Store’s what you’re talking about. The App Store also happens to be the major thing that’s in the crosshairs of regulators, both in the United States, and in Europe. Because they say that by owning the App Store, and then also developing their own apps or having partnerships with certain companies that they might get more revenue from, they are favoring themselves over smaller players. Now what you just said makes me think that maybe that’s not the case. How should investors think about this? Brian Withers: Yeah. It seems like everybody is gunning for Apple right now, the U.S. government, there’s courtroom battles. Epic Games, the maker of Fortnite has been the most in the news. They’ve sued in the United States, Europe, Australia, and the U.K. for antitrust. Mainly because Epic can’t get access to the Apple ecosystem in the iPhones without going through Apple and paying a 30 percent cut.

Now, Apple, you may think, “Oh, well that’s just the way they can do that off on the side.” But Apple even prohibits what they call sideloading, and it really forces developers to have to use the App Store not only for initial sales on the platform, but ongoing in-app purchases. There have been a number of complaints by Spotify, Facebook, Epic Games, and the courtroom battle in the U.S. just concluded at the end of May, and we expect a decision in the next couple of months. In Europe, the European Commission issued charges that Apple violated antitrust laws. There’s some bills going through Congress. One of the provisions known as the American Innovation and Choice Online Act could further limit Apple’s ability to control their App Store, the limit to access there. In Europe, there’s an act going through the EU called the Digital Markets Act, which also limits provisions for sideloading.

The question is, there is all this stuff going on. Should investors be worried? I don’t think so. [laughs] Looking back at the Microsoft antitrust case, and I encourage you if you are an Apple’s shareholder, go look this up. This thing drug on for years. Even after it was initially decided, Apple [meant to say Microsoft] appealed, and eventually won. I mean, it was almost like this decade-long battle. At the end of the day, Apple [meant to say Microsoft] ended up agreeing to some different things that helped at least allay the fears that they were being a massive monopolistic entity. But in the meantime, [laughs] while the court battle was going on, they continued their behavior.

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