Why This Apple Expert Thinks App Store Can Survive Legislative And Regulatory Challenges

Zinger Key Points
  • Bills being considered in Congress could cost Apple 5% of its revenues from the App Store.
  • Expert says slim Democratic minorities will make congressional approval a challenge.

Apple, Inc.'s AAPL App Store has been in the eye of the storm for quite some time now, with developers taking up cudgels against the company for fleecing them off a fair share of what is due to them.

After warding off legal challenges thrown up by disgruntled developers, Cupertino may be facing its toughest challenge yet with regard to its App Stores. Bloomberg columnist and an Apple expert, Mark Gurman, however, feels the company may navigate through the issue without much of a hit.

How App Store Changes Will Impact Apple: Some lawmakers, who wield political clout, are clamoring to pass a bill in Congress that, if enacted, will deprive Apple of billions of dollars per year and also push the App Store to the brink, Gurman noted.

The two bills that will likely have implication for Apple's App Store are the "Open App Markets Act" and the "American Innovation and Choice Online Act," the Apple expert noted.

The first bill, Gurman said, will likely have the biggest impact, as it will allow what is called "sideloading," which would open the door to alternative App Stores and third-party payment systems.

Gurman estimates that it will cost Apple $20 billion in revenue per year. For the fiscal-year ending September 2022, the company is estimated to report revenues of $395.28 billion. This would mean, Apple stands to lose 5% of its revenues from the App Store changes lawmakers are seeking.

The second bill will prevent Apple from promoting its own software on the App Store over apps from third-party developers.

Related Link: Apple's Spring Event Could Come Sooner Than You Think: Major Launches Ahead

App Store May Survive Near-term: The bills have already been introduced, and to become laws, they have to go through a three-step approval, Gurman said. As is the case with any bill, they have to be approved by a super majority of senators and a majority of the full House and signed in to a law by President Joe Biden.

Given that the House and Senate have slim Democratic minorities, getting approval in either of the legislative bodies will be a challenge, Gurman said. Secondly, voting on these bills may not be a priority for Senate Majority Leader Chuck Schumer, he added.

"Based on everything already on the agenda, it seems highly unlikely that Congress will vote to turn these bills into a law this year. If it gets done, it will probably take a future Congress," Gurman wrote in his Power On newsletter.

Apple, therefore, will get by in the U.S. without any serious changes to the App Store, but in Europe, it may have to contend with the region's efforts to revise the App Store with alternative distribution and payment methods, he added.

Related Link: Why 7 Apple Analysts Say Investors Should Take A Bite Of The Stock After Q1 Blowout

Photo: Courtesy of Wolf Gang on Flickr

Market News and Data brought to you by Benzinga APIs
Posted In: NewsTechMediaApp StoreChuck SchumerJoe BidenMark Gurman
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!