Apple users unlikely to ditch App Store for cheaper alternatives, analyst says

Apple’s (AAPL) App Store may soon be competing for space on iPhones in Europe thanks to the European Union’s Digital Markets Act. The law, which goes into effect Jan. 11, 2023, with enforcement beginning in early 2024, could force Apple to allow users to install third-party app stores on their devices, circumventing Apple’s own digital storefront.

The problem, for Apple at least, is that if developers can take advantage of third-party app stores they’ll be able to bypass the 30% fees Apple charges on app sales and in-app purchases.

Without those fees, developers could charge consumers less for their apps, making Apple’s App Store less appealing overall. But according to Morgan Stanley Research’s Erik Woodring, iPhone and iPad owners are unlikely to ditch Apple’s storefront, even if it means saving some extra cash.

“From the consumer perspective, we see very little demand for alternatives to the App Store given the unmatched security, ease of use (centralization), and reliability the App Store provides,” Woodring wrote in a recent investor note.

The App Store charges developers a 30% fee for all app and in-app purchases that use Apple’s in-app payment system. Of course, the only way to make purchases via the App Store, in most cases, is via that system.

There are some exceptions to the 30% fee structure. App developers that make less than $1 million in app sales per year only pay 15% for each purchase. Subscription services, meanwhile, pay Apple 30% of the cost of the first year of a subscription. That then drops to 15% for each subsequent year.

Developers and regulators around the world have complained about Apple’s fees for years. In June, Apple introduced changes to its South Korean App Store that allows developers to offer their own payment options, cutting out Apple’s fees.

The E.U.’s law goes a step further, allowing customers to buy apps from third-party app stores. According to Bloomberg, Apple is currently preparing the appropriate software updates to enable third-party stores.