Apple’s App Store growth is slowing


Tim Cook at WWDC21 on June 7, 2021.

Source: Apple

Every January, Apple releases the total amount of money App Store developers have made since 2008, a data point that allows analysts and Apple investors to get an idea of ​​how much money the App Store is making.

This year’s revelation suggests that Apple’s App Store growth has leveled off.

On Tuesday, Apple said it paid $320 billion to developers, up from $260 billion last year, a $60 billion jump. Developers receive between 70% and 85% of gross sales, depending on whether they qualify for Apple’s reduced rate.

If all developers paid a 30% discount to Apple, Apple’s App Store could bring in more than $85 billion by 2022, according to an analysis by CNBC. If Apple’s commissions were all 15%, the App Store’s estimated gross revenue would be lower, about $70 billion.

It’s the same number of sales Apple suggested with its data point last year, when the company said it paid developers $60 billion by 2021.

This is a rough estimate that can vary because it’s unclear how much developers pay the lower 15% discount instead of the 30% discount, and because the stats Apple shares have been rounded up.

Attempts to extrapolate the size of the App Store business from developer revenues are inaccurate, Apple said, because the commission ranges from 15% to 30%, and the vast majority of developers pay the lower commission under the App Store Small Business program that offers a lower discount for app makers who earn less than $1 million per year.

Apple said in its release that 2022 was a “record year” for the App Store, revealing 900 million subscriptions, up from 745 million subscriptions in 2021. Apple’s stats include everyone who subscribes to a service through Apple’s App Store, not just its own first-party services like Apple TV+ and Music.

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But Tuesday’s data point underscores that App Store growth slowed last year, which is important to investors because the App Store is an important part of Apple’s services business and is a profit engine for the company.

Apple’s services business grew to $78.1 billion in fiscal 2022, up 14%. But that was a significant slowdown from the 27% growth rate the division posted in fiscal 2021.

Apple faces tough comparisons with higher app usage and sales in 2021 and 2020 as people bought games and software as they weathered the Covid pandemic. Apple is also facing consumer uncertainty around the world as interest rates rise and economists worry about a possible recession.

Morgan Stanley analyst Erik Woodring tracks the App Store’s slowing growth. According to his data, App Store net sales fell for six consecutive months from June to November before growing again in December.

Woodring wrote in a note this month that app sales will grow in 2023 because year-over-year comparisons will be easier and as some app price increases in international markets late last year will benefit Apple.

“While App Store growth remains near its lowest level in history, and we recognize that global consumers continue to be challenged, we are encouraged to see the growth trajectory continue to improve after the September low,” wrote Woodring.

Correction: Apple said in its release that 2022 was a “record year” for the App Store and revealed 900 million subscriptions, up from 745 million subscriptions in 2021. An earlier version miscalculated a year.

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