Apple used to seem invincible, but the smartphone market has clearly hit a saturation point. How is Apple going to grow its sales? They hoped to have success by turning to a “service” model for the App Store and milk customers for more cash, but they are now facing new pressures on that front as well:
Late last year, Netflix rebelled against Apple’s fees, which can range from 15 percent to 30 percent. Analysts fear other companies may follow. And attorneys representing consumers in a pending Supreme Court case charge that Apple is an unfair monopolist in the market for iPhone apps. An adverse decision in that case could open a legal door that might eventually force Apple to cut its generous commissions.
That could spell more bad news for Apple, which is already reeling from a slump in iPhone sales that has knocked down its shares by 25 percent. The company has been positioning its booming digital-services business as its new profit engine. That plan could hit a snag if the app store takes a hit, since it currently generates about a third of the company’s services revenue.
Investors are now hanging onto Apple services as a “life preserver in the choppy seas” just as it’s about to float away, Macquarie Securities analyst Benjamin Schachter concluded after the Netflix.
Apple has doubled down on digital services as consumers cling to older iPhone models, hurting sales. Apple’s iPhone revenue this year is expected to drop by 15 percent from last year $141 billion, according to analysts surveyed by FactSet.