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App Store As Apple’s WWDC Kicks Off Services In the Spotlight

As Apple’s WWDC Kicks Off, App Store, Services In the Spotlight

June 07, 2021 at 04:18PM
by PYMNTS

Monday (June 7) marks the kickoff of Apple’s Worldwide Developer’s Conference, a weeklong confab, being held online (due to the coronavirus).

And during that event, as is customary, the company will train the spotlight on what’s new, what’s upcoming — and of course, what’s going to create considerable buzz as Apple seeks to forge an ever-connected economy of its own, an ecosystem that, of course, includes (and needs!) developers.

But it is the relationship with developers that may be the buzz — where the courtroom battle between Apple and Epic Games has concluded (the trial, anyway) — and the App Store (and software), and the ongoing debate over privacy, will no doubt be drawn into sharper focus.

As for the hardware launches, the tech giant is widely expected to announce a new version of the MacBook Pro. And amid the speculation of what else might be new, sites like CNN have anticipated that the company may also introduce a new iteration of its AirPods.

Moving Beyond The Macs And The AirPods 

Beyond the hardware, it’s likely we’ll see some discussion of privacy. Recall the fact that last year, at the same WWDC event, Apple announced an update to its operating system that gives users the ability to let apps track them as they wield their iPhones, or keep them from doing so (in terms of mechanics, those users would be consenting to advertising identifiers known IDFAs). And that’s a change that has stirred some pushback from at least some developers.

As has been reported in this space, some mobile app developers have been looking to sidestep Apple’s new privacy rules. Those developers may seek to use “device fingerprinting” instead — in an effort to preserve advertising-related revenues, at least for them, but would run up against Apple’s policy — which in turn would lead to friction as apps might be kicked off the App Store.

In terms of timing, WWDC is coming just weeks after the epic (pun only slightly intended) trial against the firm behind Fortnite, Epic Games. At the heart of that trial was, and still is, the 30 percent commission that Apple garners from its developers.

The verdict has yet to be rendered, via judge Yvonne Gonzalez. If the ruling goes against Apple, the company might be forced to let developers place their apps on Apple devices without the App Store, which would effectively cut down a revenue stream for Apple.

And though Apple doesn’t break out its App Store economics (not entirely, anyway), a posting on the company’s site earlier this month shows just how huge the “App Store ecosystem” (as it’s defined by the company) has become.

The Exploding (App) Ecosystem

The company said that the ecosystem facilitated $643 billion in billings and sales during 2020, a 24 percent gain over the previous year, as found via independent study by Analysis Group.

Apple maintains that smaller developers have benefitted through the development of this ecosystem, defined as those developers with fewer than one million downloads and less than $1 million in earnings generated from their apps annually.

“The number of small developers worldwide has grown by 40 percent since 2015 — and they make up more than 90 percent of App Store developers,” according to the release. More than 1 in 4 smaller developers on the App store have grown their earnings by at least 25 percent annually through each of the past five years.

These stats, displayed ahead of WWDC, represent Tim Cook & Co.’s bid to show that the connected economy is a tide that lifts all boats. The blurring of the lines between hardware and software, we contend, gets easier, and in fact is made possible, via apps.

Through the past few years, Apple has been pivoting away from its roots in hardware, in a bid to become a more services-oriented firm.

For Apple, the lure is there to keep users using apps and subscriptions and bundled services — services, after all, have in past quarters garnered gross margins north of 80 percent, as compared to hardware at around 30 percent.

In the latest quarter, Apple said its services segment stood at $16.9 billion in its latest fiscal second quarter, compared to $13.4 billion a year ago — and management said demand for App Store and subscriptions, such as Apple Music, have been strong. Chief Financial Officer Luca Maestri said during the post-earnings-release conference call that paid subscriptions grew by 145 million in the past year, adding 40 million in the latest quarter.

The connected economy, the ecosystem Apple is forging (with a sticky subscriber base) hinges on developers, and the fortunes of smaller developers, it seems, hinge on Apple. WWDC will likely only sharpen focus on the push and pull between them.

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