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Days away from the launch of its next iPhone, Apple is dealing with a host of headaches
Apple (AAPL) on Tuesday said it will host its annual fall event on Sept. 14, where it’s widely expected to launch the iPhone 13, a new Apple Watch, and AirPods. But the widely anticipated event comes just when Apple is navigating controversies that could hinder how it operates for years to come.
Apple is seemingly immune to these controversies, though, as its stock price continues to ride to all-time highs as of Tuesday, before a tick down Wednesday that still left its market cap well above $2.5 trillion. What's more, analysts expect the upcoming iPhone 13 to be a massive hit for the tech giant.
“In the grand scheme of things, from an Apple user perspective, from an investor perspective, I think they're largely non-events,” Loup Ventures managing partner Gene Munster told Yahoo Finance, referring to recent antitrust and privacy backlashes against the tech giant.
Most pressing is Apple’s legal battle with “Fortnite” maker Epic Games over its App Store fees and mandate that certain developers use Apple’s proprietary payment system. A ruling in the case, expected in the coming weeks, could transform how Apple runs its digital store. It’s not just Epic that’s taking on the App Store, though. Apple is also reportedly facing probes by the Department of Justice and the European Union’s European Commission.
Outside of antitrust worries, Apple has faced pushback over its planned child protection software that will scan users’ iCloud accounts for images of child sexual abuse material. The feature has raised concerns among privacy and free speech advocates who say totalitarian governments could use it to root out political enemies and protesters.
But none of that seems to bother consumers or investors.
Apple’s antitrust fight isn’t spooking investors
Perhaps Apple’s biggest existential risk is its antitrust fight with Epic. The “Fortnite” maker sued the tech giant in August 2020, alleging that Apple’s App Store payment system and restrictions against third-party app stores violated antitrust laws. Specifically, Epic claims that consumers are hurt by Apple’s policy of forcing developers to use its payment system, which draws a 30% commission.
The trial wrapped up in May, and U.S. District Judge Yvonne Gonzalez Rogers is expected to announce her ruling in the coming weeks. Apple’s App Store generates billions of dollars in revenue, and developers like Epic have long complained about the 30% fee that Apple applies to each purchase made through the marketplace.
Apple has attempted to placate smaller developers by lowering the fee to 15% for companies that make less than $1 million per year, but that hasn’t slowed the criticism.
Last week, Apple announced that it will begin allowing developers of “reader” apps to link out to their own websites to allow users to set up and manage their accounts. Reader apps are those like Netflix, Spotify, or the Amazon Kindle app that let you view content you haven’t purchased through the Apple App Store. The change followed an investigation by the Japanese Fair Trade Commission, and applies to all reader apps globally.
While that would seemingly scare off investors, Apple doesn’t actually make much money off of those apps. Instead, the company gets most of its App Store revenue from games.
In August, Apple announced that it will now allow app developers to tell users how they can purchase items outside of the App Store via email. But developers like Spotify and Netflix have long created a workaround for this by only letting users sign up for their services outside of the App Store.
Still, the move is seen by analysts as a wise one on Apple’s part, as it continues to face pressure over its App Store policies.
“The recent concessions...that Apple has inked towards developers over the last few weeks is a smart move, as [CEO Tim] Cook and company see the writing on the wall that tweaks and fee changes must be made on areas of the App Store going forward,” Wedbush analyst Dan Ives told Yahoo Finance.
For investors, those changes don’t appear to be much of an issue, and users are seemingly unbothered by where they pay for apps or who gets a cut.
Developers, though, will continue to oppose Apple’s App Store policies.
“There's room for further adjustments to some of the App Store policies,” Munster said. “I think that those headlines are going to be part of the Apple story for probably the next year or two.”
Privacy troubles are stirring, but consumers are still buying iPhones
Apple has made privacy the cornerstone of its products for years, pushing its capabilities and policies in TV ads and billboards across the world.
But the company has been under fire as of late for its plans to scan users' iCloud accounts for images of child sexual abuse material. While the elimination of such content is admirable, privacy and cybersecurity experts say the process opened up Apple to potential abuse by restrictive governments like China’s Communist Party.
Cybersecurity experts say that Apple’s approach could allow such governments to find dissidents by forcing Apple to scan for additional content including protest material.
Apple has since said it will take more time to work out the basics of the feature, but it’s dealt a blow to the company’s reputation for maintaining user privacy.
Still, according to Ives, this isn’t likely to hurt sales of the iPhone 13.
“We do not see all these issues overshadowing the upcoming iPhone 13 launch, which we believe represents a massive 5G upgrade opportunity with roughly 25% of the Apple installed base not upgrading their phones in over 3.5 years,” Ives said.
Apple won’t be immune forever
While Apple’s controversies haven’t dinged its stock price, or sales of its devices, they could eventually add up, and begin to hurt the tech giant and its reputation for being more free of scandal than, say, Amazon or Facebook.
“I view corporate perception as a system of debits and credits and Apple built up many credits, but each negative debit chips away at the perception,” Patrick Moorhead, president of Moor Insights and Strategies, told Yahoo Finance.
“Consumers haven’t seemed to care about any of this lately as Apple’s credits significantly outweigh the debit, but over time, the crossover could happen," Moorhead said. “That would be a dark day for Apple investors, but we are a ways away from that point.”
In the meantime, Apple's stock may just keep on reaching new highs.
Daniel Howley is tech editor at Yahoo Finance.
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