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Morgan Stanley Says Microsoft App Store Could Bite Into Apple

 |  March 21, 2023

Microsoft app store could potentially pose a major threat to AppleMorgan Stanley says.

Analysts for the investment firm said in a note to investors Tuesday (March 21) that if Microsoft proceeds with plans to launch a mobile app game store — in tandem with the advent of the European Union’s Digital Market Act (DMA) — Apple could face significant competition.

“If we took a ‘worst case’ view of the world and said the potential Microsoft app store could take all EU gaming revenue from the Apple App Store — given the focus of the DMA is just in Europe, for now — that would equate to 8% of App Store revenue, 2% of Apple Services revenue, and a ~1% hit to Apple company-level revenue and EPS,” said the analysts, whose comments were reported by CNBC.

Read more: The Microsoft Open App Store Principles in Eight Points

The news comes one day after reports that Microsoft was planning to open a games store for iPhone and Android phones in a bid to compete with Apple and Google.

Speaking to the Financial Times, Microsoft Gaming CEO Phil Spencer said the launch could come as soon as next year, provided regulators give the greenlight to his company’s $75 billion purchase of Activision Blizzard.

Next year will also see the EU begin enforcement of new rules under the DMA, which will make Apple and Google open their platforms to third-party app stores.

“We want to be in a position to offer Xbox and content from both us and our third-party partners across any screen where somebody would want to play,” said Spencer. “Today, we can’t do that on mobile devices but we want to build towards a world that we think will be coming where those devices are opened up.”

Assuming Microsoft’s purchase of Activision proceeds and it does launch its app store, the Morgan Stanley analysts did not seem that concerned about its ultimate impact on Apple.

Last year, they said, Microsoft and Activision had an “immaterial impact” on Apple’s company-level revenue, accounting for less than 1% of total Apple Services revenue combined.

“We estimate the impact of a potential Microsoft App Store on the iPhone would be limited to <3% of App Store revenue and <0.5% of EPS, but it still represents the biggest potential threat to the App Store today,” they wrote.