Apple Says App Store Changes and Mobile Gaming Softness Affected Services Revenue

[MacRumors]

Softness in mobile gaming and Apple's changes to the App Store business model in some countries impacted the performance of the App Store, Apple CFO Kevan Parekh said during today's earnings call.

Apple's services revenue was $30.7 billion, a 12% increase over the $27.4 billion it earned in the year-ago quarter. Though the category saw growth, revenue came in under expectations, prompting analyst questions that led to Parekh's comments on the App Store.

We also had some factors that impacted the performance of the App Store. We did see some headwinds in mobile gaming, and then keep in mind, we also made some changes to the App Store business model in certain countries, and in the U.S., we do continue to operate under a court ruling impacting the link-out transactions. But we're pleased the Supreme Court will hear our appeal.

There have been App Store fee updates in Japan and Brazil as of late, with Apple collecting no fees on link-outs in the U.S. and lower fees from alternative app marketplace apps in the EU. Despite the rule changes, the App Store still set a June quarter revenue record. Apple saw double-digit growth in cloud services, video, payment services, and advertising, with a record level of Apple Pay users.

During the call, Apple also said it now has 1.5 billion paid subscriptions, with transacting and paid accounts hitting an all-time high.

Parekh said it wasn't the App Store alone that impacted services revenue, and Apple also took a hit from foreign exchange. Last year, Apple also had the theatrical release of F1, and no equivalent release this year, making for a tougher compare.

Services growth in the September quarter is expected to be similar to the June quarter when excluding an approximately 2.5 percentage point foreign exchange headwind.

Article Link: Apple Says App Store Changes and Mobile Gaming Softness Affected Services Revenue

 

[erikkfi]

Apple explaining to nervous investors why their services division only made $30.7 billion dollars is really something.

 

[egodspeed]

The 12% year-over-year growth is still strong. This sounds more like a mix of App Store changes, currency, and a difficult F1 comparison than a collapse in demand. The useful question is whether cloud, payments, and advertising can keep offsetting slower mobile gaming.

 

[artifex]

I wonder to what they attributed the headwinds in mobile gaming?

 

[Diopter]

Mobile gaming headwinds? So the in app purchase “casinos for kids” addiction is finally flattening a little? Thank goodness.

Apple knows most of its App Store games revenue comes from people addicted to paid game mechanics. It’s no different to slot/poker machine addiction.

 

[cateye]

Locked-in rent-seeking AppStore starting to wobble? Cry me a river.

 

[RALentz]

Apple has you focused on a year ago, when looking at last quarter is much more interesting.

Last quarter services made $31 billion, so this was a drop.

Even backing out FX headwinds of 2.5% this quarter would have at best been $31.5 billion.

That's not much sequential growth, just 1.5%. That's a rather problematic sign if one is focused on growth.

I am sure that Services still made hefty profit to help costs on the constrained memory and storage components. (I believe it's previously been said that Services margin is over 70%.)

-R

 

[RALentz]

I wonder to what they attributed the headwinds in mobile gaming?

I believe the alternative app stores in some countries and no-commission pay linkouts in the States.

-R