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Why Apple Had To Make Another App Store Concession, And Could Face More

Facing antitrust scrutiny worldwide related to its App Store business practices, Apple (AAPL) has made a major change to its policies to settle a case in Japan. Meanwhile, it faces a new antitrust probe in India. Apple stock rose on Thursday.




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The Cupertino, Calif.-based company announced late Wednesday that it has settled an investigation by the Japan Fair Trade Commission. As part of the settlement, Apple agreed to allow developers of so-called “reader” apps to include an in-app link to their website for users to set up or manage an account. That will give those developers a chance to avoid paying Apple’s commission fees. The change will take effect early next year.

While the agreement was made with Japanese regulators, Apple will apply the change globally to all such media-consumption apps on the App Store. “Reader” apps provide previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music and video. The changes will affect companies such as Netflix (NFLX), Spotify Technology (SPOT) and others.

Apple said it will still require the use of its payment system for in-app purchases of digital goods and services.

Apple Stock In Record High Territory

In afternoon trading on the stock market today, Apple stock climbed a fraction, near 152.65. Apple stock hit an all-time high 154.98 on Wednesday.

CFRA Research analyst Angelo Zino said the change will have a notable impact on Apple’s services business but should put the company in a better light with regulators. The change only pertains to reader apps not video games, which are the biggest revenue generator for the App Store, he said.

“We estimate that reader apps make up less than 20% of the company’s App Store business so any potential change in consumer behavior won’t be material,” Zino said in a note to clients. “The bigger concern is if commission fees will be reduced for gaming purchases.”

Zino rates Apple stock as buy with a price target of 160.

Earlier App Store Changes

Apple’s App Store change for reader apps follows several other App Store changes announced last week in response to legal challenges.

On Aug. 26, Apple proposed several App Store changes to settle a 2019 federal class-action lawsuit brought by U.S. developers. Apple said it would give developers access to customer email addresses so they could inform them about alternatives to Apple’s payment system. However, developers still wouldn’t be able to promote alternative payment systems inside the apps.

Apple also launched the News Partner Program to support local journalism and help news organizations on the App Store.

Challenges In India, South Korea

Meanwhile, legislators in South Korea on Tuesday approved a bill that would require Apple and Alphabet‘s (GOOGL) Google to open their app stores to alternative payment systems.

And on Thursday, Reuters reported that Apple is facing an antitrust challenge in India. A complaint filed with Competition Commission of India accuses Apple of abusing its dominant position in the apps market by forcing developers to use its proprietary in-app purchase system. In that system, Apple charges a commission of up to 30%.

Apple also is facing App Store antitrust action in the U.S. and the European Union.

“Regulators continue to explore options for reining in what many see as an unhealthy monopoly on App Store payments, but the bottom-line impact of allowing third-party payments remains unclear,” Evercore ISI analyst Amit Daryanani said in a note to clients Thursday. He reiterated his outperform rating on Apple stock with a price target of 180.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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