Apple's 5% iOS fee cut in China: These companies are most affected

Investing.com -- Apple’s decision to cut iOS commissions in China by 5ppt will modestly boost earnings for several major internet platforms, according to Morgan Stanley analyst Gary Yu.

The iPhone maker lowered its standard App Store take rate in China to 25%, effective March 15, after discussions with regulators.

For “qualified transactions under App Store Small Business Program and Mini Apps Partner Program, and auto-renewals after the first year,” the commission will fall to 12% from 15%, Morgan Stanley said.

Yu wrote that the change “should reduce channel fees and lift net profit for internet companies,” estimating a 0.4%-1.9% earnings uplift for Tencent, NetEase, Tencent Music Entertainment, Kuaishou and Baidu Zhihuang (BZ). Bilibili, he added, could see a 3%-4% lift “given its relatively lower margin vs. peers.”

The degree of benefit, Yu explained, depends on each company’s net margin and how much of its revenue comes from iOS in-app purchases.

“We think this directly benefits internet companies that rely on in-app purchases, as the fee cut should flow through to the bottom line,” he wrote.

Morgan Stanley also highlighted the possibility that Android app stores could follow Apple’s move, since it stemmed from regulatory engagement.

“We think games will see the most upside if Android follows,” Yu wrote, while noting the effect may be muted because “most companies may already [have] developed their own channel in Android.”

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