Microsoft plans to launch new app store for games to rival Apple and Google

In what analysts said could pose the ‘biggest potential threat’ to Apple’s App Store, Microsoft is gearing up to launch a games app store for iPhones and Androids in 2023 if government regulators approve its acquisition of Activision Blizzard is approved.

In an interview with Financial Times on Monday, Microsoft head of Gaming Phil Spencer said the tech giant could launch a new app store for games as early as next year if regulators approve the company’s $75 billion acquisition of Activision Blizzard.

The EU’s Digital Markets Act is anticipated to introduce fresh regulations mandating that Apple and Google permit other companies’ app stores starting from March 2024. Nevertheless, Microsoft is currently in the midst of grappling with regulators in the US, Europe, and the UK over concerns regarding anti-competitive behavior. However, the company could seamlessly modify its Xbox and Game Pass applications to sell mobile games and subscriptions.

Analysts at Morgan Stanley said on Tuesday that Microsoft’s potential launch of its own app store would pose an “immaterial risk” to Apple, although it should still be regarded as a “long-term threat” worth monitoring, CNBC reported.

“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,” the analysts said.

The lucrative App Store business could cut into Apple’s profit if Microsoft were to enter into the App Store business. For example, Apple generated $20.77 billion in services revenue during its fiscal first quarter of 2023 alone.

Although Microsoft may successfully acquire Activision Blizzard and establish an app store, Morgan Stanley analysts remain unconvinced that this development would pose a threat to Apple.

As per 2022 reports, Microsoft and Activision Blizzard’s contribution to Apple’s overall revenue was deemed negligible, as their combined revenue accounted for less than 1% of Apple Services’ revenue.

“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 in a Tuesday note.

In January 2022, Microsoft acquired video game giant Activision Blizzard in a $68.7 billion all-cash deal. Microsoft said the acquisition would bolster its Game Pass portfolio with plans to launch Activision Blizzard games into Game Pass, which has reached a new milestone of over 25 million subscribers.