Barring a settlement, the end is three weeks away — and a foregone conclusion, says analyst Daniel Ives.
From a note to clients that landed on my desktop Sunday:
“Game of Thrones” Court Battle Between Epic and Apple Kick Off This Week This week Epic Games, the maker of Fortnite, will officially begin its much anticipated court battle royale with Apple in Northern District of California that we ultimately believe Cupertino will win while defending its golden jewel App Store ecosystem…
Our thoughts. Epic Games has taken a risky and calculated path in going after Apple at a time that Cook & Co. are under the bright spotlight both in the Beltway and in the EU (preliminary antitrust ruling filed this week) around its App Store stronghold and 30% fee structure.
While Epic will play into Fortnite’s massive installed base which is unrivaled and drum up support (through social media, etc), legally Apple has successfully defended its App Store moat again and again with this time being no different in our opinion.
From an investor perspective, the key services business and its $65 billion+ annual revenue stream for FY21 remain what we estimate is a $1.3 trillion valuation alone for this business and key to future monetization efforts with more bundling efforts on the horizon.
This is a high stakes game of poker being played as Apple needs to make sure the Epic challenge, which is very timely in light of anti-trust swirls and growing opposition to Big Tech within the Beltway, does not create a ripple effect which developers and regulators globally are watching carefully.
We will be watching this trial closely and the ultimate ruling likely in the next three weeks for any ripple effects that could negatively impact the App Store fee structure going forward which we view as fortress-like despite the Epic noise. A negative ruling vs. Apple would be a major gut punch to the App Store crown jewel monetization engine.
Maintains Outperform rating and Street-high $185 price target.