Dividends and Fortnite maker Epic Games sues Apple after removal of game from App Store

Sometimes law suits give you the investor a deeper understanding of how the business works. For example, if you own Apple shares directly or indirectly, one of the reasons for holding the company is the increasing dollars spent in the service component of their revenue.

In an article by Stephen Nellis and Munsif Vengattil of Reuters, Apple removed a popular video game Fortnite from its App store for violating the company’s in-app payment guidelines. Epic Games sued to try to change Apple policy.

Apple takes a cut between 15% and 30% for most app subscriptions and payments made inside apps. although there are some exceptions. Analysts believe games are the biggest contributor to spending inside the App store which is the largest component of Apple’s $46.3 billion services segment.

Epic’s free-to-play battle royal video game Fortnite has reached massive popularity among young games since its launch in 2017. Epic Games is headquartered in North Carolina and is partly owned by Chinese internet giant Tencent.

In July 2020, Fortnite had 2 million downloads in Apple’s App Store and Google’s Play Store, but according to mobile analytics firm SensorTower, Apple users spent $34 million while Google users spent $2 million.

Linking to dividend paying stocks, all companies love subscriptions because it is recurring income which if the company is successful is renewed on a yearly basis. Then it is up to the company to increase the add ons for more income. Part of the success of Apple is the services business, however once you are in, it is hard to get out even if you want to. The ecosystem is powerful or captures people for a long time, for an investor that is good news. For the subscriber one hopes they gain value from it. If the subscribers continue to renew at high rates, then holding the stock is a good thing.

There are more questions than answers, till the next time – to raising questions.

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