Should Mobile Gaming Stocks Worry about Apple’s In-App Downloads Settlement?

Should Mobile Gaming Stocks Worry about Apple’s In-App Downloads Settlement?

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Apple's paying $33 million to angry parents. Could this signal trouble for stocks that profit from in-app downloads? 

By now we're familiar with the story. Mobile gaming stocks certainly are. An unwitting parent opens up a game on their iPhone thinking it will help keep their child occupied in the car, grocery line, doctors office… and in 30 short minutes they have quietly and unassumingly tripled the phone bill (or worse). 

In their rush to monetize, social media companies and game developers began releasing in-app purchases that you can buy to improve your gaming experience: things like extra lives, special weapons, or virtual pets.

These add-ons have become extremely lucrative. Popular game Candy Crush alone is estimated to bring in about $900,000 per day. That's been enough revenue to fuel speculation about a potential IPO for Candy Crush's publisher, King. 

Unfortunately for tech companies that produce apps like them, parents have finally figured out a way to fight back.

While there is lots of documentation to suggest that a company like Apple (AAPL) has already been pretty generous when it comes to issuing refunds to angry parents, the Federal Trade Commission thinks that's not enough. Yesterday Apple reached a settlement with the group, saying it would pay about $33 million to the parents of app-binging children.

Authorities all over the world have been reacting to the problem. A case in Germany recently made it to the nation's highest court, which went to so far as to ban some online advertising for in-app products.  

Now, Apple made over $10 billion on the App store in 2013, so this is really just a drop in the bucket. And the tech stock actually rose over 2% during the day, perhaps due to surging demand for the iPhone 5s in China.

But as for the wild party of in-app profit taking? Looks like the parents came home early. 

Interested in how in-app downloads impact mobile gaming stocks? We gathered a list of some of the major players who produce smartphones, games and app stores. 

Click on the interactive chart below to view data over time. 

Do you think that companies that rely on in-app downloads are in trouble? Use the list below to begin your analysis.

1. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets PCs, mobile devices, and portable digital music players, and sells related software, services, and third-party digital applications. Market cap at $503.94B, most recent closing price at $555.72.
 

 

2. Google Inc. (GOOG, Earnings, Analysts, Financials): Google is the world's most popular search engine. Market cap at $383.20B, most recent closing price at $1153.47.
 

 

3. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $306.54B, most recent closing price at $36.2.
 

 

4. Zynga, Inc. (ZNGA, Earnings, Analysts, Financials): Develops, markets, and operates online social games as live services on the Internet, social networking sites, and mobile platforms. Market cap at $3.24B, most recent closing price at $3.69.
 

 

5. Electronic Arts Inc. (EA, Earnings, Analysts, Financials): Develops, markets, publishes, and distributes game software and content for video game consoles, personal computers, mobile phones, tablets and electronic readers, hand held game players, and the Internet. Market cap at $6.75B, most recent closing price at $21.36.
 

 

(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)

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One Response to “Should Mobile Gaming Stocks Worry about Apple’s In-App Downloads Settlement?”

  1. priya says:

    In the proposed settlement, Apple will provide iTunes credit to as many as 23 million customers whose children made "in-app" transactions for virtual goods without their parents' knowledge. Great post.

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