- Apple stands to lose a huge amount of revenue after Netflix dumped iTunes billing.
- Netflix is currently the highest wholesale app on the App Store and has to hand Apple up to 30 % of user subscriptions billed through iTunes
- The streaming giant will force new and used users through its website rather than iTunes.
Apple had a rough time over the festive period.
In late December, VentureBeat revealed that Netflix would start forcing new and lapsed iOS users to pay for the streaming service through its website, rather than through iTunes.
On Wednesday, Apple issued a shock revenue warning after iPhone sales and China's economy were slower than expected.
The Netflix development does not seem like a big deal, except that Apple is a consi the amount of money from the streaming service thanks to its 30% subscriptions, in-app content, and one-off payments for anything through its App Store.
Apple's sweet talk about its $ 10.8 billion services business was totally undermined by Netflix
Basically, if you pay for stuff on apps through Apple, the developer has to hand over or revenue to Apple . This applies to digital content businesses like mobile games and music and streaming services rather than apps like Uber or Airbnb, which provide real-world services. Netflix is hugely popular and, in the US, it earned more revenue through the App Store than any other app, according to November data from SensorTower. We can assume then that it's also the top-earning third-party app for Apple. Further figures suggest Apple could end up redeeming $ 256 million in potential annual revenue thanks to Netflix customizing iTunes billing. So Apple is about to lose a big chunk of cash from the App Store
Here's what might look like, visualized
Analysts at Nomura noted that there's a precedent for Netflix's move: Spotify has been asking subscribers for years to switch away from paying through Apple. The analysts put together a chart, compiled with data from SensorTower and Instinet, showing just how affected the App Store revenue.
This chart shows that Apple will feel a lot bigger from Netflix than Spotify:
Nomura / Business Insider
This isn't particularly good news for Apple, which is currently trying to persuade investors that its services business can make up for its slowing iPhone revenues. Apple counts revenue from the App Store as part of its services business. It also includes the money it makes from iCloud, AppleCare, and Apple Music.
Business Insider estimates that revenue from the App Store accounts for almost 40% or Apple's services business. You can see how we worked out here. Netflix may not include that number, but it might be a trend for other big subscription and content businesses – like major news outlets or Tinder – likewise trying to bypass the iTunes billing process.