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Home / Technology / Why Netflix removes iTunes billing from the iPhone app should scare Apple

Why Netflix removes iTunes billing from the iPhone app should scare Apple



Many people pay about $ 11 per month for Netflix.

In exchange, they get a large library of TV shows, movies and original content they can stream on multiple devices, including iPhones and iPads.

But if someone subscribes to Netflix through the built-in billing system for iPhones and iPads, the streaming giant only gets 70% to 85% of the $ 11 a month.

The rest goes to Apple.

Apple's App Store is carefully controlled, and if an app developer wants to use Apple's billing infrastructure, Apple gets a sharp cut.

That brings us to the current situation: Netflix removed the iTunes billing option from its iPhone app, VentureBeat reported late last week.

That means if you download the Netflix app on an iPhone and want to pay to view content, instead of using fingerprints or face to count your iTunes account, you will be sent to a site and requested to sign up for a Netflix account.

This allows Netflix to keep 1

5% to 30% that Apple would otherwise have taken.

Also, Netflix is ​​not a smaller app in Apple's walled garden, according to Sensor Tower, an app analyst firm:

  • It was the No 1 Whole-Hour App on November's Apple App Store.
  • Netflix has collected about $ 1.4 billion through Apple and Google's app marketplaces.
  • In the third quarter, Netflix achieved 50 million new users, leading to over 600 million app installations worldwide.

Netflix is ​​a whale – and for years, Apple was able to take about 30% of its customers' money paid to the app just because they signed up for an iPhone or iPad.

This was an unsustainable situation from Netflix's perspective. The streaming giant goes into debt to create new shows and enter new markets, and it can't make millions of subscribers pay less because Apple is between it and someone who looks at the "Bird Box" on an iPhone.


Read more : How an invitation meeting at Apple's luxury loft in New York set the stage for one of the world's largest subscription companies


Many app developers I've talked about whether Apple's App Store cuts have strong feelings about the event. While some argue that 30% is a reasonable price for paying for secure and easy distribution to one billion units, others have claimed that the cut is essentially drying out its margins and making it much more difficult to produce high quality software for iPhone and iPads without take advantage of tricks and purchases in the app.

This is one reason why Apple a few years ago moved its terms a little – now if a customer subscribes to your app with regular payments, Apple's portion of sales falls to 15% from 30 %.

But Netflix's move suggests that Apple's reduced fee after one year was not enough to make it happy. If Netflix is ​​successful and does not see a drop in new registrations, expect other giants such as Spotify, HBO, or maybe Tinder to try a similar move.

Jaap Arriens / NurPhoto via Getty Images

Apple has highlighted the App Store as one of its biggest growth opportunities as iPhone sales slow, saying investors should think about the services Apple sells to existing customers, where crown jewel is the fees it collects from the App Store.

Netflix leaving Apple's platform is not a good sign of sustained growth. Remember, it's the best wholesaler on the App Store. "The move is a fraction negative to earnings, along with a psychological headwind for investors covering the topic of Apple as a service," wrote Gene Munster, Loup Venture's founder, in an email on Monday.

"That said, we think Spotify is the only other brand that is in danger of leaving, and Apple as a service theme is intact," he continued.

Of course, you will still be able to see Netflix on iPhone and iPads. The app is not being pulled by the App Store, and people who subscribe to iTunes will be the grandfather for now. For customers, there is not much change.

But the episode reveals how disputed Apple's control over the App Store is, and how many developers are trying to bypass the 30% charge. The structure is also facing legal challenges – The Supreme Court recently heard an argument that the cut increased prices for consumers and could break the antitrust law.

On Monday, the largest wholesale application in the US was the gaming experience Fortnite, whose developer has cut Google out of downloads on Android devices and is trying to build its own app store. For now, it makes their money from in-app payments, which is more difficult to circumvent than a subscription.

But there is a sure effort that all the companies that make millions from the Apple App Store are planning a day where they may not need to cut Apple into the transaction.


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