VentureBeat reports, from now, Netflix will no longer offer in-app purchases to iOS users e.g iPhone, iPad. However, Apple is already encouraging app developers to use the in-app subscription as a model, this change by Netflix cuts a big amount of revenue for Apple.
The change applies to those who are new to Netflix or allowed their subscriptions to delay, those who are already on Apple’s platform to pay for Netflix can continue with it.
In 2017 Apple invited a developers meeting in New York City where they encouraged them to spread out an in-app purchase subscription model for software offered in App store. They took this step for publishing financially strong successful apps and games in the App Store.
Apple took a 30% cut when they launched this subscription model and later cut it to 15% after the developers’ feedback on a significant previous cut.
Apple pointed out that the services like this help them to balance the certain slow smartphone sales. That doesn’t mean the in-app subscription model is a major revenue factor for Apple, that also includes Apple Music, iCloud, and many other services based on the subscription model.
Sensor Tower data, cited by TechCrunch stating, Netflix earned about $853 million in the App Store in 2018. By taking a 15% cut, Apple’s subscription could face a huge reduction of over $120 million in revenue by Netflix’s decision, should the subscriber numbers be similar in 2019. Remember this estimate does not apply to existing users and they will enjoy this support until they do not interrupt their automatic payments.
Netflix has already ended in-app subscription support for on Google Play Store and testing this on iOS App Store before making its new policy.
Although Netflix will lose some by this change too as anyone in e-commerce knows that any friction trying all the users to get to that BUY or Subscribe button is always costly. Even navigation to an additional screen drops off conversion rate in double digits, and to ask users to go to another website or device could be even worse.
Amazon and Netflix can do this because of higher customers confident to their brand but the small app developers don’t have that high brand authority, they might not be able to take this approach. They are completely dependent on Apple for their revenue. However, Netflix is big enough to challenge Apple where developers can’t.
This is not the first time Apple and Netflix have a split on initiatives, Netflix left out the inclusion in Apple TV app which is one of the main selling points of the Apple TV 4K and a backbone of entertainment on iOS devices. Most of the similar services to Netflix support iOS TV app.
Apple is planning to launch it’s own TV service this year to compete directly with Netflix, with the original programming profile creators moving forward.
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