Netflix Experiments With Bypassing Apple App Store Subscription Fees

Netflix Experiments With Bypassing Apple App Store Subscription Fees

App developers have put up with Apple and Google taking a 30 percent cut of sales for a decade, and some are starting to look for ways around this revenue drain that won’t isolate them from customers. Netflix is the latest company to test a model for avoiding the fees associated with App Store distribution, but it’s far from alone.

Apple set the standard for the 70-30 percent revenue split with the App Store, but Google followed suit with the Android Market (now the Play Store) a few years later. That means every transaction in apps from those platforms includes the payment to Apple and Google, even in-app purchases. The only sign of movement has been on app subscriptions — both Apple and Google cut that fee to just 15 percent. However, both companies have also cracked down on attempts to get around the revenue sharing arrangement. For example, trying to stuff a PayPal link in your app is sure to get you in trouble.

Netflix is going with a rather passive-aggressive approach. In 33 test markets (not including the US), the Netflix iOS app no longer lets you sign up for a subscription. Instead, new users are booted into the web browser to sign up on Netflix.com. Since this transaction happens outside the app, Netflix doesn’t have to give Apple its 30 percent cut (15 percent after the first year).

According to reports, Netflix will run this test through September to see how it affects users signups. If it loses less than 30 percent revenue in those markets, Netflix will still come out ahead. It may even choose to expand the trial to more markets like the US. That’s when things get real for Apple.

Netflix CEO Reed Hastings when he found out how much the company paid in App Store fees.
Netflix CEO Reed Hastings when he found out how much the company paid in App Store fees.

This approach is even more extreme than what Spotify does on iOS. If you sign up for a subscription via Apple’s platform, the cost is $12.99 per month to cover the Apple fees. If you sign up online, Spotify only charged $9.99. It has even reached out to customers to help them transfer their membership outside of Apple’s sandbox. Meanwhile, Epic Games has decided to distribute Fortnite on its website rather than in the Play Store. Android phones can install apps from other sources, unlike iOS.

There’s clearly an increasing opposition to paying Google and Apple such a substantial cut of revenues. The biggest apps might have some hope of escaping the app store economies, but small developers are largely at the mercy of Apple and Google.

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