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Netflix is no longer allowing global users of Apple devices to sign up for a Netflix subscription through iTunes or App Store, per TechCrunch.
Netflix is looking to make its relationships with consumers even more direct in a bid to retain more of its subscription revenue. Subscription fees remain Netflix’s sole revenue stream, so it makes sense that the company aims to maximize ARPU. Apple takes a 30% cut of subscription fees from any subscription sign-ups made through its platform, which then halves to 15% in the second subscription year.
Netflix’s move to extricate itself from billing through Apple could protect hundreds of millions in revenue. Netflix grossed $853million in 2018 via Apple's App Store — with about $256 million of that going to Apple, per Sensor Tower data. Worldwide on iOS, Netflix was the top-grossing app in 2017 — ahead of Tencent Video, Tinder, and iQIYI — and is the top grosser of all time (July 2010 through May 2018), per App Annie.
It’s unclear what specific sign-up workaround Netflix is providing, but the break with Apple is likely to add a friction point for potential subs. To date, working with Apple and Google to facilitate sign-ups has been a vital strategy to propel user growth by reducing friction in the sign-up and billing process.
Adding friction to the sign-up process could frustrate some subs and dampen user growth that comes from mobile devices, particularly in developing markets where smartphone penetration is accelerating and Netflix increasingly seeks growth. Likewise, Netflix risks some subs lapsing now that billing through Apple is no longer accepted.
Netflix is betting that its service is desirable enough that it can add friction and still grow. Netflix knows that people want its product. Multiple times, it's successfully raised prices, for example, and the vast majority of users haven’t balked.
For comparison, Epic Games recently made a similar move and ended billing through Google Play. Instead, it now requires users to download its popular game “Fortnite” via a dedicated installer on their website on a mobile browser. That’s more upfront work for users, but many were willing to go through it given the ultimate desirability of the product experience.
DTC subscription services like Netflix are likely to increasingly debate the long-term usefulness of such partnerships as they grow more dominant in their own right. As Netflix has blossomed into a tech giant with global reach, the revenue that Apple and Google siphon off has likewise become more meaningful.
To date, the Netflix iOS app has generated more than $1.5 billion through in-app subscriptions, per Sensor Tower. In May of this year, Netflix also dropped in-app subscription sign-ups made through Google’s app store, Google Play, which itself collects 30% off the top of sub fees driven by its platform. Netflix still earns money on Google Play through existing subs, but that figure is reportedly declining.
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