Netflix will no longer offer subscription purchases in the app for users of iOS devices such as iPhones and iPads, VentureBeat reports. The change breaks a significant revenue for Apple at a time when it's difficult to invite app developers to subscribe subscriptions as a model and when it depends on its service sector to tell a growth story to its shareholders.
The change applies to customers who are new to Netflix or who have allowed their subscriptions to lapse. Currently, customers who already use Apple's platform to pay for Netflix can continue to do so.
Subscriptions have been an important focus for Apple too late. In 2017, the company invited app developers to a meeting in New York City where it set a tone for using a software subscription model offered in the iOS App Store. Apple placed subscriptions as the new model for publishing economically successful apps and games on the platform. When its subscription program was first launched, Apple took a 30 percent reduction, but the portion was reduced to 15 percent as it heard developing feedback that the previous cut was too significant.
In the latest earnings reports, Apple has highlighted its service sector – an umbrella covering subscriptions – as its major growth area. The company points to revenue from services like this as a counterweight to the inevitable of its slow smartphone sales. That said, app subscriptions are not the only important factor in Apple's service sector. It also includes Apple Music, iCloud and many other things.
According to data from the Sensor Tower quoted by TechCrunch, Netflix broke about $ 853 million. In the iOS App Store in 2018. By today's 15 percent platform tag, this means that Netflix's subscription program could face a reduction of more than $ 120 million. As a result of Netflix's decision, the subscriber numbers should be the same in 2019.
Netflix had already completed subscriptions in the app at the Google Play store used by Android handset owners, and Netflix tried this decision on iOS in some markets before it became the new policy.
It makes sense – Netflix could also have something to lose in this change. Anyone who has worked in e-commerce or other conversion-oriented businesses knows that any friction at all for users trying to access the "buy" or "subscribe" button is expensive. Even navigating an additional screen can lead to conversion rate deviations in the dual digits. Asking customers to go to another app, site, or device may be even worse. Netflix, like Amazon, likes it because customers trust their strong brand.
But smaller app developers may not have the brand strength, and they may not realistically take this approach. In most cases, they are totally dependent on Apple for their revenue. Netflix is big enough to challenge Apple, where other developers can't.
At this point, this is not the first time that Netflix and Apple have split into key initiatives on the latter's platforms. Netflix was left out of inclusion in Apple's TV app, which is one of the primary sales points of Apple TV 4K and a cornerstone of the entertainment experience on iOS devices. Most similar services support the TV app, and the lack of Netflix is detrimental to the value profile of Apple's TV lovers platform.
Apple is planning to launch its own TV service as soon as this year, with the original programming from high-profile creators already moving forward. The service is likely to compete directly with Netflix, so we do not expect that the relationship between these two companies will be more enjoyable in the future.