Netflix nixes iTunes billing for new subscribers

Brief:

Netflix has stopped letting new users pay for a subscription to its video-streaming service in its iOS app, meaning Apple no longer gets a cut of that revenue. Netflix made the move after experimenting with the change in more than two dozen markets globally, Venture Beat reported.
Existing Netflix subscribers can continue to use iTunes as a payment method. Customers who had canceled Netflix service for at least one month and now want to rejoin also aren't allowed to use iTunes billing, per Venture Beat.
Netflix last year grossed $853 million from the iOS App Store, according to Sensor Tower data cited by TechCrunch, suggesting that Apple would have netted about $256 million from Netflix subscribers who paid for service through iTunes.

Insight:

Netflix's steps to collect subscription revenue directly rather than through Apple's App Store likely will save the video streaming giant hundreds of millions of dollars each year. Apple isn't likely to retaliate based on its history with other tech companies that sought to avoid the so-called "Apple tax," TechCrunch reported. Apple collects a hefty 30% fee of subscription revenue during the first year, which is then cut to 15% after, according to Venture Beat. Earlier last year, Netflix also removed in-app subscription sign-ups in its Android app on Google Play.

Netflix is among the companies seeking to reduce payments made to app stores. Epic Games, the maker of the hit video game "Fortnite," last year bypassed Google Play altogether by letting players download the Android version of the app directly. Google likely lost more than $50 million in app store fees as a result of the decision, TechCrunch reported. Music streaming service Spotify and The Financial Times also have sought to reduce app store fees in similar manners.

While Apple is mostly dependent on device sales, its fastest-growing business segment has been in services such as the App Store, Apple Music, iTunes, iCloud storage and device warranties. Apple's paid subscription revenue grew more than 60% in the past year to about $300 million as more than 30,000 apps started charging recurring fees, CEO Tim Cook said in a July conference call with investors. Critics have said that most of that subscription revenue is concentrated among major streaming media providers like Netflix, Pandora, Spotify and HBO.

Video streaming on mobile devices is likely to become more popular as cellular carriers roll out high-speed 5G networks worldwide and content providers offer more live programming. The growth in mobile streaming could lift the number of new Netflix subscribers, and the new App Store policy will let the company keep that revenue.