Netflix walks away from App Store payments, costing Apple up to $256m/year

When Ios launched, Apple's App Store took a 30% royalty on all apps sold. App vendors responded in large part by switching to free apps that charged in-app for annual subscriptions and other fees, prompting Apple (by then the dominant smartphone seller and critical to many companies' businesses) to ban in-app purchases except through Apple, which would charge a 30% commission on the lifetime revenues from each user.

Competition from Android and hybrid models where users sign up (and pay) on the web and then login to their apps has driven Apple's lifetime tax on in-app transactions to 15%, but for Apple's top suppliers, this still adds up to hundreds of millions per year.

This has prompted a slow, but growing exodus from in-app payments, from Amazon Video to Spotify, and now, Netfix.

After an experiment in requiring users to pay via the web, Netflix has now discontinued the use of in-app payments for all new users; last year, Netflix paid Apple an estimated $256m in "Apple Tax" for users who paid through the app — Netflix can afford to lose millions of users from this switch and still come out ahead.

Netflix dropped in-app purchases from the Google Play store earlier in 2018, and found that even users who were still permitted to pay in-app gradually but steadily switched to making payments via the web, eroding Google's share of its business.

For example, Amazon has historically restricted movie and TV rentals and purchases to its own website or other "compatible" apps, instead of allowing them to take place through its Prime Video app. The same goes for Kindle e-books, which also aren't offered in the Kindle mobile app. Spotify also discontinued the option to pay for its Premium service using Apple's in-app payment system.

And Epic Games this year bypassed Google's Play Store altogether — as well as its 30 percent cut — when it launched Fortnite for Android as a sideloaded app. That decision resulted in Google's loss of $50 million+ in marketplaces fees.

Netflix earlier this year had dropped in-app subscription sign-ups in its Android app on Google Play. That signaled its intentions to later take back the so-called "Apple tax" for itself, too.

Netflix stops paying the 'Apple tax' on its $853M in annual iOS revenue [Sarah Perez/Tech Crunch]

(via /.)