Netflix cut off a $256 million revenue stream for Apple by circumventing iTunes billing

Reed Hastings, CEO of NetflixReed Hastings, CEO of NetflixHector Vivas/Latin Content/Getty Images

  • Netflix has canned the ability for Apple device users to pay for the streaming service via iTunes.
  • Instead, new or lapsed users will be asked to pay for Netflix via the streaming service's own website.
  • This is so Netflix can avoid paying Apple's 15% levy on in-app subscriptions.
  • The move will deprive Apple of up to $256 million in annual revenue.

Netflix has canned the ability for iPad and iPhone users to pay for the streaming service through iTunes, depriving Apple of an estimated $256 million in annual revenue.

The change means iOS users will pay for Netflix through its website, rather than through Apple's service.

Netflix confirmed to VentureBeat that it had pulled the plug on in-app payment, with a spokesman stating: "We no longer support iTunes as a method of payment for new members."

Read more: Apple and Google's app-store businesses are coming under pressure - and the companies could end up losing billions of dollars

The company has also updated the FAQ on its website with the following statement: "iTunes billing for Netflix is not available to new or rejoining Netflix customers. If you are currently billed by iTunes, you can continue to use iTunes billing until your account is cancelled."

The change allows Netflix to avoid paying the 15% levy that Apple charges on in-app subscriptions, and keep all subscription revenue for itself. Netflix was already testing a way to bypass iTunes payments in 33 countries, and will now be rolling that out globally.

It will be a costly change for Apple.

According to SensorTower, Netflix is the top grossing app in the US for Apple, bringing in $43 million in November alone. And according to new data cited by TechCrunch, the streaming service handed around $256 million in 2018 to Apple.

Netflix isn't the first developer to buck against the steep fees charged by Apple and Google on in-app purchases. Both take a 30% cut of paid apps, in-app purchases, and subscriptions. That drops to 15% in the second year of a subscription.

Amazon has long had a clunky workaround that means anyone using the Kindle app on the iPhone or iPad can't actually buy books directly through the app.

Epic Games, the creator of "Fortnite", has also chosen not to offer the hit game through Google's app store, Google Play, citing the "store tax." Instead, Android owners have to head to the Fortnite website to download the Android app via a dedicated installer.

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