Apple on the hook for $16 billion revenue loss, and Netflix is to blame

Apple on the hook for $16 billion revenue loss, and Netflix is to blame
Apple's CEO Tim Cook loves to brag at conference calls with investors that the revenue and profits from its "services" business is growing leaps and bounds, far outstripping the revenue growth in its bread-and-butter iPhone department. The App Store alone is now a Fortune 100 company by itself, raking in more than, say, the whole McDonalds franchise last year.

What Tim Cook fails to mention, however, is that a huge chunk of the App Store revenues is coming via the 30% cut (15% after the first year) Apple takes from subscription service providers like Netflix or HBO. With more and more companies balking at the Apple or Google "tax," however, that revenue is under severe threat.

In fact, if Netflix goes through with the idea to circumvent the App Store, as Epic Games did with Fortnite on Android, and others follow suit, Apple may be on the hook for up to $16 billion in revenue losses in 2020, tip analysts. That's not valid only for Apple, though, as Google will then be losing $8 billion worth of revenue as well. 

All in all, due to bailing subscription service providers and regulatory pressure, the App Store and Google Play may be forced to slash their average commission rates to much lower points than what we have now, losing a very lucrative, high-margin source of revenue. Where would all that money go? Hopefully, in more original Netflix series, although Apple has plans for that market, too.

source: BI via 9to5Mac

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12 Comments

1. toukale

Posts: 672; Member since: Jun 10, 2015

Oh my! Apple is doomed, doomed I tell you.

4. Atechguy0

Posts: 918; Member since: Aug 03, 2018

Apples greed is slowly catching up to them.

11. Phullofphil

Posts: 1846; Member since: Feb 10, 2009

There all greedy but really there not. That’s the whole point of having a business. Make money while you can. They are not greedy by the sheer fact that they are not a person. Just by nature if everybody does ther job then that’s what happens. I think if your using there platform to make money than give them there tax. I would hope if they do that then kick the Netflix app out of the store.

2. lyndon420

Posts: 6915; Member since: Jul 11, 2012

App developers that bring in a huge amount of uploads and solid user bases should be rewarded with considerably lower fees to prevent situations like this. A constant and reliable flow of decent revenue is better than having top developers jump ship. Maybe a tiered system that goes from 30% down to something like 10% depending on revenue generated would keep the big guys around longer. Maybe another idea - rather than charge Netflix the 30% fee, maybe charge the users directly?

10. Dingy_cellar_dweller

Posts: 339; Member since: Mar 16, 2013

apple had the same idea but it was take it from 30% and bring it up to 50%

3. DarthJarJar

Posts: 69; Member since: Feb 01, 2018

That’s good for the companies that are losing money because of the “convenience” of getting apps in the App Store. It’s unfortunate that the App Store itself is a manopoly. As far as I know, the official IOS software doesn’t allow competitor app stores to be installed on their phone.

5. cmdacos

Posts: 4388; Member since: Nov 01, 2016

I've been subscribing directly through Netflix for a few years now since I left Apple because of the iTunes tax. Netflix will be just fine if they can make this happen.

6. tedkord

Posts: 17512; Member since: Jun 17, 2009

Yes, but then Apple is already trying to force all app developers into subscription only, with no upfront sale. And while you can pay for content outside the Apple bubble, you can only get the apps from their App Store. Genius, if evil.

7. apple-rulz

Posts: 2198; Member since: Dec 27, 2016

Nothing evil about it.

9. strategic_developer

Posts: 1627; Member since: Jul 17, 2018

But many of the subscription services can be done by other means. Example, unless Apple blocks Netflix from working in the browser, you don't need an app at all. In fact for ALL streaming services both audio and video, you don't need an app. They all work in a web browser. Also since consoles and smart TV's all have Netflix and other services pre-installed or can easily be installed, I don't know why anyone pays for the subscription via Android or IOS. You go to the service website, sign up directly and then link account to other devices, via the app. if you pay for Netflix via their website, then you won't give Apple a dime to load the Netflix app on your phone an sign-in. All Netflix has to do is encourage users to subscribe via a web browser. Not the Play Store or App Store apps.

12. Valdomero

Posts: 707; Member since: Nov 13, 2012

Totally true! I pay for Crunchyroll's service $4.99/month from their website, If I would pay that same service within the App store I would've paid $6.99 (WHAT!?). Same goes for Netlfix and other streaming services, you can always go to your web browser and launch the service from there, heck, you don't even need Safari for that, downloading Google Chrome does the job.

8. Rigmaster

Posts: 234; Member since: Jan 22, 2018

I smell a Samsung commercial coming - no Netflix on iPhones with a notch-cut.

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