Netflix has stated they are testing a new payment method that would let its subscribers to skip billing through iTunes entirely when renewing their contract with the video streaming company. No doubt there would be a lot at stake here for if the Netflix experiment proves successful, there could be a significant loss in revenue for Apple.
Right now, Apple takes a cut of 30 percent from Netflix for the first year and 15 percent from there onwards for every subscription made through its iTunes billing channel. That makes for a considerable amount for Apple to gain and Netflix to lose and is again the bone of contention between the two.
In fact, the in-app purchases happen to be the backbone of the entire revenue stream from the app ecosystem, one that proves to be more lucrative than outright hardware sales. Also, Netflix alone isn’t unhappy with device makers taking a cut of what they claim to be a cut of the subscription fees. Among other, Spotify too has expressed their displeasure on this before. Amazon, on its part, has gone a step ahead and has banned the purchase of ebooks via the Kindle iOS apps precisely to prevent Apple from collecting a portion of the money.
Netflix has stated they are testing the new direct payment method in 33 countries worldwide. So as things stand right now, both new or current subscribers who wish to renew their contract with Netflix are being redirected directly to the Netflix site for users to make their payments.
The test is being run in counties along Asia, Europe, and Latin America. Here is the list of countries where the direct billing system is live until September 30: Argentina, Australia, Austria, Belgium, Brazil, Canada, Colombia, Croatia, Czech Republic, Denmark, Ecuador, Finland, France, Germany, Great Britain, Hungary, India, Indonesia, Italy, Japan, Korea, Malaysia, Mexico, Norway, Peru, Philippines, Poland, Slovakia, South Africa, Spain, Sweden, Taiwan and Thailand.
Apple will no doubt have to re-think its strategy here for if the Netflix experiment comes out to be a success, more companies will be attempting to replicate the same. While it is true that companies like Apple provide the service providers with a huge chunk of clients, the amount of cut money taken in return has always proved to be a thorn in their relation.
One option for Apple will be to renegotiate for a lesser amount taken from the subscription fees as letting go of Netflix could be a huge loss, more so when it happens to be one of its highest grossing apps.