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Spotify & Netflix Are Bypassing Apple's App Store Billing Charges
Both companies are now driving new subscribers to pay directly, avoiding iTunes' 30% cut.
Spotify and Netflix are both directing users away from subscribing to their services via the iTunes App Store -- acts that stand to boost profit margins and distance the companies from the $1 trillion tech giant making moves in content.
TechCrunch learned this week that Netflix is testing a payment method that bypasses iTunes in 33 countries. Until Sept. 30, new or lapsed users in select European, Latin American and Asian markets will be unable to pay using iTunes. Instead -- like with Spotify -- they will be redirected to Netflix's website to enter payment details directly with the video streaming service. In May, Netflix made a similar move prohibiting new subscribers from paying via Google Play.
A rep for Netflix tells Billboard, "We are constantly innovating and testing new signup approaches on different platforms to better understand what our members like. Based on what we learn, we work to improve the Netflix experience for members everywhere."
Over two years ago, Spotify similarly updated its payment policy making it so new users could no longer pay for Spotify Premium accounts using Apple's in-app payment system. Instead, it now drives subscribers to cancel the automatic renewal of their Spotify payment with Apple, wait until their current subscription expires and then resubscribe directly with the company.
While the 30 percent cut Apple takes on first year subscriptions and 15 percent on years following surely helped move these decisions, Apple's aggressive moves into video and music content surely contributed as well.
Spotify has been holding out against iTunes' fee for some time, arguing Apple's subscription policy punishes third-party streaming services and gives its own native services a leg up. In 2016, the company claimed in a letter sent to Apple's top lawyer and passed to some congressional staff in Washington D.C. that Apple was "causing grave harm to Spotify and its customers" by blocking an app update that was blocked from the iOS App Store for trying to sidestep Apple's fees.
"This latest episode raises serious concerns under both U.S. and EU competition law," Spotify general counsel Horacio Gutierrez wrote then. "It continues a troubling pattern of behavior by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple’s previous anticompetitive conduct aimed at Spotify … we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors."
While it is unclear specifically how Spotify and Netflix's methods differ, or whether Netflix will expand its test into a permanent policy, the new moves are a reminder app stores are still an active battle ground in the streaming wars and more streaming services are likely to take note of any successes.
UPDATE: An earlier version of this article stated Spotify's subscription policy had changed this month, when it actually changed over two years ago.