Netflix, the streaming giant and Apple, the tech and music master were a nice looking couple for some years. Then Apple started to think about replacing its successful partner. The once mutual profitable alliance is quickly vanishing. Winter is coming
Netflix and Apple were working in symbiosis. Netflix provided content and original shows and Apple provided the platform to sell the plans as well as the hardware to enjoy the service. This doesn’t come free for Netflix, 30% of the subscription (on the first year) goes to Apple. Upon renewal, it comes down to 15%. Despite the toll it’s taking on Netflix’ profits, it remains a profitable partnership.
Great hardware and an impulsive fingerprint
Apple provides great hardware to use the Netflix platform. Whether it be on an iPhone, iPad or a Mac. It’s also supported by the Apple TV so Apple fans can stream like crazy.
But this is not the only advantage. The subscription process through the Apple store is very fluid and a single readout of the fingerprint opens the way to an impulsive buy. Much easier than the regular process on the Netflix website. With 40% of subscriptions being made from a computer, the in-app purchase is a major part of the Netflix strategy.
What’s in it for Apple?
Obviously, 30% of Netflix subscriptions on Apple devices does add up to quite a war treasure. It’s one of the highest grossing apps on the App Store with close to $11.5 billion in annual revenue last year alone. No development, no upgrades necessary: easy money. So why does this seemingly mutually profitable agreement go the way of the dodo?
Streaming and original content are the missing link for Apple
Apple is one of the leaders of online music and films. With iTunes, one can buy tracks, albums, films (and ringtones!). Apple has already launched its music streaming service: Apple Music. But if you seek film streaming, there are no plans for such a service. All one can do is rent a movie and watch it within the days following the purchase. Hardly the current viewing model of most people.
With many platforms trying to take a bite at the streaming cake (DC, Disney, Amazon…) Apple can’t stay away much longer.
Apple’s plans for 2019
Here’s the news that aroused Netflix’ anger. Apple will launch its own streaming service in 2019. With the massive funds at its disposal, Apple will quickly produce its own content. This should be Apple’s key sales pitch. Netflix has had to wait to make enough money to start producing shows, but Apple will launch with content creation. The listing of current projects is dazzling! The filmmaker list includes Steven Spielberg, J.J. Abrams , M. Night Shyamalan (6th Sense). Jennifer Anniston will make her first return to a series since Friends. Oprah Winfrey will team up with Apple to draw her huge following to the platform. Quite enough to get Netflix worried about the upcoming year.
With this announcement, Apple is joining the ranks of Netflix predators. And Netflix sees no reason to continue filling up Apple’s treasure chest so it can create even more competitive content. The first blow includes removing the possibility to pay using in-app subscriptions. Users from 33 countries will now be directed to a page out of the App Store to complete their subscription. Will Apple respond with a change in policy regarding in-app purchase? Or will the fruit company wait for the launch of its streaming platform to respond to Netflix?
All we know for sure is that this is only the beginning and it could get dirty.