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The app-store war between Netflix and Apple is heating up

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The app-store war between Netflix and Apple is heating up

A growing number of software companies seek to avoid the dominant guardians of the app store at Apple and Google, selling their services directly to consumers and undermining the technological giants that for years have controlled how most iPhone and mobile users Android discover, download and pay for their applications

The revolt is being led by companies such as Netflix, which became the latest firm to cut a lucrative relationship for Apple when it confirmed that new customers will no longer be able to pay their monthly subscription fees through iTunes. Instead, you are redirecting subscribers to make payments on the Netflix website.

Netflix’s decision follows that of another important online service, Spotify, which ended support for subscription payments in the application in 2016. And amid the explosive growth of its Fortnite video game, the digital publisher Epic Games has said that He intends to create his own store of applications for games in an attempt to compete with existing online stores. The company already offers its Android application for Fortnite outside of the traditional Google Play Store.

The announcement of Netflix could save you hundreds of millions of dollars and is potentially devastating for Apple. Through payments within the application, the iPhone manufacturer currently gets a cut of 30 percent of first-year subscription revenue and 15 percent of revenue generated by long-term subscribers.

Apple earned $ 257 million of Netflix this way in 2018, according to estimates from Sensor Tower, a market research firm based in San Francisco. But as Netflix continues to grow internationally, Apple may lose up to $ 500 million on Netflix alone in 2019, said Randy Nelson, head of mobile information at Sensor Tower.

“You have this application that is an incredibly popular application in terms of facilities, but over time it will generate less and less revenue for Apple,” said Nelson. “It puts Apple in an intriguing and interesting situation.”

Netflix said in a statement that existing subscribers can still use iTunes to pay for their subscriptions if they wish.

“Apple is a valuable partner with whom we work closely to provide great entertainment to members around the world on a wide range of devices, including the iPhone and Apple TV,” said Netflix.

Apple and Google did not respond to an interview request. Epic Games declined to comment. Spotify did not respond immediately to a request for comment.

After Spotify made customer payments leave the billing in the application, Apple experienced a sharp decrease in the amount of revenue it received from the company, according to Nelson, which fell from $ 11 million per month in April 2016 at just $ 1.5 million per month by December 2018 (Sensor Tower says it produces its estimates by comparing, among other things, the app store ratings and the combination of those with specific revenue numbers in its possession).

A similar dynamic affects the Google Play Store, said Nelson, who now does not receive revenue from Spotify after the invoicing in the application ended in 2014. Netflix followed suit in May 2018. The simple existence of either of the two applications does not It is significant Costs for companies.

The change of Spotify, and then Netflix and Epic, underscores the growing dominance of those companies in their own right. Netflix’s position as the world’s largest provider of video streaming gives it the power to snub Apple’s platform without sacrificing its visibility to potential customers. But a small-time developer with weaker brand recognition benefits greatly from being on the Apple and Google platforms, which can help customers discover new applications through promotion and marketing, said Doug Creutz, a gaming industry analyst from Cowen & Co.

“[Netflix and Epic] are two of the largest entertainment products on the planet. They do not need the app store to help them sell their products, “said Creutz.” Most software developers do not have that luxury. Most of them need the location provided by the app store. ”

The uncontrolled success of Epic Games with Fortnite has catapulted the publisher into a leading position. The company reported a profit of $ 3 billion in 2018, in part thanks to its successful game and the cultural phenomenon it has become. The experience, according to CEO Tim Sweeney, has taught Epic how to build a better rival for Play Store, App Store and Steam, the main equivalent of iTunes in the gaming industry.

The idea of ​​taking a 30 percent cut in a developer’s revenue and transferring the remaining 70 percent was a “breakthrough” in the early days of the Internet, Sweeney told Game Informer last month. But as the digital economy matured and more developers started offering software, he said, platform companies have continued to extract the same amounts, even when the costs of administering an app store have declined.

“Economies of scale have not benefited developers,” Sweeney told Game Informer.

Epic Games has said that its application store will be friendlier to software manufacturers, cutting only 12 percent of its revenue. It was released last year for Mac and PC, and is expected to launch as an Android application in 2019. But Epic has run into a barrier with Apple: the small print of the iPhone manufacturer for the iOS App Store prohibits applications that serve as markets for other products. , including applications.

Logjam means that it could be some time before the Epic Games store is available for iPhones and iPads. More generally, it highlights how Apple, famous for its control over every part of its ecosystem, from chips to devices and the operating system, still retains a great deal of influence over how rebellion can develop against legacy application stores. .

Still, other factors could come into play to change the balance. Mass content publishers, such as Electronic Arts, Activision Blizzard and Ubisoft, have built digital stores in recent years that seek to move users away from popular platforms such as Steam, establish direct relationships with players and give publishers greater control over your own intellectual property.

For now, publisher-based application stores have focused mainly on selling PC games and their in-game items. But Brian Nowak, an industry analyst at Morgan Stanley, anticipates that the model will be extended to consoles and mobile devices. This could put pressure on the stores of inherited applications to reduce their rates, not only in Apple and Google, but also in Microsoft and Sony.

“The big winners here are the video game publishers,” said Nowak. “If the mobile app store consumption rate of 30 percent was reduced, it really helps companies like Zynga.”

The push to reject payment systems in the application by major software companies points to future problems for the technology industry amid fears of an economic slowdown. Apple’s stock plummeted on Thursday when chief executive Tim Cook warned of slower iPhone sales, particularly in China. On a positive note, he said, revenues from business segments such as services, a category that includes the App Store, grew compared to last year.

But as the recent decisions of Netflix and Spotify may suggest, a wider revolt against billing within the application could cause these service revenues to increase.

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