Apple enjoys the App Store‘s rules and regulations, because it brings in a lot of money for the company. So when a huge company like Netflix balks at the idea of playing by those rules anymore, Apple might try a bit harder to keep them around.
And, indeed, that appears to be what happened after Netflix started exploring the option of bypassing the in-app purchase support for the App Store. Those tests started in 2018, and, by the end of the year, were rolled out for the end user. With the change, no new Netflix subscribers would be able to sign up for the streaming service directly through the iPhone or iPad app.
By not being able to sign up through those apps, Apple misses out on the commission it earns from those customers. Obviously not the best situation for Apple as Netflix is a huge source of recurring customers. And in new internal emails revealed as part of the ongoing Epic Games vs. Apple antitrust case, it turns out Apple was scrambling to keep Netflix on board.
As noted today by 9to5Mac, several higher-ups at Apple were talking about the topic in an email chain. Those included are: Eric Gray, Product Manager, Commerce & Pricing for Apple Services; Peter Stern, VP of Services; Matt Fischer, VP of App Store; Pete Distad, VP of Product Marketing; Sheryline Chapman, App Store Business Management; Christopher Campbell, Apple Hardware Engineer; and Carson Oliver, Director of App Store Business Management.
Oliver kicks things off:
Outside of the voluntary churn issue, Netflix is concerned with understanding the incremental value of offering subscription via IAP on iOS. To measure this, they proposed a test that would remove the ability to purchase the subscription via in-app purchase in a select number of markets for a two-month period (see list of markets below). They would like to run the test in May and June, and estimate this test would impact 1.9% of annual in-app signups. We expressed our concern that running this test would create a bad customer experience for app users in those markets and limit co-marketing opportunities, including on-store featuring.
It’s interesting right out of the gate, because it turns out that a lot of Netflix subscribers using their iPhone to sign up are letting their subscriptions lapse. In fact, the “voluntary churn issue” is just that: Netflix sees more voluntary subscription cancellations from folks signing up through IAP than on any other platform. Additional, and specific, data is redacted in the exchange, but it looks like Apple suggested it was because many of those customers were using gift cards — and then had to switch to Netflix’s website to keep up the subscription.
Netflix disputed that claim, though.
Punitive measures on Apple’s part were considered. And executives at the company lined up several different meetings with Netflix to try and get the steamer to stop its plans to skip IAP sign-ups. Even Eddy Cue wanted to meet with Netflix’s CEO, Reed Hastings, face-to-face:
Eddy has asked that before we agree to the A/B test (i.e., if Matt, Pete & I fail with Greg Peters and Bill Holmes), he wants to meet with Reed. I’ve let Eddy know how they feel, but he rightly points out that if we can’t get it done, then we have less to lose.
It didn’t stop there
Apple pulled out all the stops and presented a slide show. Yes, a slide show. How could Netflix say no to that, right? Apple only went to those lengths because Netflix had officially started the A/B testing to skip IAP for new sign-ups. Apple’s goal with the slide show was to show Netflix that its commission was justified (basically, the same thing Apple is doing now with Epic Games, but on a much larger scale).
Apple showed how it was supporting Netflix in general, including more featured elements in the App Store, download rates, and the download numbers from the App Store. Apple even showed how Netflix could keep working with Apple in new ways:
- Continue coordinated featuring across iOS and Apple TV
- Provide featuring performance data: impressions, story engagement, conversion rate, installs, etc.
- Coordinated A/B testing on iOS
- Personalization override for a set number of tentpoles yearly
- Give them the power to determine what shows we feature
- Apple TV bundle
- Video partner program benefits including:
- Ability to up-sell non-IAP customers, taking 0% commission
- Billing flexibility to easily un-grandfather and cancel subscription charges
Apple did what it could, but ultimately Netflix would decide to pull its support for IAP and new subscribers. And of course, there are plenty of other services that do the same thing. Like Spotify, for instance. If you open that App and want to subscribe to the Premium tier, the app will tell you, “You can’t upgrade to Premium in the app. We know, it’s not ideal.”
Spotify can’t tell the customer where they can upgrade to Premium, either, which is another store point for many of these companies.