Netflix Pulls the Plug on iTunes Billing for New Subscribers
The change will not affect existing subscribers.
If you’re an iOS user and are considering a Netflix (NASDAQ: NFLX) subscription in the new year, or a canceled subscriber who wants to re-up, you won’t be able to make your monthly subscription payments via iTunes. According to TechCrunch, in 2018, Netflix conducted a two-month test in 33 countries across Europe, Latin America and Asia to see if omitting the payment option would be a deal breaker for new customers. Apparently not. Netflix told Venture Beat the change will be permanent and global. Netflix’s FAQ page has been updated to reflect this change.
“We no longer support iTunes as a method of payment for new members,” says the Netflix FAQ page. “Existing members who currently use iTunes as a method of payment can continue to do so.”
TechCrunch points out that, as of May 2018, Netflix stopped allowing new or returning customers to use Google Play as a payment method too. Why is Netflix doing this? By cutting out the middle man, Netflix retains more of its subscription revenue. Apple is known for its 30 percent Apple tax, meaning it gets a 30 percent cut of revenue generated when apps are purchased through the App Store. Apple has since updated this policy to take 30 percent in year 1 and dropping that cut to 15 percent after year 1 of a subscription.
Netflix accepts the following forms of payment:
- Visa, MasterCard, Discover or American Express, provided they allow for recurring monthly payments
- Prepaid Visa, MasterCard, Discover or American Express cards
- Netflix gift cards
- Partner billing through Comcast/Xfinity, Cox and T-Mobile
Netflix offers a one-month free trial to prospective subscribers, but they are required to select a method of payment and provide payment details when they subscribe to ensure that service won’t be interrupted at the end of the free trial. If you don’t love Netflix as much as the company thinks you will, you can cancel the streaming video service at any time during the free trial. Note: the length and availability of free trials may vary by region or market.
In the U.S., Netflix offers three streaming plans at various price points.
- The Basic plan is $7.99 a month, plus applicable taxes and fees, for viewing on one screen in SD quality.
- The Standard plan is $10.99 a month, plus applicable taxes and fees, for viewing on two screens at a time in HD quality where available.
- The Premium plan is $13.99 a month, plus applicable taxes and fees, for viewing on up to four screens at a time in HD and Ultra HD quality where available.
This move should not come as a surprise to Apple or to iOS or Netflix users. News of Netflix’s billing test was released last summer, and with Netflix discontinuing billing through Google Play in May of last year, this was inevitable. It’s a sound business move on the part of Netflix, particularly since it doesn’t impact existing subscribers. It will allow Netflix to keep all its recurring revenue from new subscribers, except in other partnership arrangements such as Comcast. Omitting the Apple tax on new subscriptions will improve the company’s gross margin in 2019, and will allow Netflix to compete on more even ground when Apple releases its own streaming video subscription service later this year.