Apple vs Epic Games trial has revealed that Apple put in a lot of effort to try and convince Netflix to not remove in-app purchases from its iOS app back in 2018. As we all know, Apple did not succeed and Netflix removed in-app purchases, forcing people to sign up using its website, and getting rid of the commission that it had to be pay to the Cupertino giant.
The story of how Netflix stopped offering IAP revealed in Apple’s internal emails
As per Apple’s emails revealed through the trial and shared by 9to5Mac, it shows that employees had found that Netflix was A/B testing removal of in-app purchases in different markets. This led Carson Oliver, Director of App Store Business Management, to start an internal email thread with various other employees to discuss what Netflix’s concerns were and why it wanted to perform A/B testing, and what its impact would be.
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.
Netflix had pointed out that there was high “voluntary churn” with App Store sign-ups. Customers who were subscribing through Netflix’s iOS app were unsubscribing at higher rates than other platforms. Apple suggested that this was due to Netflix gift cards forcing users to register using the website. However, Netflix disagreed and the actual reason was not shared. Other Netflix concerns included the inability to offer discounts or un-grandfather plans for customers subscribed via IAP.
Oliver also discussed “punitive measures” in response to the A/B testing by Netflix, as the company believed that it would impact user experience. One of the suggested measures was to pull any featured listings of Netflix in the App store during the A/B testing period. The company also discussed how it would be communicated to Netflix, which was through Eddy Cue’s meeting with Netflix CEO Reed Hastings. These discussions also included attempts to integrate Netflix with the Apple TV app but that did not happen in the end.
When Apple realized that Netflix would be dropping in-app purchases for good, a presentation deck was made as an attempt to convince the video streaming giant to stick with IAP. This included a number of incentives:
- Feature Netflix more than other partners in the App Store, which should help increase downloads on iOS and Apple TV
- Provide more performance data to Netflix such as impressions, conversion rate, installs, etc.
- A/B testing on iOS
- Personalization override for a set number of tentpoles yearly
- Let Netflix decide which shows to feature in App Store
- A possibility of an Apple TV bundle
- Ability to up-sell non-IAP customers, with 0% commission
- Allow Netflix to un-grandfather and cancel subscription charges
- Multiple co-funded marketing and parternship efforts to promote Netflix via App Store email campaigns, bundle offers, carrier and payment partners, Today@Apple events, placement on demo devices in Apple Stores, and product marketing to talk about Netflix where possible.
Ultimately, none of these suggestions were enough to convince Netflix to stick with App Store payments, and in December 2018, users were shown a message that they cannot sign up via the app. Thanks to App Store policies, Netflix could not link to its website or tell users that they can register using the website, but that did not impact the video streaming service’s business and popularity over the long run.