Epic exposes Apple's efforts to persuade Netflix to keep in-app subscriptions
Special favors, including advertising within B&M stores and coercion by punitive meansBy Cal Jeffrey 15 comments
In brief: Epic Games presented documents in its lawsuit against Apple showing that the Cupertino tech giant went to great lengths to prevent Netflix from dropping in-app payment (IAP) subscriptions from its iOS app. Efforts included special favors and the consideration of punitive measures. Epic hopes to portray Apple as "anything goes" when it comes to retaining its App Store commissions.
In 2018, Netflix was debating whether it should remove in-app subscriptions for new customers in its iPhone app. It planned to run tests that summer in select markets to see its effect on subscription numbers. When Apple learned this, it called all-hands-on-deck to prevent the streaming service from going through with it.
In an email thread (Exhibit A below), several Apple execs, including Vice President of the App Store Matt Fischer, Vice President of Marketing Pete Distad, Vice President of Service Peter Stern, and others, expressed their concerns over Netflix conducting the tests and the possibility of it removing IAPs from its app. Apple did not want Netflix to eliminate subscription options from the software for obvious reasons, but it also didn't like the company even conducting its own tests.
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"Outside of the voluntary churn issue, Netflix is concerned with understanding the incremental value of offering subscription via IAP on iOS," wrote VP Fischer. "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."
The email also discussed taking punitive measures against the movie streaming service. "Pulling all global featuring" was suggested as an example.
They conducted several meetings with leaders at Netflix, including a face-to-face between Apple's Eddy Cue, senior vice president of internet software and services, and Netflix's CEO Reed Hastings. During the meetings, Apple more or less begged Netflix not to perform the tests, even going so far as to offer promotions in its brick-and-mortar stores in a slide presentation (Exhibit B below).
Netflix ultimately ran the tests and found that "voluntary churn" was higher for those subscribing via in-app payments than through the Netflix website or other means. It subsequently removed IAPs at the end of December 2018.
By presenting this evidence, Epic wanted to show a couple of things. One is that Apple is not above providing special treatment to big customers when it stands to benefit. This favoritism creates an unlevel playing field for smaller iOS developers. Second, that Apple has previously considered taking punitive action against companies not willing to pay the so-called "Apple tax"---a point it contends is what happened with the Fortnite removal.
We'll see in the coming weeks whether Judge Rogers has a sympathetic ear on the matter.
Image credit: XanderSt