Digiday+ Member Article

The digital “store tax” levied by distributors such as iTunes and Android can be a hard pill to swallow for streaming video companies — even if many have accepted it as just the cost of doing business on those platforms.

The key hits:

  • Netflix recently bypassed the Apple iTunes tax of 30 percent (and 15 percent in subsequent years) by preventing new subscribers from signing up on iTunes.
  • There is growing pressure for Apple and Google to reduce the cut they take from in-app purchases through iTunes and Android’s app stores.
  • For video programmers, the economics are tough: a 30 percent tax, plus 10 to 15 percent of revenue going toward subscriber acquisition costs, plus content acquisitions and other costs make it hard to build a sustainable balance sheet.
  • For big companies such as Netflix, it’s less of an issue; for smaller programmers, the store tax has become just the cost of doing business.
  • Marketplaces/stores certainly provide value in everything from new audiences to billing services.
  • But new competition among other distributors is the only thing that will incentivize any distributor — from storefronts to channel resellers — to offer more favorable terms.

In December, Netflix instituted a workaround on the “Apple tax,” which takes a 30 percent cut of subscription revenue whenever someone signs up and pays for Netflix through their iTunes account. As it did with its Android app earlier in the year, Netflix made it impossible for new users to sign up for its service through iTunes — they now have to go directly to Netflix to do so, which Apple and Android don’t get to collect on. Netflix was reportedly paying $256 million per year in commissions to Apple. (After the first year, the iTunes tax goes down to 15 percent for all subscribers that haven’t churned out; the same goes for Android.)

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Integer nec odio. Praesent libero. Sed cursus ante dapibus diam. Sed nisi. Nulla quis sem at nibh elementum imperdiet. Duis sagittis ipsum. Praesent mauris. Fusce nec tellus sed augue semper porta. Mauris massa. Vestibulum lacinia arcu eget nulla. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. Curabitur sodales ligula in libero. Sed dignissim lacinia nunc.

Curabitur tortor. Pellentesque nibh. Fusce nec tellus sed augue semper porta. Aenean quam. In scelerisque sem at dolor. Maecenas mattis. Sed convallis tristique sem. Proin ut ligula vel nunc egestas porttitor. Morbi lectus risus, iaculis vel, suscipit quis, luctus non, massa. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. Fusce ac turpis quis ligula lacinia aliquet. Mauris ipsum. Aenean quam. Nulla metus metus, ullamcorper vel, tincidunt sed, euismod in, nibh.

Quisque volutpat condimentum velit. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos himenaeos. Nam nec ante. Sed lacinia, urna non tincidunt mattis, tortor neque adipiscing diam, a cursus ipsum ante quis turpis. Nulla facilisi. Ut fringilla. Suspendisse potenti. Nunc feugiat mi a tellus consequat imperdiet. Vestibulum sapien. Proin quam. Etiam ultrices. Nam nec ante. Suspendisse in justo eu magna luctus suscipit.

Sed lectus. Integer euismod lacus luctus magna. Quisque cursus, metus vitae pharetra auctor, sem massa mattis sem, at interdum magna augue eget diam. Vestibulum ante ipsum primis in faucibus orci luctus et ultrices posuere cubilia Curae; Morbi lacinia molestie dui. Praesent blandit dolor. Sed non quam. In vel mi sit amet augue congue elementum. Morbi in ipsum sit amet pede facilisis laoreet. Donec lacus nunc, viverra nec, blandit vel, egestas et, augue. Vestibulum tincidunt malesuada tellus. Ut ultrices ultrices enim. Curabitur sit amet mauris. Morbi in dui quis est pulvinar ullamcorper.

  • LinkedIn Icon