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Apple execs describe a “unique arrangement” with Netflix (2018)

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Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#211
post #83

I am pretty sure I read something similar before. Probably from Benedict Evans or somewhere else. I think the most important issue from these email isn't the lack of Alternative App Store, IAP, or 70/30 split. It is that Apple Execs has Zero understanding of how other business works especially with respect to Internet or Software Services. They continue to think Netflix as a physical product ( As they often like to c…

For comparison Netflix spends about $1.2 Billion dollars per year on AWS (Amazon Web Services). Their total revenue last year was 27.5B. So that means that AWS fees account for 4.3% of Netflix's revenue. AWS is streaming video, operating hundreds of edge location CDN locations, and everything else running on expensive server infrastructure. AWS has real serious costs with offering that service, to the point that Netf…

> next to no value for Netflix

Apple basically has an iron-fisted grip on _worldwide_ audience of people with money to spend. Google, for example, does not, and their App store is a raging dumpster fire in comparison. I'm not saying that their "cut" shouldn't irritate people, it should - that's just market forces at play, but one must also recognize that for Netflix to not be in the App Store would be pretty catastrophi revenue-wise, much for the same reason why it'd be catastrophic for Google to not be the default search engine in iOS.

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#212

Earlier quoted context omitted.

For comparison Netflix spends about $1.2 Billion dollars per year on AWS (Amazon Web Services). Their total revenue last year was 27.5B. So that means that AWS fees account for 4.3% of Netflix's revenue. AWS is streaming video, operating hundreds of edge location CDN locations, and everything else running on expensive server infrastructure. AWS has real serious costs with offering that service, to the point that Netf…

Apple by comparison demands 15% which is 3.5x as much of a cut. Apple provides credit card processing, and approval into the App Store (plus according to a comment in this email, it sounds like they keep Netflix in the App Store promotion rotation as "free" ad-space). This isn't anywhere near the value that AWS provides That's debatable. To put it mildly. Apple provides them access to, literally, nearly a billion pot…

> Apple provides them access to

This is in many ways the same argument that ISPs used during the net neutrality debates as to why Netflix should have to pay them extra money. Netflix was using all the bandwidth, and ISPs were keeping that access fast... blah, blah, blah. Many of the objections that I had to ISPs trying to double-dip on bandwidth fees back then also apply to this idea that Apple's product to Netflix is its customers.

The thing is that Apple provides a platform for their customers to access Netflix. Apple benefits heavily from Netflix being on their platform, they would lose a lot of customers if every content provider decided to leave iOS tomorrow. Those customers pay Apple for a phone that they can use to watch their favorite TV shows, they pay Apple for a device that can keep pace in capabilities with other tablets and phone OSes on the market.

So the argument that Apple deserves compensation for maintaining a market that is itself regularly compensating them is the same kind of double dipping that ISPs tried to engage in. I pay my ISP for an Internet connection so that I can access websites. People pay Apple for good hardware with a good app store. That's the arrangement; the deal isn't really happening on Netflix's side of the table.

It's very difficult to argue that Apple has invested in best-of-class hardware for Netflix's sake. They did it so that people would pay them money to buy phones. Apple is not selling their phones at a loss, and they were clear during the recent trial with Epic that they do not look at the app store as a revenue target. Taking fees for maintenance is one thing, but it's very difficult to seriously argue that Apple had an idea for a 3rd-party platform and then made an attractive phone in order to support that platform. We all know that it's the other way around.

This talk about Apple being the gatekeeper that graciously allows companies access to a market is also a somewhat dangerous road to go down, because it creates a lot of perverse incentives for the company. I have no doubt that some parts of Apple's leadership do think of their customer base as an asset that they offer other companies. And I think that attitude can help explain some of Apple's lock-in behavior and refusal to work with other platforms, because when users are an asset to be horded and leveraged, it becomes more important to force them to be loyal and to make it harder for them to switch platforms based on your future business decisions.

I feel like one of the biggest lessons of the modern Internet is that it's dangerous for consumers when companies start referring to their customer base as a product. Apple is occasionally a breath of fresh air in that regard. But in this case, not so much.

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#213

Earlier quoted context omitted.

> But at this point I doubt Netflix is willing to risk it as there is simply to many streaming options. Well, but as you point out, they aren't using IAP at the moment so there's nothing to risk. An interesting question is what would happen if Apple decided to play hardball and demand Netflix use IAP again, with no external option, similar to what is required for video games. Honestly, my money would be on Netflix pu…

Moreover, Netflix is an app that would work perfectly fine in the browser. Netflix was providing a native app as a courtesy to the customer, not the other way around. Most Netflix subscribers I know would probably shake their fist at Apple and God and then go back to binging Friends in Safari.

[deleted]

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#214
post #205

Earlier quoted context omitted.

Maybe this is not a popular opinion but I think that Apple do provide the value. They created the device, the OS, the marketing behind it, the physical stores, all of that. The iPhone is an iconic device because of all the investment Apple put into it. Yes, there are also the millions of developers and apps out there. But the one thing that Apple did right (for me and I guess most iOS users) is that they kept control…

Remove all third-party apps from the ecosystem. How long do iDevices survive in this scenario? Even now that it's already such a behemoth of a platform? Now do the opposite—make Apple as a whole disappear. What would app developers do? I'm not saying Apple doesn't provide value, but let's not pretend they don't need the third-party developers they are so keen on squeezing no matter what. More than they need Apple, at…

Yes they do. I don’t think I was arguing the opposite. On the contrary. I think it’s a relationship. But one where Apple from day 1 have set the expectations on what and how they want that to work. In the end it’s their platform. Developers make the choice to create apps there and they are not happy with the rules. (Ignoring the Apple Watch keyboard and other features stealing issues here as Apple are 110% at fault there).

What my arguments is: Apple want their devices to have a specific feel and UX - so they enforce rules for iAP. But it’s the feel of an Apple product and customers vote with their money they like that feel.

I know you can make the case of let ppl vote when you have alternative forms of payment but we all know that if that is allowed a certain part of the UX will be hurt. Apple simply do not want to compromise their “vision”, “magic” , “feel” or whatever they want to call it so that developers earn more money.

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#215
post #149

Earlier quoted context omitted.

From Apple's perspective, developers are either creating competing products or products that Apple will eventually compete with. Either way they would rather not help.

And the arrogance and entitlement they've shown during Epic trial. Apple really believes that their OS and Store are godsend to developers, and this makes developers forever indebted to Apple for the 30% cut of everything happening through it. I have to use mediocre Xcode, limited OS APIs, fight signing, sandboxing, lack of Vulcan, and capricious review. I need to keep rewriting churning APIs with "No Overview Availa…

> Apple really believes that their OS and Store are godsend to developers,

Or, at least, their lawyers have decided that is the line of argument likeliest to lead to a victory.

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#216
post #178

Earlier quoted context omitted.

Yea, legally it’s clear Apple can charge whatever they want. The actual leverage large companies have is by not having their Apps on iOS Apple may lose customers. But at this point I doubt Netflix is willing to risk it as there is simply to many streaming options. However, Netflix doesn’t need to use IAP so for them it’s a question of increased conversions with IAP rather than dropping the platform. Assuming their al…

> But at this point I doubt Netflix is willing to risk it as there is simply to many streaming options. Well, but as you point out, they aren't using IAP at the moment so there's nothing to risk. An interesting question is what would happen if Apple decided to play hardball and demand Netflix use IAP again, with no external option, similar to what is required for video games. Honestly, my money would be on Netflix pu…

If I'm understanding the outcome of the Epic case that these documents came to light from, that kind of hardball would probably go pretty poorly. While Apple mostly won the case, between this and a case in South Korea, it's pretty clear they're going to be required to allow some kind of linking for external account management of "reader apps," which they classify Netflix as.

Personally, I suspect if Apple had not gone the ridiculously overreaching "we want a cut of every purchase of digital goods/services when the purchase occurs in any app on iOS" route, and had let Netflix and Amazon and anyone doing "reader apps" at least link out from the very beginning (and more reasonably, allow them to -- gasp! -- load a web view to purchase/manage subscriptions, buy ebooks, etc.), it would have saved an awful lot of heartache.

Well, that and just go with a 15% cut across the board rather than 30%.

Well, all of that and also include at least streaming game services in their quirky definition of "reader apps".

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#217
This is not new, 15 % has been possible in the Video Partner Program since 2016.

The power dynamics is different with content providers for Apple. Apple TV needs content from the Big 4/5 Studios and that is a lot of leverage they have to negotiate better rates,

Netflix may not have the same leverage as other content providers, it would have been easier for them to negotiate comparable terms.

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#218

Earlier quoted context omitted.

This is a solved problem. Just do what most American cities do with other natural monopolies like utilities: use careful price controls to cap margins and slow rate increases. You don't need to invent some esoteric market-based solution, especially for a service where marginal costs are near zero and supply is almost infinite.

Absolutely not a solved problem. The utilities have no reason to innovate at that point. In my local municipality I have no way to choose renewable energy apart from building my own power plant on my roof. That’s a complete failure of these government granted monopolies.

What's wrong with your local power provider not incorporating renewables? There are still solar installers, and it probably a better deal overall to own your own plant, as it were.

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#219

Earlier quoted context omitted.

Better plan? How about we stop letting tech companies reach "monopoly scale"?

The market is globally competitive. How would expect tech companies to compete if you have policies that continuously place them at a disadvantage against global competitors. Tariffs don't solve these problems either. OP's suggestion is pretty decent idea relative to playing wack a mole with price fixing while trying to make sure your country's corps can compete on the global market.

It's not a free market, it has never been a free market, and this is just another part of a market that should also be regulated.

Re: Apple execs describe a “unique arrangement” with Netflix (2018)

#220

Earlier quoted context omitted.

Maybe this is not a popular opinion but I think that Apple do provide the value. They created the device, the OS, the marketing behind it, the physical stores, all of that. The iPhone is an iconic device because of all the investment Apple put into it. Yes, there are also the millions of developers and apps out there. But the one thing that Apple did right (for me and I guess most iOS users) is that they kept control…

The customer wants convenience, the developer wants to give convenience, and Apple charges 10-30x the going rate of merchant fees for it. And neither the developer nor the customer can pick a different style of convenience. I don't think it can be a free market if customers can't choose another option and developers can't compete with existing options.

Well I disagree. You can choose Android. What I feel normally lacks from the discussion is that the consumer has consciously chosen the OS and device. That choice needs to be respected and I think developers are now trying to augment what platform is doing. Apart from making more money I can’t see a reason how this benefits the customer (except edge cases - happy to be proven wrong here but haven’t really thought of a good example when this actually very useful). Also it’s more convenient for me to use Apple Pay and manage my subscriptions from the Settings app than from the 20 diff apps I have subscribed to and each one has an incentive to incorporate dark patterns in order to keep me from cancelling. Apple on the other hand cares for me being the next iPhone, watch, Mac, iPad so they Are not too fussed by me cancelling a subscription which I don’t use or want anymore.
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