Apple Tax suspended for video subscription services - for now - The UpStream

Apple Tax suspended for video subscription services - for now

posted Saturday Apr 4, 2020 by Scott Ertz

Apple Tax suspended for video subscription services - for now

One of the biggest limiting factors for media services on Apple is the Apple Tax. The company requires that all subscriptions made available through apps on the platform be run through its App Store. While this may make the process a little easier for users signing up on Apple devices, it is not ideal for the companies themselves. Apple charges a 30 percent fee on all App Store transactions, commonly referred to as the Apple Tax. This means that a company like Spotify or Netflix must give 30 percent of their revenue, not profit, to Apple for providing a service that neither company wants nor needs.

Currently, however, some subscription services are receiving a tax break from Apple. The company is suspending its controversial revenue split for "premium subscription video entertainment providers." The move allows a company like Netflix to implement App Store subscriptions in their apps for new subscribers without losing much of their profit margin.

Publicly, the reasoning behind this is to expedite the process for the flood of new customers flocking to streaming services while stuck at home. However, the tax-free holiday is not a permanent situation, and, if services implement this feature in their apps during the waiver, they will still lose that revenue in the future when the Apple Tax has returned. That future trapped revenue is what Apple is hoping for.

It's not a completely surprising move, considering how many companies have been removing the feature from their platforms in recent months. Most notably, Google canceled all YouTube TV subscriptions that were being billed through the Apple App Store in March 2020. Netflix removed the ability to sign up for service through the store years ago to recover revenue. It is unlikely that any premium services will take Apple up on this temporary offer, knowing what the company's goal truly is.

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