The first screen that comes up when you initially open the Netflix app might surprise you. It reads:
"Trying to join Netflix? You can't sign up for Netflix in the app. We know it's a hassle. After you're a member, you can start watching in the app."
Try as you might, in fact, there's nothing in the app that even tells you how or where you actually can sign up for Netflix. You're left on your own--eventually to figure out that you have to search the internet or point your browser to Netflix.com.
What explains this insane user experience? Of all companies, you'd think that Netflix would be one to streamline the experience to get new members to join its 182 million-strong subscriber base.
The answer has to do with the fact that Netflix can do simple math.
As I reported soon after it happened, Netflix decided in 2018 to stop allowing new users to sign up for its service via Apple's app distribution, because of Apple's terms of service.
Basically, if you signed up for Netflix via the app on your iPhone, Netflix had to pay Apple a 30 percent commission for the first year, and a 15 percent commission of your membership fee for every year afterward.
During 2018, one analyst calculated that Netflix likely grossed $853 million from subscribers who came to it from iTunes, which meant paying an "Apple tax" of roughly $256 million.
That same year, Netflix gradually weaned itself off the Apple payment system, first in some overseas markets. It also did the same thing on Google Play. As of the start of 2019, it was displaying the kind of message I got over the weekend.
As far as I can tell, Netflix never made an announcement about this change, but the company confirmed it after an eagle-eyed journalist, Manish Singh of VentureBeat, noticed it.
(I should disclose I already have a Netflix account; I just wanted to add the app to my phone. And I also knew about the no-new-customers restriction, since I wrote about this back then.)
At the time, it seemed a risky move. Netflix is a big company, but it's dwarfed by Apple and Google. And with few exceptions, most app developers simply accepted that Apple had built a gargantuan app signup and delivery mechanism, and could charge what it wanted.
So, how much of a hit did Netflix take by no longer allowing new subscribers to sign up via its apps, and instead requiring them to deal directly with Netflix?
While we can't calculate an unknown unknown like that, we can look at two things:
First, Netflix's subscriber base has ballooned, with 15.7 million new members during the first quarter of 2020 alone. (The fact that so much of the world was isolated at home during that time due to the pandemic clearly didn't hurt.)
About 2.3 million of those new Netflix subscribers were in the U.S. and Canada.
Second, imitation is the sincerest form of flattery, by which I mean that other companies are now doing exactly as Netflix has done.
Among the very popular apps that won't allow customers to subscribe, according to a recent survey by The Wall Street Journal: Spotify, Amazon Prime, and Rakuten's Kobo. Amazon's Kindle app will let you read books you've already purchased, but not buy new ones.
Some other apps allow new subscribers via the App store, but charge them a higher rate. For example, the Journal's Nicole Nguyen reports, a Tinder Gold membership costs $29.99 if you buy it through Apple, but just $13.49 if you buy directly--but Apple doesn't allow any mention of the fact that prices are lower elsewhere.
In the end, I suppose this is all a function of leverage, and it applies to many different industries.
If you've built a product or service but you don't have an audience, you're likely to wind up paying for that privilege, either by running paid marketing or offering commissions.
But if do you have customers who are willing to seek you out, and even jump through an extra step or two to find a way to pay you, you have a lot more power.
The key is to know with as much certainty as possible what category you're in.
Netflix made a bet that it had the power in its relationship with Apple. And nearly two years later, it seems that it paid off.