Photographer: John Taggart/Bloomberg

Apple to Cut Fees Video Services Will Pay for App Store, Say Sources

  • Move comes as Apple prepares to roll out a new TV app
  • Video partners had been frustrated with Apple’s revenue slice

Apple Inc. plans to cut the amount it charges to sell video services over the widely used App Store, a move to appease partners whose movies and TV shows are vital to the technology giant’s video strategy.

The iPhone maker intends to reduce the slice of revenue it is paid by subscription video streaming apps from the current 30 percent to 15 percent, according to people familiar with the plans. Other non-video apps see their bill from Apple halved from 30 percent only after a customer has completed a year’s subscription. Apple spokesman Tom Neumayr declined to comment.

Apple’s hefty cut of sales made via its App Store has long angered partners, some of whom have accused the technology giant of anti-competitive behavior. The concessions speak to the growing importance of video to Apple, which next month will introduce a new app devoted to TV shows and movies.

Apple’s new TV app is part of the company’s effort to make its devices the hub for watching video by pooling television shows and movies from multiple apps in one place. Apple has explored creating its own live TV service, but delayed those plans after difficulty getting rights from programmers and broadcast networks, who have observed with caution how Apple has assumed a dominant role in the music industry. Instead, Apple has crafted an app that relies on programming from services like Hulu, Showtime and HBO.

Slowing iPhone sales have prompted a greater focus on revenue from the App Store and other services, including Apple Music and iCloud. Services have become the fastest growing business segment for the Cupertino, California-based company, with sales jumping 22 percent to $24 billion in the fiscal year ended in September.

Some video partners have already been paying 15 percent of monthly subscription fees to Apple. The company is now extending the rate to all subscription video services as long as they are integrated with Apple’s new TV app, said the people who asked not to be identified because the changes aren’t public. To compensate for the fee, some providers increased the price of their services sold through the App Store to equal the revenue generated on other distribution channels.

For example, Google’s YouTube Red video and music subscription service costs $12.99 a month on iPhones and iPads and $9.99 a month elsewhere.

The move may also speak to the growing competition in providing video apps. Amazon.com Inc. has begun selling other companies’ video apps as an add-on to its Prime delivery service, which also includes an on-demand video library.

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