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Apple Is Gaining from Rising SVOD App Revenue—Here’s the Catch

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Jan. 29 2019, Published 1:12 p.m. ET

Top ten SVOD apps’ gross revenue surged in 2018

Apple’s (AAPL) App Store revenue has been growing quickly and is an integral part of the company’s fast-growing Services segment. The company makes an impressive amount of money by taking a 15%–30% cut on in-app purchases.

The ploy has helped Apple grow its App Store revenue, especially with the number of SVOD (subscription video on demand) services now available in the App Store.

According to the latest report by SensorTower, mobile users in the United States spent as much as $1.27 billion on the top ten SVOD apps in both Apple’s iOS App Store and Google’s Play Store, representing a whopping 62% rise over 2017 and almost threefold growth since 2016.

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Netflix’s recent move will be a drag on Apple’s services growth

Netflix, YouTube, HBO Now, Hulu, and YouTube TV were the top five companies on the list of the top ten SVOD apps in 2017. SensorTower estimates that Netflix (NFLX) grossed $529 million from in-app subscriptions in 2017.

However, the streaming giant has stopped offering in-app subscriptions, which will cost Apple millions of dollars. Many apps could follow suit, which could hurt Apple’s Services growth this year.

However, analysts estimate that the money Apple makes from Alphabet’s (GOOG) Google to make Google Search the default on its devices could surge in the coming years, more than compensating for Netflix’s circumvention of its fees.

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