Alphabet Cuts Off YouTube TV Subscriptions Through Apple's App Store

Following Netflix and Spotify, YouTube is the latest company to move away from paying Apple's App Store fees. Alphabet is placing more focus on YouTube's revenue potential and expanding its money-making opportunities.
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Alphabet's YouTube is shunning the App Store as it seeks to place more focus on the video platform's financial performance. 

On Thursday, YouTube circulated an email to customers of its subscription product, YouTube TV, saying that it will no longer accept payment through Apple's App Store. YouTube is the latest company to ditch the platform for payments processing. 

Alphabet  (GOOGL) - Get Report shares were flat on Friday at $1,512.77, and Apple's  (AAPL) - Get Report were down 0.22% to $324.14.

Apple's App Store fees have become an increasing source of friction with developers. For subscriptions processed through the platform, Apple takes an initial cut of 30%, which then drops to 15% after 12 months. But some popular subscription services, namely Netflix  (NFLX) - Get Report and Spotify  (SPOT) - Get Report, have opted to circumvent those fees by directing customers to pay by going through their own sites. 

YouTube TV costs $49.99 per month, and Alphabet revealed in its December quarter earnings report that the service has two million paid subscribers. The company has recently sought to highlight how much money YouTube is bringing in, telling investors that it also earned $15 billion in advertising revenues in 2019, an increase of 36% over the prior year, and that subscriptions and non-advertising revenues had an annual run rate of $3 billion in 2019. 

YouTube is among the top contributors to top-line growth at Alphabet -- and the company is also seeking to expand revenue opportunities at YouTube, including shopping options and potentially other initiatives.  

According to a recent report in The Information, Alphabet is contemplating turning YouTube into a destination platform for subscribers of other subscription video services.

YouTube already offers a limited number of add-ons to its YouTube TV subscription, such as Showtime. Reportedly, it is also holding talks with a number of entertainment companies to expand the number of channels it offers through YouTube TV. If enacted, such a move would expand its role as a content middleman, not unlike Apple or Amazon, in addition to serving as a destination for original content. Amazon  (AMZN) - Get Report, for example offers hundreds of outside subscriptions through its Amazon Channels platform. 

Apple, for its part, has been aggressively expanding its services offerings beyond juggernauts like the App Store. In its most recent quarter, Apple reported $12.5 billion in revenue for its growing Services division.

In addition to moves by Netflix, YouTube and Spotify to circumvent the App Store, its fees are also the subject of a long-standing court battle over the rights of developers to sue Apple over the fees. Last June, developers sued Apple alleging that the mandatory fees amount to anticompetitive conduct.