A growing number of software companies are looking to bypass the dominant app-store gatekeepers at Apple and Google — selling their services directly to consumers and undercutting the tech giants that for years have controlled how most of iPhone and Android users discover, download and pay for their apps.

The revolt is being led by companies such as Netflix, which became the latest firm to cut off a lucrative relationship for Apple when it confirmed that new customers will no longer be able to pay their monthly subscription fees through iTunes. Instead, subscribers are being redirected to make payments on Netflix’s own website.

Netflix’s decision follows that of another major online service, Spotify, which ended support for in-app subscription payments in 2016.

And amid the explosive growth of its video game Fortnite, digital publisher Epic Games has said it intends to create its own app store for games in a bid to compete with existing online storefronts. The company already offers its Android app for Fortnite outside of the traditional Google Play Store.

High-stakes revenue

Netflix’s announcement could save it hundreds of millions of dollars and is potentially devastating for Apple. Through in-app payments, the iPhone maker currently takes a 30 percent cut of revenue from an app’s first-year subscriptions, and 15 percent of revenue generated by long-term subscribers.

Apple made as much as $257 million from Netflix this way in 2018, according to estimates by Sensor Tower, a San Francisco-based market-research firm. But as Netflix continues to grow internationally, Apple stands to miss out on as much as half a billion dollars in 2019 from Netflix alone, said Randy Nelson, head of mobile insights at Sensor Tower.

“You have this app that is an incredibly popular app in terms of installs, but over time is going to be generating less and less revenue for Apple,” Nelson said. “It puts Apple in an intriguing and interesting situation.”

Netflix said existing subscribers can still use iTunes to pay for their subscriptions if they choose.

“Apple is a valued partner with whom we work closely to deliver great entertainment to members around the world across a range of devices including the iPhone and Apple TV,” Netflix said.

Apple, Google and Spotify didn’t respond to a request for an interview. Epic Games declined to comment.

After Spotify transitioned customer payments away from in-app billing, Apple witnessed a sharp decline in the amount of revenue it received from the company, according to Nelson — falling from $11 million a month in April 2016 to barely $1.5 million a month by December 2018. (Sensor Tower said it produces its estimates by comparing, among other things, app-store rankings and combining those with concrete revenue numbers it has in its possession.)

A similar dynamic affects the Google Play Store, Nelson said, which now receives no revenue from Spotify after it ended in-app billing there as early as 2014. Netflix followed suit in May 2018. Simply existing on either app store does not come with significant costs for the companies.

A statement of power

The shift by Spotify — and then Netflix and Epic — underscores the growing dominance of those firms. Netflix’s position as the world’s biggest provider of streaming video gives it the power to snub Apple’s platform without sacrificing its visibility to potential customers.

But a small-time developer with weaker brand recognition benefits from being on Apple and Google’s platforms, which can help customers discover new apps through promotion and marketing, said Doug Creutz, a game-industry analyst at Cowen & Co.

“Netflix and Epic are two of the biggest entertainment products on the planet. They don’t need the app store to help them sell their products,” Creutz said. “Most software developers don’t have that luxury. Most of them need the placement the app store provides.”

Epic Games’ runaway success with Fortnite catapulted the publisher into a leading position. Epic reportedly made $3 billion in profit in 2018, thanks in part to its hit game and the cultural phenomenon it has become.