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Illustration: Rebecca Zisser/Axios

After years of grudgingly handing over as much as 30% of their mobile revenue to Apple or Google, some app makers and digital service providers are exploring ways to cut out the middlemen.

Among the recent examples: Epic Games is distributing Fortnite for Android outside Google's Play Store. Netflix is testing the removal of the ability to subscribe from within its iOS apps. Spotify, which once offered a discount to iPhone customers who subscribe outside of the app, has discontinued the ability for new subscribers to pay via the app.

The bottom line: Apple and Google make big bucks off their cut of subscriptions.

  • Sensor Tower estimates that Apple, for example, made $85 million in the first half of 2018 from those subscribing to Netflix, $26 million from Pandora subscribers and $15 million from those purchasing Hulu.
  • Google, it estimates, made $17 million off Pandora subscriptions and $14 million from those subscribing to Netflix, over the same period.

Be smart: While selling virtual goods doesn't carry the same expenses as operating a brick-and-mortar store, there are still some costs to Apple and Google. Credit card fees are the most notable hard cost, along with the costs associated with hosting the app stores and delivering digital content.

And, while there are savings to be had, there are other costs associated with cutting out the app store.

  • With Apple, it's a simple dollars and cents equation. Does the increase in sales you get offering subscriptions or content sales in the app offset the cut you have to give to Apple? And if what you are selling is the app itself, there really is no choice — there isn't any way to get around Apple's App Store if you're distributing iPhone apps.
  • On Android, it's more complicated. There are plenty of options to go around Google, but doing so requires missing out on the most widely used method for getting apps — and it also requires users to turn off a security setting that helps stop malware.

History lesson: It's not like anyone likes handing over 30% of sales to Apple or Google. Still, most of the industry has just adjusted to this as the cost of doing business. But not everyone: Amazon, for example, pulled the ability to buy books from its Kindle and Audible audiobook iOS apps in order to avoid having to give a cut to Apple.

What they're saying:

  • Startup investor/adviser Steven Sinofsky tells Axios that Apple and Google don't just distribute apps, they created the ecosystems, curate the stores and help spur demand. And the option to go around those stores, he noted, is rather limited. "Just because Fortnite or Amazon do it does not mean the newest game has, or should have, the same leverage."
  • "It feels like something bubbling up here. The dollars are just getting so big. They just don’t want to be paying Apple and Google billions," Macquarie analyst Ben Schachter told Bloomberg, which raised the issue in a story Wednesday.

Go deeper

Rohingya refugees sue Facebook over Myanmar hate speech

Internally displaced Rohingya peoples at a market area in the Baw Du Pha IDP Camp in Sittwe in Myanmar's western Rakhine state. Photo: STR/AFP via Getty Images

Rohingya refugees accused Facebook in a $150 million lawsuit filed Monday of amplifying hate speech against the persecuted minority Muslims in Myanmar via algorithms and failing to take down inflammatory posts.

Why it matters: Thousands of Rohingya Muslims have been killed in Myanmar in what the United Nations deemed a genocidal campaign. Tens of thousands of others have been displaced, notably following a massacre by Myanmar's military in 2017.

Former D.C. Guard alleges Army generals lied about Jan. 6 response

Members of the National Guard and Capitol police keep a small group of pro-Trump demonstrators away from the Capitol following the insurrection on Jan. 6. Photo: Spencer Platt/Getty Images

A former D.C. National Guard official has alleged that top Army generals "lied" to Congress in their testimony on the U.S. Capitol riot, Politico first reported Monday.

The big picture: Col. Earl Matthews, who was serving on Jan. 6, alleges in a memo that the official version on the military response is "worthy of the best Stalinist or North Korea propagandist" and that the Pentagon inspector general's November report on it features "myriad inaccuracies, false or misleading statements, or examples of faulty analysis."

Toyota to build $1.3 billion U.S. battery plant in North Carolina

The all-electric Toyota bZ4X, the company's first battery-electric vehicle, at the Los Angeles Auto Show in Los Angeles, California on Nov. 17. Photo: Frederic J. Brown/AFP via Getty Images

Toyota announced Monday it's investing $1.3 billion to construct an electric vehicle battery "megasite" near Greensboro, North Carolina, set to open in 2025.

Why it matters: Toyota's Prius hybrid won environmental plaudits when it launched in 1997, but it has since lost ground to electric vehicle world leader Tesla, per Axios' Joann Muller. This battery plant will be the first to produce automotive batteries for Toyota in North America.