Fast Company

Netflix Deal Reveals Apple's Secret Sauce: iTunes Pay Channel

As announced this week, the new Apple TV brings a new UI, better internal specs, and full HD capability to the table. But there's the business equivalent of an Easter egg hidden in it for Netflix subscribers: From now on, if you want to join Netflix you can do it through your Apple TV, and Apple handles the payments via its iTunes back channel.

Essentially it works like this: The Apple TV functionality hinges on your iTunes user account, the same kind that's powered 25 billion app downloads to date. You give Apple your credit card details then click "okay, charge it" when you buy an app, rent a movie, or download a song from iTunes. Now Apple's made joining Netflix just as frictionless through Apple TV, eliminating the need to retype your credit card info into the Netflix app. You just allow Apple to charge your iTunes account.

It works from a consumer point of view because it's easy, and because we're all getting used to trusting Apple as a pay channel for our apps and content--handing over $1.99 for an app, trusting Apple's device-to-device security and so on is now normal. It works for Netflix because it makes it easier for users to sign up to their paid service, which is likely to bump up the numbers. It also works from Apple's point of view, because they no doubt get a little financial action from Netflix on the deal (though probably not the traditional App Store 30% cut--we've queried them on this) and certainly they can use the information to improve their customer analytics.

But the iTunes customer database is now composed of hundreds upon hundreds of millions of users, with a secure verification system and credit card number attached to each account. Apple's even pushing its Mac userbase toward signing up to an Apple account, even if you're not an iTunes subcriber, with the Mac app store, meaning there are millions more customers handing over their data to Apple.

And it's at this point you need to remember Apple's EasyPay system, on trial in U.S. stores. It's a clever "future shopping" play, whereby you can actually order and pay for physical goods in Apple stores through the Store app on, say, your iPhone. And for certain goods you can actually pick them off the shelves, scan the code, pay for it through the app and leave the store without speaking to a sales assistant. It's simple, convenient, enabled by Apple's iTunes/Mac account database, has built-in security courtesy of your phone's own security layers and its known location at the time of the transaction, it all happens over Wi-Fi, and there's no NFC or Bluetooth gizmos involved. And it sounds a whole lot like the mobile payments-based future shopping revolution we've written about.

Now Apple's expanding this influence to let you pay for Netflix too. What Apple is quietly doing is changing how you pay for things online, and the more speculative reader may wonder if this is a bigger step toward a long-rumored mobile payment system from Apple. As we've noted, and several recent moves by different players in this game from credit card companies and PayPal have confirmed, the mobile pay space is evolving so quickly that there's something of a land-grab going on, each firm trying to ensure its position in the upcoming mobile payment space.

Apple's iTunes trick for EasyPay and now Netflix neatly side-steps all of this mess. As far as Apple's concerned it has your credit card details, it can verify who you are for security reasons, it has its own software running on its own hardware and it has its own solutions to user problems. As it's demonstrated with iMessage, responsible for worrying the phone networks so much, Apple's quite happy to go its own way with things--meaning it could easily come up with its own mobile pay solution, an expansion of EasyPay that lets you pay for groceries in the supermarket, or tickets in a movie theater just as easily as a pair of headphones in the Apple Store. It's speculation, but it's not that big a step.

[Image: Flickr user Avijeet Sachdev]

Chat about this news with Kit Eaton on Twitter and Fast Company too.

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