$0 * 30% is apples problem. It is apples decision to have apps that can be $0. Apple is free to set a different minimum price.
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Apple Says Spotify Only Pays 15% Fee on About 0.5% of Subscribers in Response to App Store Complaint
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$0 * 30% is apples problem. It is apples decision to have apps that can be $0. Apple is free to set a different minimum price.
You know the adage about what is an appropriate price for something, that it is as much as the market will bear? The same applies to percentage fees. There is no snowball's chance in hell that Apple could get a 15% (let alone 30%) fee for, eg, products bought through the Amazon app. Amazon would pull the app or people would stop using it (depending on which side would be paying the fee). Even a 5% fee wouldn't fly for that.
Could Apple squeeze 5% out of Uber? Maybe, but unless Apple wants to negotiate a custom rate with every single company that does business via iPhone apps it has to create clearly defined categories. And currently it has three of those: (1) anything that relates to a physical product or service is not taxed, (2) recurring revenue aka subscription for digital goods or services that can be consumed (and are bought) through the app are taxed at 15% (after the first year), and (3) non-recurring revenue of the same 30%.
For Apple to charge Uber 5% but not Amazon, it would need to create another category, defined in a way that is pretty unambiguous and that is overall beneficial for Apple (ie, it shouldn't drive away customers from using the relevant app or create a public backlash). And I don't think that would be an easy task. Apple is already fighting a rearguard action with its fees as evidenced by them cutting the rate to 15% for subscriptions and even that being too much for some like Netflix and Spotify (which might be two largest companies in terms of number of subscriptions). And more and more software that has even the tiniest service component (eg, just synching settings between different instances of the app) is moving to a subscription model, rarely primarily because they want to avoid the 30% rate but that is certainly an aspect that factors in.
But Apple isn't any different than everybody else. Which company wouldn't like to get more for its products and services, which individual wouldn't like to get a higher wage for their work? Whether anybody is abusing their market dominance (as Apple might be doing via their control of the App Store, or movie stars or CEOs are in their salary negotiations) can at some point be decided by regulatory agencies. Look at the rates credit card companies charge merchants. Inside the EU this has been capped to 0.3% (whereas it used to be between 1 and 4%, where it still is in the U.S.).
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The obvious thing is that Apple has the ultimate power to decide whether they accept this workaround as an exemption from the 15% fee or not.
Apple stated that the vast majority of the Spotify users are using the free tier and there is 680,000 subscribing customers through IAP. As we don't know how many are using the free tier, lets look at the numbers for just the paying customers.
Spotify app is 94MB and there's been 20 updates this year so far = 1.88GB
Times that by 680,000 users = 1.278PB of data transferred.
Given that "the vast majority of users use the free tier", we can see how this hosting and bandwidth used is going to be significantly higher than 1.278PB.
Please explain to me where I can host and have access to 1.278PB of bandwidth for "effectively free".
Not exactly true....you can see here that Spotify alerts users exactly how to obtain premium and opens their website directly in safari.
Sure, but Apple knows that certain apps simply have to be free or otherwise people would use a mobile-optimised website instead. And since Apple also is convinced that using an app is generally overall a better experience for the user and it wants is its iPhone owners to have a good experience it accepts that free apps have to exist. Other apps might simply not exist if they were to use a mobile website (eg, a lot of games) and thus Apple accepts that those can be free, ad-supported apps because the availability of those apps makes the iPhone are more attractive. And so on.
Apple provides a service with its App Store. If it feels it can extract a fee for that service and depending on whether charging it (or not charging it) has other net benefits for Apple (eg, making the iPhone more attractive) it tries to charge that fee (or even not).
The big difference was Microsoft were compelling all PC manufacturers to install Windows as standard which included IE as the default browser. Apple build their own hardware and can install whatever they want on it. They are not compelling any other manufacturer to install iOS/ Safari/ Apple Music.
Yes.... They'd better watch their Apple event invites don't get revoked
Imagine Microsoft demanding a cut from the Adobe Creative Cloud subscription... I hope Apple gets slapped with a big fine, they deserve it.
First please explain to me why Facebook which is way more downloaded than Spotify pays Apple 0.00 dollars in hosting fees beyond base App Store developer fees.
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The addition of more users does for free apps as well.
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You lost me in the first paragraph when you assumed my answer would be nonsense. Hopefully Apple has lawyers with a little more respect. I'll give you more than what that reply deserves, exactly 1 sentence: try to explain to me why apps like Facebook, Instagram, and YouTube thrive off of ads (a self-hosted media that contributes most of their financial income) and pay nothing to Apple while Spotify has to pay 15% to serve music (a self-hosted media that contributes most of their financial income).
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The pitfalls of adopting a business model where every new customer actually causes you to lose more money.
Why didn’t Spotify just price their product with a sustainable margin from the outset?
Products or services with unsustainable business models should be allowed to fail instead of trying to prop them up by taking money from another business.
This is actually a very informational and thoughtful answer. Don’t see that a lot around here. Uber and Lyft are tricky but I’d argue (and I’m sure Apple would too) that those companies wouldn’t exist if not for the smartphone. Just because you’re not consuming their product on your device shouldn’t matter. If Apple had anticipated something like that in 2008 you can be there would’ve been a fee/commission/tax for that business too. Probably not 30% or even 15%. The easiest way for Apple to make this headache go away is to allow apps for digital goods to operate the same way non digital goods apps do. What’s the difference whether I sign up for Spotify via Safari or the app on my iOS device? The app support Apple is providing them is the same either way. And if the argument is Apple deserves a cut of digital media sales/subscriptions then why does Apple allow reader apps to exist at all?
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It’s not really a level playing field when companies like Apple and Google can offer the same service and don’t need to make money on it. And where you end up then is big platform companies owning everything.
This is 100% the ultimate reply to this thread that demonstrates how ridiculous 15% is for something that Apple isn't even hosting. I'm not even replying anymore - everyone else just needs to keep re-reading this in a cycle until they get it
The Verge article is pure rubbish. Where to start? How about these little gems:
Spotify ended 2014 with 15 million paid subscribers. In September 2016 they had 40 million. I don’t know how many they ended 2016 with, but it’s not a stretch to think they added another 5 million based on their growth rate. So Spotify literally tripled their paid subscriber base between 2014 and 2016 and The Verge wants to pretend that time period is irrelevant because Spotify subscriptions “had years to dwindle”?
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Spotify no longer allows customers to pay through Apple. And even when they did, most customers signed up through their website. Spotify isn’t going to be able to show harm when a tiny fraction of their customers used IAP for their subscriptions. Spotify also won’t be able to show Apple doing any sort of “lock in” by preventing Spotify customers from going outside The App because most of them did.
Well for $99 annual, AppStore Developer fee.
That math on "free" apps applies to all the Freeimum garbage hanging out on their servers that never takes off. It's not just Spotify pushing petabytes of "free" data across Apple's wires.
Apple has several options to deal with hosting costs. Raise the developer fee, impose new fees for "cert", set a minimum App price above $0, charge Devs a per-access-request fee on downloads/updates of their app, turn the AppStore into a subscription service itself. These would offset hosting costs.
They could also allow sideloading and 3rd-party stores/installation. They could increase the robustness of HTML5 WebApp local storage, and API access. Any of which would take the hosting cost totally off their servers. They could still require code signing with Apple App Certification even on those, and get their $99 annual in "Dev" fees. Basically turn the "business" of Enterprises Class cert/deployment that Facebook and others were "abusing", into an actual business.
Say $199 (or more) annual for a "Sideload" cert + a per-app/update processing fee for the cert to be applied by Apple.
As if paying directly through the Spotify app wouldn't be trivial, if Apple allowed it. They force Spotify to use their pay system, Spotify certainly doesn't need them to. That would be like Walmart forcing anyone purchasing a post-paid Verizon phone to use Walmart Pay for the monthly bill, and then taking 30% for themselves (for the first year, then 15% thereafter).
Let's not forget there are MANY developer accounts that never release a single app through the app store.
It’s got absolutely nothing to do with charges and everything to do with Apple giving it’s self a monopoly on the App Store. Allow people to side load apps and the problem goes away but what are the chances?
Spotify needs to allow subscriptions through the app with a disclaimer on the price due to apple policies. Stating that they will save 30% going through their website.
Oh wait, apple wouldnt allow that disclaimer
Oh wait, apple wouldnt allow that disclaimer
It's not a "monopoly", since customers can choose other platforms; but it is "monopolistic behavior". And in either case, there are remedies other than "breaking it up", which would be a bad thing for consumers, as Apple could no longer take responsibility for quality control of the entire eco-system; something I value highly. It would be much better for everyone if the App Store were subject to some reasonable regulation, rather than just thoughtlessly "breaking it up" without regard to the consequences.
Spotify can also offer their product on other platforms. They are not forced to offer it on iOS. But they want to, because it benefits them. How can Apple be a monopoly if there are numerous other options that offer their platforms/ecosystem service for less money, giving consumers other choices? I’m not a lawyer, but isn’t a monopoly a company that effectively controls an entire market? Apple doesn’t control a market. Could you say Apple charging a fee is anti-competitive? How about the same fee Spotify had to pay on other platforms?
It just seems like the meddlers are looking to expand the definition of monopoly and anti-competitiveness so they have more control.
"Apple also forbids Spotify and other developers from alerting users that they can sign up for a subscription or complete a purchase outside of its iOS app, and disallows Spotify from advertising deals to its customers in the app or by email, as these practices would circumvent Apple's in-app purchase system."
This is the entire core of the issue to me.
Charging 30% or even 15% does seem excessive for effectively just being a payment processor, but that's less of a concern for me than Apple dictating how other companies may communicate with their users.
It's not anticompetitive to charge a lot of money. In fact, that's pro-competitive - it encourages people to seek other options. But what is clearly anticompetitive at least to me is forbidding your clients from telling users about other options in the app or especially by E-mail. Is Apple actually saying that you may not E-mail your own customers with content of your choosing if that content might affect the 30% tax?
Visa makes a percentage of all credit card transactions they process. Imagine if Visa told stores they were not permitted to have a sign on the counter showing other payment options. Imagine if a sign that said "Cash or Visa accepted here" was considered against Visa policy. I doubt that'd work out too well. Same goes for PayPal - imagine if an eBay listing that allows PayPal payments would not be permitted to advertise that the seller accepts other forms of payment.
I think if anything is going to be Apple's mistake, it's this part of the policy. The 30% payment processing charge is honestly ridiculous, and even 15% is out there, but forbidding your clients from communicating options with their customers, especially dictating communication OUTSIDE of the app (email)... how exactly can that not be seen as anticompetitive?
I also find it kind of immature that Apple is just going to pound on this 0.5% of subscribers figure. That's not the point. To me that's like saying "Only 0.5% of people who took this medicine died, so there's no point in investigating how we can fix it" or "Only 0.5% of batteries exploded, no point in figuring out how to make safer batteries." It's basically trying to divert attention from the issue by minimizing it. Not cool.
This is the entire core of the issue to me.
Charging 30% or even 15% does seem excessive for effectively just being a payment processor, but that's less of a concern for me than Apple dictating how other companies may communicate with their users.
It's not anticompetitive to charge a lot of money. In fact, that's pro-competitive - it encourages people to seek other options. But what is clearly anticompetitive at least to me is forbidding your clients from telling users about other options in the app or especially by E-mail. Is Apple actually saying that you may not E-mail your own customers with content of your choosing if that content might affect the 30% tax?
Visa makes a percentage of all credit card transactions they process. Imagine if Visa told stores they were not permitted to have a sign on the counter showing other payment options. Imagine if a sign that said "Cash or Visa accepted here" was considered against Visa policy. I doubt that'd work out too well. Same goes for PayPal - imagine if an eBay listing that allows PayPal payments would not be permitted to advertise that the seller accepts other forms of payment.
I think if anything is going to be Apple's mistake, it's this part of the policy. The 30% payment processing charge is honestly ridiculous, and even 15% is out there, but forbidding your clients from communicating options with their customers, especially dictating communication OUTSIDE of the app (email)... how exactly can that not be seen as anticompetitive?
I also find it kind of immature that Apple is just going to pound on this 0.5% of subscribers figure. That's not the point. To me that's like saying "Only 0.5% of people who took this medicine died, so there's no point in investigating how we can fix it" or "Only 0.5% of batteries exploded, no point in figuring out how to make safer batteries." It's basically trying to divert attention from the issue by minimizing it. Not cool.