EU to Investigate Apple Over Spotify's Antitrust Complaint

[78Bandit]

Tangible goods and services vs intangible goods and services.

Yes, that is the distinction Apple made when deciding what items cannot use an external payment system linked from within the app. One obvious reason for making that distinction is because Apple also competes directly in that market segment and they are doing what they think they can get away with to make it more difficult for their competitors.

I'm just going to assume you don't have a rational reason to support that distinction.

 

[Futurix]

Tim Cook claimed at WWDC last year that there are 20 million registered iOS dev accounts so I would imagine the two billion or so dollars that they rake in, in registration fees goes some way towards covering that.

Why would my $100 fee go towards satisfying the needs of Spotify? (or any other developer really)

Ultimately if it will be easy for developers to distribute apps via App Store and use those apps to direct users towards their own payment methods it will:

1) Make App Store unprofitable for Apple to maintain.

2) Worsen the experience for users (would you like to input your card details in every app separately, not have a central place to manage subscriptions, have all different apps have different subscription rules, have no easy guaranteed way to stop subscriptions, etc).

3) Expose users to potential security lapses (right now only Apple has access to my credit card - and I’d rather limit it to just them).

 

[FFR]

Yes, that is the distinction Apple made when deciding what items cannot use an external payment system linked from within the app. I'm just going to assume you don't have a rational reason to support that distinction.

Don’t have to.

As I said earlier, there is no discernible difference between in app and website payments, other than apple iTunes payment system.

Isn’t that what all this is really about?

 

[PickUrPoison]

I know what Apple’s current policy is. My points are challenging those who seem to think the current policy is acceptable and/or makes sense as is. Of course Spotify isn’t forced to offer in-app purchases. They know that. They’re challenging Apple’s rules, not pretending they don’t know what the rules are.

The current policy is acceptable and does make sense as is. None of your points persuade otherwise. Of course Spotify isn’t forced to offer in-app purchases, but if they do, they have to pay the same commissions everyone else does. They don’t deserve special treatment.

Nobody in good faith could really argue that it makes sense for Apple to take 30/15% of e-book or digital music sales but not a ride sharing transaction. Uber didn’t exist when the App Store “tax” was first introduced. As to your point #3...a lot of people defend the 30/15% “tax” by calling it a customer acquisition fee; that Apple has the right to charge it because they’re providing access to a large lucrative customer base. If that’s the case then arbitrarily applying it to digital goods only makes even less sense.

Nobody could argue in good faith that it doesn’t make sense to charge fees on digital goods unless Apple also charges for physical goods and/or services. It makes no more sense to charge 15/30% on an uber ride than it would to charge fees on a hair cut, carpet cleaning or tax return preparation for an app that let you buy and pay for those services.

It’s true that Apple’s App Store does provide access to a billion plus potential customers, and you can distribute a free app (or free digital goods) to all of them at virtually no cost. But to the extent you’re selling an app or any other digital goods—whether through initial app purchase or subsequent in-app purchases—you must split that revenue with Apple. There’s nothing logical about saying a revenue split for digital goods “doesn’t make sense” simply because Apple isn’t also charging fees for services or physical goods.

Apple’s policy used to be 30% in perpetuity for subscriptions, then they changed it to 30% for the first year and 15% for every year after. Apple should be constantly reviewing App Store rules and changing things as needed. Why couldn’t Apple offer something simple like Sign up via iTunes or Sign up via [insert app name here] (which would redirect to the web to complete sign-up and provide credit card details). People who want to use iTunes billing because they think it’s more secure or they want all their subscriptions/purchases in one place would use iTunes. Those that don’t care might choose the other option. Of course Apple would never do that because the non-iTunes option would be cheaper so more people would probably select it. But again, unless Apple can legitimately argue that getting a cut of sales of digital goods is warranted there’s no reason for them not to offer an alternative payment method in-app.

Of course Apple can legitimately argue that getting a cut of sales of digital goods is warranted. They have an App Store. It sells digital goods on a revenue share model. Having an in-app purchase is not an acceptable way to bypass having to share revenue, otherwise everyone would just have a free app and an in-app purchase button and no one would ever have to pay Apple a dime.

Apple has created a thriving platform that has resulted in vendors making billions of dollars selling digital goods via the App Store sales. 100% of the revenue doesn’t go to the vendor, just like it doesn’t in any other store. It’s really strange (to me) that you think revenue sharing for apps/in-app sales is “unwarranted”.

 

[Rogifan]

The current policy is acceptable and does make sense as is. None of your points persuade otherwise. Of course Spotify isn’t forced to offer in-app purchases, but if they do, they have to pay the same commissions everyone else does. They don’t ntvdeserve special treatment.

Nobody could argue in good faith that it doesn’t make sense to charge fees on digital goods unless Apple also charges for physical goods and/or services. It makes no more sense to charge 15/30% on an uber ride than it would to charge fees on a hair cut, carpet cleaning or tax return preparation for an app that let you buy and pay for those services.

It’s true that Apple’s App Store does provide access to a billion plus potential customers, and you can distribute a free app (or free digital goods) to all of them at virtually no cost. But to the extent you’re selling an app or any other digital goods—whether through initial app purchase or subsequent in-app purchases—you must split that revenue with Apple. There’s nothing logical about saying a revenue split for digital goods “doesn’t make sense” simply because Apple isn’t also charging fees for services or physical goods.


Of course Apple can legitimately argue that getting a cut of sales of digital goods is warranted. They have an App Store. It sells digital goods on a revenue share model. Having an in-app purchase is not an acceptable way to bypass having to share revenue, otherwise everyone would just have a free app and an in-app purchase button and no one would ever have to pay Apple a dime.

Apple has created a thriving platform that has resulted in vendors making billions of dollars selling digital goods via the App Store sales. 100% of the revenue doesn’t go to the vendor, just like it doesn’t in any other store. It’s really strange (to me) that you think revenue sharing for apps/in-app sales is “unwarranted”.

Nowhere in your reply do you explain why it makes sense for Apple to apply a tax only on digital goods. Also the reason people bring up Uber is because it’s a service that didn’t exist prior to the smartphone and probably wouldn’t exist without iOS/App Store.

 

[lowendlinux]

I rally hope they break the app store, and add some healthy fines to go with it

 

[Coconut Bean]

So you think that Spotify et al should just create a free app but then create a link to sign up on their own website? So essentially just using the App Store as free advertising?

"I don't want to actually sell my products in your store because I don't want you to make a profit from my product...but what I am happy to do is put up a big advert in your storefront window directing potential buyers to my own store across the street...that OK? Cool..."

Sounds very much like "ambush marketing" to me in scope. In this article it explains what "ambush marketing" is:

"Ambush marketing is an attempt by an unauthorised party, through deliberate marketing activity, to take advantage of the high media profile of an event, team or individual (often of a sporting nature) at the expense of another company's (usually a rival's) official association with them, without paying any licence or sponsorship fees.

Ambush marketing is clearly a very effective marketing tool for brand owners, as it attracts consumers at the expense of competitors, and at little cost to the brand owner. However, it also has damaging effects, not only for those ambushed competitors, but also for the integrity of the event, team or individual concerned and their potential to attract future sponsors."

Now replace "event, team or individual" with "brand" and that's what this amounts to. Spotify (or Netflix etc.) wanting to take advantage of the "high profile" of the App Store without paying any fees. And, as per the above definition, it "attracts consumers at the expense of competitors, and at little cost to the brand owner" (the "brand owner" being Spotify in this case).

While "ambush marketing" isn't illegal in the UK, and while Spotify re-directing users out of the App Store to sign up on its own website wouldn't be "ambush marketing" in the strictest sense, it is parallel in terms of its mechanism and goals. I know that they can't currently do this but if the EU does try to enforce Apple to allow such links then I personally believe that would be the EU actually implementing anti-competitive rules.

Spotify is free to compete; free to compete on price, free to compete on service and free to compete on offering. If Apple Music is taking customers away from Spotify then that isn't purely based on price. And even if it were, Spotify are free to drop their price if they so choose. Just as they are free to vacate the App Store completely.

You have no clue what ambush marketing is. Putting a link to your own website from your own app is definitely does not fall into that category. Apple forcing their own payment solution on developers is also a form of ambushing then too, or showing a samsung ad on Safari on iPhone. Simply by your flawed logic, so is basically every app ever created.

So you think that Spotify et al should just create a free app but then create a link to sign up on their own website?

No, we think that Apple should allow Spotify to add their own payment solution, like a dozen of apps on my iPhone already have, including transportation apps (taxi, uber, scooters, train) or food services. Some of these support Apple Pay and adding credit card and other mobile payment solution.

So essentially just using the App Store as free advertising?

Are you kidding me? App Store is also good for Apple, that's what ultimately makes their phone useful, it is a symbiosis and not Apple doing favours. Ultimately it is neither about Apple or Spotify, but the consumer.

Consumer benefits from competition and Apple is CLEARLY using their advantage as distributor of apps to make their competitors product less viable, and they are being schmuck about it citing bunch of ******** reasons about customer experience, security and so on. There are dozens of apps with more downloads (Facebook, snapchat), that generate NO REVENUE to Apple, yet they are trying to go after a music streaming company.

Most people have to stop looking at this issue from company first perspective. Apple is providing a service and by their size and popularity they are obligated to provide it in reasonable fashion, not exploiting their prime position.

But who am I to say, maybe you also like the super competitive and cheap cellular service in the US...

 

[78Bandit]

Don’t have to.

As I said earlier, there is no discernible difference between in app and website payments, other than apple iTunes payment system.

Isn’t that what all this is really about?

If there is no discernible difference between in-app and website payments then why are you so insistent that Apple keep that distinction only for digital sales? Would you be fine applying the same terms to Uber and force them to use external website payments or pay Apple 30% of their revenue?

 

[PickUrPoison]

<snip>Apple’s rule that this “tax” only applies to digital good is outdated. So either expand the tax to encompass more things or allow digital goods to be purchased in-app using non-Apple payment methods.

There’s nothing outdated about Apple only requiring revenue sharing on digital goods just because you say it is. And it’s not a tax just because you call it that.

Apple may expand the revenue sharing model to include more than just digital goods in the future, but they’re certainly under no obligation to do so, just because you want them to, or think they should.

Furthermore, even if Apple were to allow digital goods to be purchased in-app using non-Apple payment methods, the vendor would still owe Apple its share of the revenue. Just having a different payment method wouldn’t allow them to short-circuit the revenue sharing requirement. Otherwise, everyone would just have a free app with a PayPal button inside for the real cost of the app.

 

[78Bandit]

There’s nothing outdated about Apple only requiring revenue sharing on digital goods just because you say it is. And it’s not a tax just because you call it that.

Apple may expand the revenue sharing model to include more than just digital goods in the future, but they’re certainly under no obligation to do so, just because you want them to, or think they should.

Furthermore, even if Apple were to allow digital goods to be purchased in-app using non-Apple payment methods, the vendor would still owe Apple its share of the revenue. Just having a different payment method wouldn’t allow them to short-circuit the revenue sharing requirement. Otherwise, everyone would just have a free app with a PayPal button inside for the real cost of the app.

Everything you just said falls apart if the EU agrees with Spotify and finds Apple is only applying the restrictive terms to digital goods in an effort to hinder its competitors in that market. Apple is going to need to answer the question "why are you doing it this way only for a market in which you also compete, but not others?"

 

[TVOR]

It's only zero sum on the final SEC filing.

Which is why I specifically said “bottom line profits”...

 

[123]

They get their cut of sales, however.

No, they don't get anything whatsoever from physical goods sold.

 

[BuffaloTF]

Which is why I specifically said “bottom line profits”...

No no... don't get me wrong with why I quoted you back. I'm not trying to get pedantic or fight over the nuance.

I just want everyone else to understand it's not some monolith where everything they offer is free to everyone internally, that each department is almost like its own little business with budgets and revenue targets. You've already acknowledged as such.

Sorry for not being clear initially, that's on me.

 

[PickUrPoison]

If there is no discernible difference between in-app and website payments then why are you so insistent that Apple keep that distinction only for digital sales? Would you be fine applying the same terms to Uber and force them to use external website payments or pay Apple 30% of their revenue?

Apple only charges revenue sharing on digital goods. Uber isn’t selling digital goods, so they don’t have to share revenue. Apple may expand their revenue sharing to include additional categories in the future, but they’re under no obligation to do so.

The line of thinking that says Apple shouldn’t require revenue sharing on one category (such as intangible digital goods) unless they also require it on other categories (such as services and physical goods) is not logical. There’s no basis to demand an “all or none” treatment.

Also, whether an in-app purchase button completes through Apple’s billing system or (if Apple were to allow it) ships you off to Spotify’s site to pay for the purchase, Apple would be entitled to their revenue share in either case. It’s the action of purchasing in-app, not the payment method per se, which triggers the revenue sharing requirement.

But practically speaking, it would be an auditing/compliance nightmare for Apple to try to track in-app purchases if they’re not handling the billing. Apple can’t simply trust that every vendor will accurately report sales and remit the proper revenue back to Apple.

 

[FFR]

If there is no discernible difference between in-app and website payments then why are you so insistent that

Apple keep that distinction only for digital sales? Would you be fine applying the same terms to Uber and force them to use external website payments or pay Apple 30% of their revenue?

There is a distinction between tangible and intangible goods and services, there is no discernable difference between using the website or a link in an app, both are a hassle compared to iTunes billing.

If Uber wants to start offering payment through iTunes, I would use that option. One less account to bother with.

Which is The Whole point of iTunes subscriptions, convenience.

 

[JetTester]

More tech suits bringing lawsuits. Apple has deep pockets, and everybody just wants an excuse to dip their hands in and try to grab a handful of cash. The joys of being the biggest company in the world....

 

[Rogifan]

There’s nothing outdated about Apple only requiring revenue sharing on digital goods just because you say it is. And it’s not a tax just because you call it that.

Apple may expand the revenue sharing model to include more than just digital goods in the future, but they’re certainly under no obligation to do so, just because you want them to, or think they should.

Furthermore, even if Apple were to allow digital goods to be purchased in-app using non-Apple payment methods, the vendor would still owe Apple its share of the revenue. Just having a different payment method wouldn’t allow them to short-circuit the revenue sharing requirement. Otherwise, everyone would just have a free app with a PayPal button inside for the real cost of the app.

You still haven’t explained why Apple deserves a share of revenue for digital goods.

 

[78Bandit]

Apple only charges revenue sharing on digital goods. Uber isn’t selling digital goods, so they don’t have to share revenue. Apple may expand their revenue sharing to include additional categories in the future, but they’re under no obligation to do so.

The line of thinking that says Apple shouldn’t require revenue sharing on one category (such as intangible digital goods) unless they also require it on other categories (such as services and physical goods) is not logical. There’s no basis to demand an “all or none” treatment.

Also, whether an in-app purchase button completes through Apple’s billing system or (if Apple were to allow it) ships you off to Spotify’s site to pay for the purchase, Apple would be entitled to their revenue share in either case. It’s the action of purchasing in-app, not the payment method per se, which triggers the revenue sharing requirement.

But practically speaking, it would be an auditing/compliance nightmare for Apple to try to track in-app purchases if they’re not handling the billing. Apple can’t simply trust that every vendor will accurately report sales and remit the proper revenue back to Apple.

Spotifiy's argument is that Apple is only applying the restrictive payment terms to digital goods because that is also the market in which Apple competes. Apple doesn't compete with Uber, Airbnb, etc. in the services and physical goods market so they allow sellers in those markets to have much greater flexibility in determining in-app payment methods. Apple is going to need to provide a reasonable non-discriminatory reason for doing so; otherwise there is a basis to demand "all or none" treatment.

At least in the EU, ensuring companies don't harm competition at the user level is a high priority. Look at Microsoft back in the 1990's for a prime example. They were forced to include other companies' browsers as an option during Windows setup and incurred multiple heavy fines as a result of their actions both before and after the EU's decision despite Internet Explorer being completely free. Or look at Google's recent $5 Billion fine related to Android and its restrictions on search, which just happens to be Google's main market.

The logic of letting a company do what it wants is wiped away when it is doing so to stifle competition, and the conditions set by the EU could easily be a requirement that all sellers be treated equally in the app store.

 

[LovingTeddy]

Aside from the fact that you don't like it, why can't they? What did they do that forces them to give up their right to control their property?

Well they can. If they do that, then they should allow app developer to redirect to their website for payment purpose. If you disallow this, then let auto-trust athority to decide.

 

[jlc1978]

No, they don't get anything whatsoever from physical goods sold.

Amazon assuredly gets a cut from sales on their websites, even if the seller fulfills the order.

Per Amazon's website:

How much does it cost to sell on Amazon.com?
Amazon offers two selling plans. The Professional selling plan is available for a $39.99 monthly subscription fee plus per-item selling fees, which vary by category.

If you plan to sell fewer than 40 items a month, the Individual plan may be best for you. There is no monthly subscription fee. Instead, Individuals pay $0.99 per item sold plus other selling fees, which vary by category.

Learn more about Selling on Amazon pricing ›
Additional fees apply when you use Fulfillment by Amazon to pick, pack, ship, and provide customer service for your products. Learn more about FBA pricing ›

 

[78Bandit]

There is a distinction between tangible and intangible goods and services, there is no discernable difference between using the website or a link in an app, both are a hassle compared to iTunes billing.

If Uber wants to start offering payment through iTunes, I would use that option. One less account to bother with.

Which is The Whole point of iTunes subscriptions, convenience.

There you go again, changing the conditions to suit your needs. Your original post said there was "no discernible difference between in app and website payments", not a link in an app as you state here. I've used the Uber app, the Amazon app, and other apps that allow in-app payments using the seller's separate payment system as well as apps that go through iTunes billing; there is no more hassle clicking "buy it now" in Amazon compared to iTunes billing for in-app purchases. The only extra step is ensuring you have an account with the seller.

I would bet Uber would tack the 30% fee on to the transaction cost if they offered iTunes billing. Most users would not do so given the option of an in-app payment using Uber's services at no extra cost, but at least Uber has that option while Spotify does not.

You also still provide no meaningful distinction between tangible and intangible goods other than just saying "there is".

 

[jonblatho]

others are allowed to add their own payment systems in the app — Uber, Amazon Prime — so Apple decides what is allowed and what not, which is not a transparent process

Apple is very transparent that developers can have custom in-app payment systems for goods or services which are physical, not digital, in nature. A Spotify Premium subscription is not physical.

 

[hans1972]

May be because other app makers don’t face a first party competition from Apple

A lot of developers do. Anyone creating apps for email, calendar, contacts, spreadsheets, word processors, presentation programs, calculators, stock quotes, weather, audio books, e-books, video services, camera, health, maps, photography apps, photo management, video creating software, audio creating software, messaging, browsers and others.

 

[FFR]

There you go again, changing the conditions to suit your needs. Your original post said there was "no discernible difference between in app and website payments", not a link in an app as you state here. I've used the Uber app, the Amazon app, and other apps that allow in-app payments using the seller's separate payment system as well as apps that go through iTunes billing; there is no more hassle clicking "buy it now" in Amazon compared to iTunes billing for in-app purchases. The only extra step is ensuring you have an account with the seller.

I would bet Uber would tack the 30% fee on to the transaction cost if they offered iTunes billing. Most users would not do so given the option of an in-app payment using Uber's services at no extra cost, but at least Uber has that option while Spotify does not.

You also still provide no meaningful distinction between tangible and intangible goods other than just saying "there is".

Sure add in app as well still doesn’t make a difference, iTunes billing trumps all three.

Sure but again amazon, eBay, Uber, etc all sell tangible goods or service.
Spotify doesn’t, perhaps that is a concept to difficult for you to grasp.


I actually have, repeatedly. The difference between tangible goods and services vs intangible goods and services is one is tangible and the other is intangible.

Don’t think that would make a difference to you.

It certainly does to apple.

 

[PickUrPoison]

Nowhere in your reply do you explain why it makes sense for Apple to apply a tax only on digital goods. Also the reason people bring up Uber is because it’s a service that didn’t exist prior to the smartphone and probably wouldn’t exist without iOS/App Store.

The App Store is literally a store that sells digital goods... that’s what an app is, right? Whether it’s 99¢ or $99, Apple is entitled to revenue sharing. In-app purchases are not an acceptable way to short circuit the fees due Apple. Otherwise, that $99 app would just be free on the App Store, with a $99 in-app purchase to activate it, thus cheating Apple out of its rightful share. No one would ever have to pay Apple anything.

If customers buy computer programs, audio files, video files, ebooks, audiobooks (and probably a lot of other digital products that I’m not aware of) using an iOS app, Apple charges a fee. Why you think that’s not acceptable unless they also charge fees on services and/or physical goods is (to me) quite bizarre.

Apple decides what categories they want to charge fees on, and the amount those fees should be. That’s not for you to decide. You don’t have to like it, you can think they should also charge fees on other categories, but neither is relevant. Apple is a business, and they make their decisions regarding categories and rates for App Store fees according to what they think will best meet their goals and expectations.

Uber being a business started after the App Store has no relevance. If I book and pay for a dog grooming from Petsmart through their app, there’s no fee charged by Apple, just like there isn’t with Uber. Before the App Store, after the App Store, it’s a distinction without a difference. Services aren’t subject to revenue sharing. Whether Uber would/could exist with only an Android app is also not relevant.