FTC Looking Into App Store Rules Regarding Subscription Services

[Abazigal]

So to get this straight:
1. Spotify and others are businesses which make money by providing services dependant on another business (Apple).
2. Spotify and others are not content with the rules and incentives of the other business (Apple).

Let's make an analogy:
1. An individual sells a house.
2. That individual works with a real estate agency to help sell that house without any exclusivity contract.
3. The individual knows from the very beginning that the real estate agency takes a 30% commission from the price of the house.
4. The real estate agency starts a child company that develops houses in the same area of the individual and selling them at approx. the same price as the individual.
5. After the individual learns what the real estate agency does, he gets angry because he couldn't sell its house for the same profit margin the real estate agency does.
6. The individual is angry but he doesn't want to work with another real estate agency or sell the house on its own even though he's not legally tied with an exclusivity contract.
7. He calls in FTC because he's a loser and scumbag.

Does that sound like fair-play?

Spotify: F** you! Hope you crash & burn!

Well technically, Spotify doesn't have the option of working with "another real estate agency" since you have to go through the app store to sell to iOS users. The next alternative, simply packing up and leave, is basically cutting the nose to spite the face because Spotify just loses a very lucrative market and leaves a void for Apple Music to fill.

I emphasise with Spotify as I can see that they are caught between a rock and a hard place. They have yet to make a profit and Apple's entrance into the music streaming market can't be good for business, much as they are putting up a brave front now. I still don't think Spotify has a case, but I can see why they would be acting out of sheer desperation.

I am interested to see how this case unfolds though, because while Apple is big (in the profit sense), it actually still commands only a minority market share in the PC and mobile markets, so I am not sure how far you can stretch the "monopoly" card. I mean, Apple has gotten away with bundling its own default browser in every device it ships, in addition to making it the stock default browser and depriving 3rd party developers access to all its features and nobody has sued it so far.

 

[Rogifan]

If Microsoft did this...oh boy.... The fairness police would have been in out with riot gear ready to go. Reminds me of the Internet Explorer thing from years back. Might not be the same thing but it reeks of it nonetheless.

Apple. They're getting too big for their own good. Or the consumers good.

Really? Apple is not doing anything different today than they were a year or two ago. They don't have different rules for Spotify than any other developer. If Spotify doesn't want to give Apple 30% then don't offer IAP. It's not that difficult for somebody to go to Spotify.com and sign up for their subscription service. If this is the only way Spotify thinks they can fight Apple Music then they really are screwed.

 

[Benjamin Frost]

To clarify a bit: If you buy my app on the app store, there is zero cost involved for me with this. Apple deducts VAT (unfortunately), deducts its cut, and the rest is in my bank account. For Spotify, if you subscribe to their service, there is cost involved for them. Every time you play a song through your Spotify subscription, they have to pay a certain amount of money to the copyright holder. If a $10 subscription costs them $7 in fees for the songs that you play, then Apple taking its cut is fatal for their business model.

That is just as explanation. Fact is that putting apps on the store where every sale costs you money is not as good as apps where every sale is purely money in your pocket.



That's completely unrelated. If I published a book with photos from a museum, and had to pay license fees to the museum, then I would have the same problem if I turn my book into an app. Selling through the App Store is inefficient if you have to pay money to some third party for every sale.

Very well put.

In short, Apple's business model based on 30% was designed for the early days of the App Store when apps were either paid or free and there were no IAPs. It worked well for that purpose. It is much too large a fee for subscriptions or any situation when a third party is hosting and managing content.

 

[Rogifan]

Haven't read the whole thread so it's possible that further info has been posted, but there's nothing in the Reuters link in the first post to suggest that Spotify requested an investigation.

Last week Politico reported that Spotify reps were seen on Capitol Hill meeting with lawmakers pushing them to investigate Apple for anti-trust. My guess is their ultimate goal is to have the government force Apple to unbundle Apple Music and make it an app on the AppStore. It just shows how desperate they are as they know they have next to nothing to keep people from leaving. The minute there's an easy way to transfer playlists from Spotify to Apple Music they're done IMO.

 

[thekeyring]

Well technically, Spotify doesn't have the option of working with "another real estate agency" since you have to go through the app store to sell to iOS users. The next alternative, simply packing up and leave, is basically cutting the nose to spite the face because Spotify just loses a very lucrative market and leaves a void for Apple Music to fill.

I emphasise with Spotify as I can see that they are caught between a rock and a hard place. They have yet to make a profit and Apple's entrance into the music streaming market can't be good for business, much as they are putting up a brave front now. I still don't think Spotify has a case, but I can see why they would be acting out of sheer desperation.

I am interested to see how this case unfolds though, because while Apple is big (in the profit sense), it actually still commands only a minority market share in the PC and mobile markets, so I am not sure how far you can stretch the "monopoly" card. I mean, Apple has gotten away with bundling its own default browser in every device it ships, in addition to making it the stock default browser and depriving 3rd party developers access to all its features and nobody has sued it so far.

I still don't see how you can define a browser as a product in and of itself, instead of a part of the OS. Is Microsoft abusing it's position, and boosting it's clock marketshare, as it bundles it's own clock with Windows?

Google got in trouble by "bundling" Chrome with Android. Should it also be investigated for bundling Google Now Launcher with Android?

Should Apple be in trouble by using it's unfair advantage to spend millions advertising the Apple Watch? A startup couldn't have done that, even if they had a similar product.

 

[jkruehne]

I never understood why it is possible to charge something on subscriptions, etc … (is it apple or any other company)
• it's okay only allow install them via store and charge for these apps…

 

[subsonix]

I still don't see how you can define a browser as a product in and of itself, instead of a part of the OS.

Why? Strictly speaking an OS is simply creating an abstraction on top of the hardware. A web browser is a freestanding application, and an OS will work exactly as intended without one.

 

[flat five]

So to get this straight:
1. Spotify and others are businesses which make money by providing services dependant on another business (Apple).
2. Spotify and others are not content with the rules and incentives of the other business (Apple).

Let's make an analogy:
1. An individual sells a house.
2. That individual works with a real estate agency to help sell that house without any exclusivity contract.
3. The individual knows from the very beginning that the real estate agency takes a 30% commission from the price of the house and he's OK with it and wants to work with the agency.
4. The real estate agency starts a child company that develops houses in the same area of the individual and selling them at approx. the same price as the individual.
5. After the individual learns what the real estate agency does, he gets angry because he couldn't sell its house for the same profit margin the real estate agency does.
6. The individual is angry but he doesn't want to work with another real estate agency or sell the house on its own even though he's not legally tied with an exclusivity contract.
7. He calls in FTC because he's a loser and scumbag.

Does that sound like fair-play?

Spotify: F** you! Hope you crash & burn!

fair-play? sure it is, i suppose.. but at the same time, it doesn't come across as a noble gesture (or whatever).

spotify seems to have taken the easiest route possible to make their money in the past without putting measures in place to deal with new competition as it comes along.. "we'll ride this thing as long as it lasts".. but now that apple has entered the market, it's basically the end of the line for spotify's previous business plan and they're (possibly) crying to authorities now.. i mean, spotify knew this was coming since the beats acquisition and it seems like they've had a decent amount of time to prepare for it but it appears as if they didn't invest the time or money to make changes because they just wanted to keep collecting the easy money.

 

[Abazigal]

I still don't see how you can define a browser as a product in and of itself, instead of a part of the OS. Is Microsoft abusing it's position, and boosting it's clock marketshare, as it bundles it's own clock with Windows?

Google got in trouble by "bundling" Chrome with Android. Should it also be investigated for bundling Google Now Launcher with Android?

Should Apple be in trouble by using it's unfair advantage to spend millions advertising the Apple Watch? A startup couldn't have done that, even if they had a similar product.

I seem to recall an article where Microsoft was actually banned from bundling its own antivirus software on Windows because 3rd party OEMs were concerned that it would eat into profits from their own bundled software. That's why Windows is as barebones as it is. I won't be surprised if their OEMs are actually exerting pressure on Microsoft not to include certain "functional" software because they want to bundle it themselves (and earn more money).

I was trying to draw a parallel with the whole Internet Explorer debacle many years back. However, I think the crux of the argument was that Microsoft had majority market share, while Apple doesn't. And to be fair, IE sucked. Apple at least goes the distance to ensure that Safari constantly remains one of the best, if not the best browser for OSX year after year.

 

[bking10]

the govt is checking Apple to make sure they arent doing anything non competitive. Not sure how this is a surprise considering they are now directly competing with streaming services. So the govt is going to have to keep an eye on them

But then queue up the hundreds of angry post here because someone dared to question Apple. This has no affect on most people. If Apple has to lower that 30%, they would just route less money over seas to avoid paying taxes on it and have it sit there. It's in everyones best interest that there is competition. Or else Apple would have no reason to fix that buggy app

 

[diddl14]

All they got to do is put a notice in their app description in iTunes that they need to go to spotify.com to sign up. Or, say that subscription required in order to use the app. Not hard to do....well, maybe it is for spotify & Deezer.

That's against App Store policies and a reason for Apple to take the app from the store..

 

[gluckett]

How great would it be if Apple could just reject the Spotify app now completely - "You don't like our rules? Fine, thanks for playing!" hahaha I'm all for anything that makes Spotify go under at this point. I was a subscriber for a long time until they just started not caring about what their customers want or need.

 

[thekeyring]

Why? Strictly speaking an OS is simply creating an abstraction on top of the hardware. A web browser is a freestanding application, and an OS will work exactly as intended without one.

So none of the applications matter at all? When does something stop being a part of the core OS and become just an app?

 

[Lankyman]

Because you are missing all the other google apps that complete the ecosystem properly. While you can use them on iOS, they work so much better on android.

So is the answer perhaps to open up iOS or do you prefer the anti-competitive nature of their ecosystem?

 

[McDaddio]

The 30 % is not new. Spotify has been dealing with that for a while.

What is news is that they have more competition. So they should either create a better product, market better, or have better pricing.

 

[k1121j]

silly apple provides the platform a cut is fare and it'snot just streaming music service providers is all developers so no one is discriminating here ....geesh if you can't take the heat go sell your app on google store see how well you get noticed there

 

[MH01]

Incorrect. Spotify has chosen to set their wholesale price and the price they sell directly to consumers at the same price point. That is on them not anyone

Spotify cannot match apple's price at 9.99 via the App Store!

 

[MH01]

Nope. Try again. I guess that is what have your chairman a a senior white house advisor buys.

Lots of tinfoil hats ?

 

[2010mini]

So is the answer perhaps to open up iOS or do you prefer the anti-competitive nature of their ecosystem?

It's already open. Otherwise third party apps would be unavailable. Don't like apple's markup? Don't sell your software there.

 

[MH01]

Well the creators of Instagram made a billion dollars, made possible because of apple. The sweet part is they never gave apple a single penny ever?

I guess people forget how many actual free apps apple supports and enable that generate no revenue for them.

Owe please, it's not a charity!!! the reality is....

At the same time apple made it to the richest company in the world!! People quickly forget how apple benefits from all "free support" it gives

Having the best app Eco system sells more hardware! Apple is doing nothing for free!

Apple makes its money from hardware sales! To be exact, the iPhone ! The revenue made by Instagram is peanuts compared to the revenue from Apple iPhone sales!

Apple needs no money from these apps, they need as many apps as possible to keep people in the Apple ecosystem, selling more hardware each year!

 

[subsonix]

So none of the applications matter at all? When does something stop being a part of the core OS and become just an app?

I didn't say that none of the applications matters, I just questioned, strictly speaking what should be thought of as part of the OS. It's clearly useful to bundle all sorts of applications with the OS, but take an applications like Finder for example, then that's clearly part of the OS, because without it you will not be able to browse the files on the computer through the GUI.

 

[MH01]

So to get this straight:
1. Spotify and others are businesses which make money by providing services dependant on another business (Apple).
2. Spotify and others are not content with the rules and incentives of the other business (Apple).

Let's make an analogy:
1. An individual sells a house.
2. That individual works with a real estate agency to help sell that house without any exclusivity contract.
3. The individual knows from the very beginning that the real estate agency takes a 30% commission from the price of the house and he's OK with it and wants to work with the agency.
4. The real estate agency starts a child company that develops houses in the same area of the individual and selling them at approx. the same price as the individual.
5. After the individual learns what the real estate agency does, he gets angry because he couldn't sell its house for the same profit margin the real estate agency does.
6. The individual is angry but he doesn't want to work with another real estate agency or sell the house on its own even though he's not legally tied with an exclusivity contract.
7. He calls in FTC because he's a loser and scumbag.

Does that sound like fair-play?

Spotify: F** you! Hope you crash & burn!

Only minor fact is that spotify never complained to the FTC, though sure, blame them cause you never bothered to read the article!

 

[LordVic]

The free market doesn't work. It especially doesn't work when applied to an already very imbalanced market like we have here.

add in that in the US, there is a very strong tie between corporation and governance, where there really isn't a "free" market, but an economy and political system essentially given to over to the whims of extremely large corporations.

Anytime I hear "FREE MARKET!! HUHUEHEUHEUHRUHRRH" I laugh, because most of the markets in this world are anything but free.

 

[LordVic]

They don't rent space

I hate the "but it's their space" argument

if you want to use the "space" comparison, like a shopping mall (which really doesn't work in digital era), than you should not be disingenous and confuse how shopping mall space works


Stores in a shopping mall DO NOT PAY A PERCENTAGE OF EARNINGS to the shopping mall owners. They pay a fixed term cost in form of lease payments over a course of a contractual period.

The mall doesn't say "you owe us 30%" every month.

this is fundamentally different because the fixed costs can be made up easier by selling more merchandise. with Apples percentage based system, increase volume also increases 'rent'. you cannot ever make up for the cost of Apples' fees becfause of this.

this is why, fundamentally the shopping mall, and therefore "SPACE" comparison falls flat

if Apple turned around and did a fixed fee for access to the App store, with no percentage, then we'd not be having any of these discussions.

 

[LordVic]

Apple doesn't own the market, unlike Microsoft at the time, Apple is nowhere near a monopoly position. Microsoft used their near monopoly of the desktop OS to try to win and capture the browser market.

Android devices comes with the Gapps preinstalled, they can't be removed without rooting the device, and they have a larger market share, so why single out Apple when it's more appropriate to scrutinize Android in terms of market share.

one fundamental difference and why bringing up Ggoogle's default Apps is that Google allows you to never, ever, use them.

You can change the default apps for any behaviour (in stock Android). Unlike Apple which makes their Apps default with no choices.

don't want to use the gmail app? Download one of of many alternatives, and set it as default. Don't want to use Chrome? ditto. Don't want to use the App store itself? there are alternatives.

Apple doesn't give these options.

still. you are right. Apple is not a monopoly, if you don't like these practces, don't buy an iPhone. Most devices these days are Parity products. That means they're fundamentally the same, with slight differences enough for differentiation.