Senator Elizabeth Warren Accuses Apple of Trying to 'Snuff Out Competition,' Spotify Agrees

[apolloa]

I don't see where Apple is doing anything but running its business within its rules.
Since it is their business they have the right to set the rules, if you want to play with them.
Nobody is forced to be with them.
Why do people even expect that Apple should share or nurture competition?

You may not see it but a member of government does. Anti Competition rules exist, and they are there to stop giants like Apple doing whatever they want and feel like, but it seems you have no problem with them doing exactly that? Are you a share holder?
You also seem a bit clueless about business? Apple isn't doing anyone a favour? They are purely doing things for profit ONLY, like make their product extremely popular then offer a platform to others based on that product in the hope that also becomes extremely popular so they can rake the money in with 30% cuts from everything. And this also argues against your 'nobody forces them to use Apple' argument, because if others want to be successful then they DO have to use the most popular platforms, and that means the provider of that popular platform CANNOT just go and undercut everyone and destroy the competition.

But this is Apple's usual MO, it just lurves to destroy the competition, hence why it went to court with Samsung, they couldn't care less if they copied them, they just wanted to remove a main competitors products of the store shelves, because that is worth a LOT more to them at the end of the day.

 

[redhawk87]

Any outsider trying to decide how a company should run its business must be joking. Even when that business is not fair to others (Who decides what is fair) or morally and ethically reprehensible. (Who decides about moral and ethics)

In a democracy a free enterprise can legally do whatever it wants.

To sum it up SPOTIFY is also free to do what it wants.

That includes whining. Wah!

So, I guess you think Standard Oil should never have been broken up? same with AT&T? If you believe companies can do whatever they want regardless of how horrible it is, then you also should believe monopolies should be legal. If you do indeed believe monopolies should be outlawed, then your statement is moot. You then believe there is needs to be a balance between government oversight and regulations and the free market. Where that balance is is where the debating begins.

I have NEVER met anyone who believes a complete 100% free market is the ideal solution, but I guess there is always a first for everything. So forgive me if I am a little skeptical of your claims.

 

[PJL500]

Who knew Macrumors site attracted so many rednecks?

 

[Renzatic]

Guys, guys, look. This is just like if I robbed your house using nothing but a snarling bobcat held out in front of me. Between the teeth and the claws, it's basically a direct correlation, so stay with me here...

Before you go on, I wanna know how you managed to get the bobcat under control.

...it's for a science experiment.

 

[GeneralChang]

Before you go on, I wanna know how you managed to get the bobcat under control.

...it's for a science experiment.

I ordered something on eBay and let me tell you... https://xkcd.com/325/

 

[CarlJ]

I think we both know that is nearly impossible. Microsoft has done exactly that and they got what? 5% market share? 3% market share? Windows Phone is essentially irrelevant.

Windows Phone is irrelevant because Microsoft released a "me too" product, confident that "because We're Microsoft", everyone would buy it. The market, collectively said, "what, you're still alive?", because the phone had no truly compelling features - if it was compelling to the average person, then Microsoft would have significant market share (Blackberry is in the same position - they looked at the iPhone and said, "no, we here at Blackberry know what the world wants in a smart phone", and the world said, "uh, no, you don't"). Would you suggest, therefore, that Microsoft be given a "level playing field in phones" by... what, maybe requiring Apple to promote Windows Phones in Apple Stores? Maybe they could set up a card table and some folding chairs in the corner so Microsoft could try to sell some Windows Phones to people who came into the Apple store expecting to look at Apple products.

This is all Spotify really wants, the ability to set up shop, for free, in Apple Stores, to sell Spotify's product (which is composed almost entirely of music that Spotify didn't make), without Apple collecting any money from the transaction. That's fair, right?

 

[Renzatic]

This is all Spotify really wants, the ability to set up shop, for free, in Apple Stores, to sell Spotify's product (which is composed almost entirely of music that Spotify didn't make), without Apple collecting any money from the transaction. That's fair, right?

No, they just don't want Apple taking a perpetual 30% cut off their subscription revenue.

 

[CarlJ]

No, they just don't want Apple taking a perpetual 30% cut off their subscription revenue.

Fantastic, then the problem is solved and we can all go home: Spotify can sell subscriptions right now, without Apple taking any cut, they just can't advertise that information in the app. They can make millions of dollars a year in subscription fees and only pay Apple $99 a year to be in the developer program.

What they can't do, is advertise, in the app, "we don't have a subscribe button here because mean ol' Apple would get some of that money, so just go over to our site and pay it all to us there". But that's exactly what they want to do by having a "send us your email address so we can market to you" dialog in the app.

BTW, the "perpetual 30%" is obsolete - it's going to 15% after the first year now.
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But this is Apple's usual MO, it just lurves to destroy the competition, hence why it went to court with Samsung, they couldn't care less if they copied them, they just wanted to remove a main competitors products of the store shelves, because that is worth a LOT more to them at the end of the day.

Quite to the contrary, a huge part of why Apple took Samsung to court was because Steve Jobs was absolutely furious with them for slavishly copying every detail they could of the iPhone. Once Steve was out of the picture, the court case got toned down quite a bit. But what use are facts if they can't be used to prove your particular view of reality? Just go ahead and claim exactly the opposite.

 

[redhawk87]

Windows Phone is irrelevant because Microsoft released a "me too" product, confident that "because We're Microsoft", everyone would buy it. The market, collectively said, "what, you're still alive?", because the phone had no truly compelling features - if it was compelling to the average person, then Microsoft would have significant market share (Blackberry is in the same position - they looked at the iPhone and said, "no, we here at Blackberry know what the world wants in a smart phone", and the world said, "uh, no, you don't"). Would you suggest, therefore, that Microsoft be given a "level playing field in phones" by... what, maybe requiring Apple to promote Windows Phones in Apple Stores? Maybe they could set up a card table and some folding chairs in the corner so Microsoft could try to sell some Windows Phones to people who came into the Apple store expecting to look at Apple products.

This is all Spotify really wants, the ability to set up shop, for free, in Apple Stores, to sell Spotify's product (which is composed almost entirely of music that Spotify didn't make), without Apple collecting any money from the transaction. That's fair, right?

Ok, you dont like the Microsoft example. Try Palm. They had an amazing OS (WebOS) and crappy hardware and absolutely no money for advertising. They no longer exist. Look at Amazon's Fire Phone. A disaster. As you mentioned, Blackberry, another disaster. Nokia... disaster. Samsung's Tizen line of phones? I think the better question is whats Tizen? Mozilla, Garmin, Ubuntu, etc. all have tried to make phones and have horribly failed. Now you cannot tell me they all failed simply because "they all made similar phones". To be the kind of different in the Smartphone industry that makes you an instant success either takes luck (like winning the lottery) or an insane genius (like Steve Jobs). As I have mentioned, any old company technically has the potential to make a hugely successful phone on their own, but it is highly unlikely that they will succeed in doing so. So, you cannot base your argument on something that is highly unlikely.

 

[Renzatic]

Fantastic, then the problem is solved and we can all go home: Spotify can sell subscriptions right now, without Apple taking any cut, they just can't advertise that information in the app. They can make millions of dollars a year in subscription fees and only pay Apple $99 a year to be in the developer program.

What they can't do, is advertise, in the app, "we don't have a subscribe button here because mean ol' Apple would get some of that money, so just go over to our site and pay it all to us there". But that's exactly what they want to do by having a "send us your email address so we can market to you" dialog in the app.

You seem to be overly simplifying the situation so you can roll your eyes at everyone, and throw out some condescending derision. Try to understand both sides of this situation, so you can see why Apple would want some money, but also see why Spotify finds their terms too limiting and draconian.

There is a happy medium here.

 

[CarlJ]

Ok, you dont like the Microsoft example. Try Palm. They had an amazing OS (WebOS) and crappy hardware and absolutely no money for advertising. They no longer exist. Look at Amazon's Fire Phone. A disaster. As you mentioned, Blackberry, another disaster. Nokia... disaster. Samsung's Tizen line of phones? I think the better question is whats Tizen? Mozilla, Garmin, Ubuntu, etc. all have tried to make phones and have horribly failed. Now you cannot tell me they all failed simply because "they all made similar phones". To be the kind of different in the Smartphone industry that makes you an instant success either takes luck (like winning the lottery) or an insane genius (like Steve Jobs). As I have mentioned, any old company technically has the potential to make a hugely successful phone on their own, but it is highly unlikely that they will succeed in doing so. So, you cannot base your argument on something that is highly unlikely.

Apple didn't make the first smartphone, they made the first smartphone that average people would enjoy using, because they didn't just glue together existing building blocks (Windows CE, anyone?) and list a bunch of bullet points on the box, they actually considered every aspect of how it would interact with the user. They also didn't make the first MP3 player. Or the first tablet. They made the first ones that appealed to the average user, in terms of ease of use, good UI/UX, understandable features, etc. You win by either having the first product that accomplishes that (occasionally just by having the first product, period), or by coming in afterwards with a product that is SIGNIFICANTLY better than the one that was already there. Most of the other companies you listed did not arrive first, and did not bring something significantly better. Thus, yes, they were largely "me too" phones. So yeah, I am saying they failed because they were "me too" phones (your replacement phrase "they all made similar phones" does not carry quite the same meaning).

A lot of Android users (especially them, but others too) like to roll their eyes and claim "it's all marketing" - no, it's not, it's making a device that the average person believes they will understand well enough to use and enjoy, and that they believe will do useful things for them.

Palm got their start (their first start, the Palm Pilot, not their later attempt to reinvent themselves with WebOS) with really smart people designing a device that they would actually be happy with, rather than bolting together off-the-shelf components and preparing a list of the bullet points they could check off while patting themselves on the back. As I recall, the original Palm guy was famous for carrying wooden mockups of the original Palm Pilot around with him to work out what size it needed to be, in order to be truly useful and not annoyingly large. Steve Jobs was similar, in that most of the original outside speculation about the iPhone involved iPods with keypads on them, but Steve pushed for something groundbreakingly different - start with great user experience and work back from there to a product that supported that. In both those cases, it wasn't merely that they were "insane geniuses" or won a design lottery, they put in a ton of work to develop something great, that hadn't been realized in quite that form before.

"Invention, my dear friends, is 93% perspiration, 6% electricity, 4% evaporation, and 2% butterscotch ripple." -- Willy Wonka.
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Try to understand both sides of this situation, so you can see why Apple would want some money, but also see why Spotify finds their terms too limiting and draconian.

There is a happy medium here.

Oh, I do see both sides. But Apple has a sandbox with a posted set of rules, which have applied to everyone since the sandbox opened, and Spotify wants to play in the sandbox but feels the posted rules shouldn't apply to them.

What happy medium would you propose? If the rules are changed so one can freely advertise "pay us outside of the Apple ecosystem" in apps (which appears to be what Spotify wants), eventually all the money will go that way and then the App Store becomes unsustainable. Decisions relating to App Store economics all have to be considered in the light of having hundreds of thousands of developers and millions of apps. So what is the happy medium?

Aside from the first clause of my previous message, which was indeed rather snarky (sorry, it's not you specifically, some of the opinions in this thread are hard to believe), every word I said was, I believe, clear and accurate -- which part of this is incorrect: "Spotify can sell subscriptions right now, without Apple taking any cut, they just can't advertise that information in the app. They can make millions of dollars a year in subscription fees and only pay Apple $99 a year to be in the developer program."

 

[Renzatic]

Oh, I do see both sides. But Apple has a sandbox with a posted set of rules, which have applied to everyone since the sandbox opened, and Spotify wants to play in the sandbox but feels the posted rules shouldn't apply to them.

What happy medium would you propose? If the rules are changed so one can freely advertise "pay us outside of the Apple ecosystem" in apps (which appears to be what Spotify wants), eventually all the money will go that way and then the App Store becomes unsustainable. Decisions relating to App Store economics all have to be considered in the light of having hundreds of thousands of developers and millions of apps. So what is the happy medium?

Tell me this: why should Apple demand to handle Spotify's billing for them when they have the infrastructure to do it themselves? Why should they charge 30% for this privilege, when most billing companies charge about 2-5% per transaction for their larger business?

This isn't about sales and storefronts. This is about Apple forcing themselves to act as overly expensive middlemen.

The happy medium for all of this would be for Apple to demand less money. 1/3rd of a 3rd party company's revenue stream for the life of the account is ridiculous by all notions.

 

[drumcat]

This analogy your using is also completely wrong. You have two scenarios with a program being aired by a channel. Either the channel created the program itself through its own funding or some other company created the program and the channel is paying to host it on their network. Advertising (through commercials) is one way the channel funds these programs. The latter is most fitting for the Apple/Spotify debate as Apple does not own Spotify.

So by your analogy, Apple would be paying Spotify to host their app. The exact opposite is happening. Spotify is paying Apple. And, by applying your analogy to the apple/spotify scenario, Spotify would be using its hard earned capital to create a service people want (just like a company creating a TV show) and Apple would have to pay Spotify in order for Spotify to grace apple with its presence. It would then be Apple's responsibility to pass that charge onto its customers (via upping iPhone/iPad price???).

While the scenario I described is plausible, that model is not how apple does business, so I think your analogy is also moot. One would not expect the program to be aired commercial free, because they understand that the company has to pay for that programming. Since Apple only houses the Spotify App and not Spotify's service, why would it make sense to give Apple $3 every month? Is that $3 for the functionality of downloading the app whenever I need to after the initial download?

My analogy also sucks; I was trying to play within the TV realm. But to answer your question, why pay every month? Simply put, Spotify is charging a monthly subscription. As such, Apple is billing monthly. If Spotify wants to make their app $100 or whatever one time, Apple would only get paid one time.

It is a service. And also, "only houses"? No. Also bills, and reviews, and promotes. You may not see much value in those things, but there is a cost. I don't understand why you think there should be some magical discount?
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Tell me this: why should Apple demand to handle Spotify's billing for them when they have the infrastructure to do it themselves? Why should they charge 30% for this privilege, when most billing companies charge about 2-5% per transaction for their larger business?

This isn't about sales and storefronts. This is about Apple forcing themselves to act as overly expensive middlemen.

The happy medium for all of this would be for Apple to demand less money. 1/3rd of a 3rd party company's revenue stream for the life of the account is ridiculous by all notions.

See, you object to the price. That's what this all comes down to. You could make the same emotional case the other way. Apple is a benefactor for not charging 50/50; they are so nice.

It doesn't matter what your emotional reaction is. You can like it or hate it, but from ANY legal standpoint they are COMPLETELY within their right to charge that percentage.

So again, you may not like it, and you may not think it is appropriate for "innovation". It doesn't matter. I personally think they are charging the most they can and still get people to use it... But that is what they are allowed to do.

Your argument is basically the same as anyone complaining a price it too high. Meow. Unless they are a monopoly, they can charge what they want, end of story.

 

[Renzatic]

It doesn't matter what your emotional reaction is. You can like it or hate it, but from ANY legal standpoint they are COMPLETELY within their right to charge that percentage.

So again, you may not like it, and you may not think it is appropriate for "innovation". It doesn't matter. I personally think they are charging the most they can and still get people to use it... But that is what they are allowed to do.

Your argument is basically the same as anyone complaining a price it too high. Meow. Unless they are a monopoly, they can charge what they want, end of story.

There are price gouging laws on the books. You can charge what you want, so long as isn't considered harmful or grossly unfair to the competition. Considering that Apple offers their own competing service, and the price for entry to their platform is so high when compared to everyone else, their actions here could very easily be construed as being anticompetitive.

 

[CarlJ]

Tell me this: why should Apple demand to handle Spotify's billing for them when they have the infrastructure to do it themselves? Why should they charge 30% for this privilege, when most billing companies charge about 2-5% per transaction for their larger business?

This isn't about sales and storefronts. This is about Apple forcing themselves to act as overly expensive middlemen.

The happy medium for all of this would be for Apple to demand less money. 1/3rd of a 3rd party company's revenue stream for the life of the account is ridiculous by all notions.

To your first question: Apple isn't demanding to handle their billing for them. Spotify can choose to sell subscriptions in the app or not. What they can't do is sell subscriptions in the app and not give Apple a cut of that, because, again, if Apple makes a clear path for developers to collect money directly from apps in the store without Apple getting any of it, then soon that will be the model used by all (or most) apps, and then the App Store collapses. And comparing to "most billing companies" misses that most billing companies didn't build (and deliver to you) an entire ecosystem with customers - Visa and Apple are delivering substantially different things to their clients.

To your second question: Apple started with the same percentage for purchases of apps, purchases of subscriptions, and in-app purchases, because if you make one path significantly cheaper, all traffic will flow via that path. They couldn't make them substantially unequal to start with because they couldn't predict for certain how the whole thing would play out (and the backlash, if they started raising prices partway into this would have been horrendous). I think 30% is pretty high for subscriptions, but I can totally understand why they did it that way, and it isn't just "Apple wants all the $$$".

Also, "1/3rd of a 3rd party company's revenue stream for the life of the account" - you're either knowingly or unknowingly arguing using obsolete data to gain emotional appeal - as has already been stated multiple times, they are switching the subscription purchases to 15% on customers that stick around past the first year. So it's half what you claim, for the life of the account.

But, again, Spotify can put the free app in the store, sell subscriptions on their site, and advertise the heck out of that, so everyone pays them directly. If that was working out for them, this wouldn't be a problem (as well, there's also the whole Android market/economy, where they have more latitude in how things are sold). But it seems like, a) iPhone users have a tendency to be more willing to buy things (Spotify seems to be keen to have access to iPhone customers, though I'm told the Android market is larger), and b) it would appear that iPhone users appear to really like the convenience of in-app purchases (or, again, this wouldn't be such a big deal).

 

[drumcat]

There are price gouging laws on the books. You can charge what you want, so long as isn't considered harmful or grossly unfair to the competition. Considering that Apple offers their own competing service, and the price for entry to their platform is so high when compared to everyone else, their actions here could very easily be construed as being anticompetitive.

Anti-competitive? The equation for anti-competitive is that pricing hurts competition. Last I checked, the App Store still gets lots of submissions. So does the Google store. The only way it could be viewed as anti is if pricing caused margins to kill off the industry. Instead, Apple lets submitters *select* the price they want. If that isn't inherently competitive, nothing is. As for the cut they take, again, if you don't like it, don't do it. Go google. Go web based. Whatever. Anti-competitive pricing would probably be a concern if Apple took 90% because there were no Google store. 30% is neither harmful (still lots of apps coming in) nor unfair to the competition (Google charges close to the same). So I'm not sure what the problem is?

Just because a Senator says something doesn't mean she has a legal basis.

 

[redhawk87]

My analogy also sucks; I was trying to play within the TV realm. But to answer your question, why pay every month? Simply put, Spotify is charging a monthly subscription. As such, Apple is billing monthly. If Spotify wants to make their app $100 or whatever one time, Apple would only get paid one time.

It is a service. And also, "only houses"? No. Also bills, and reviews, and promotes. You may not see much value in those things, but there is a cost. I don't understand why you think there should be some magical discount?

I guess your right... Apple does handle the billing every month because it wants a streamlined billing platform for all apps to make it easier for their users. I can understand that and that is one reason I am on the fence on this issue. I understand both sides of the issue.

On one hand hosting an app on Apple's app store is a service that Apple provides to App developers. And Apple does not allow for much leeway because Apple wants it to be uniform and simple to use. This means that Apple takes care of a lot of stuff as you mentioned for the benefit of the customer. It benefiting the customer is one of the only reasons Apple has not been charged yet.

But on the other hand, Apple and Google have somewhat of an oligopoly on Phone OS platforms. And people are increasingly using their phones to listen to music. So the mere existence of the 'Apple tax' means that Apple can undercut anyone they please with any app they decide to create. And Apple makes it difficult for App developers to advertise cheaper prices elsewhere. This does create an issue. If you believe Apple possess this right, then you also have to believe that Google and every other phone company possess this right. So, lets say Google decided to close off Android and do the same thing Apple is doing. They start removing all other app stores from Android. That would mean that anyone (90+% of smartphone owners) who wanted to buy a Spotify subscription on their mobile phone (without going through the web browser) would have to pay $12.99. Spotify and every other service like it would go out of business because, like it or not, the majority of smartphone users are relatively dumb and would only go through in-app purchases. So this would mean that only companies with a successful Phone OS platform can get into the streaming music business. Which would make it nearly impossible to succeed in such a market.

 

[Renzatic]

Anti-competitive? The equation for anti-competitive is that pricing hurts competition. Last I checked, the App Store still gets lots of submissions. So does the Google store. The only way it could be viewed as anti is if pricing caused margins to kill off the industry. Instead, Apple lets submitters *select* the price they want. If that isn't inherently competitive, nothing is. As for the cut they take, again, if you don't like it, don't do it. Go google. Go web based. Whatever. Anti-competitive pricing would probably be a concern if Apple took 90% because there were no Google store. 30% is neither harmful (still lots of apps coming in) nor unfair to the competition (Google charges close to the same). So I'm not sure what the problem is?

For about the 20th time now, this isn't about what Apple collects through the App Store, this is about Apple riding 3rd party subscription fees, which go to pay for things that are entirely separate from Apple and their App Store.

 

[drumcat]

For about the 20th time now, this isn't about what Apple collects through the App Store, this is about Apple riding 3rd party subscription fees, which go to pay for things that are entirely separate from Apple and their App Store.

For the 21st time, that is irrelevant. They set a price for the monthly use of a platform. Nothing close to legally anti-competitive here; you simply don't like the price. Your feeling about said price doesn't meet any legal bar. Hell, I think it is a bit steep; 25% would probably generate more revenue overall. But that is a pricing decision, not an illegal practice.

 

[Renzatic]

For the 21st time, that is irrelevant. They set a price for the monthly use of a platform. Nothing close to legally anti-competitive here; you simply don't like the price. Your feeling about said price doesn't meet any legal bar. Hell, I think it is a bit steep; 25% would probably generate more revenue overall. But that is a pricing decision, not an illegal practice.

Yeah, actually it is. For Spotify to continue turning a profit that they easily earn on other platforms, they have to either raise prices, or require iOS users to sign up to their service through the website, instead of in the app like Apple provides. This makes Apple's own service more compelling than Spotify on their own platform.

It's the same for the Kindle store. Amazon doesn't want to give Apple 30% of every book sold through their own store that they host with their own bandwidth, requiring people to run to the website, buy it, then hop back over to the app and download it through Amazon Cloud instead of being able to buy it directly in app like you can Apple's own iBook app.

The only choice services like Kindle, Spotify, or Netflix have is to either pay Apple's exorbitant fee and raise prices to Apple customers to compensate, or make it more difficult to use the app in comparison to Apple's own offerings. It's pretty anticompetitive.

 

[drumcat]

I guess your right... Apple does handle the billing every month because it wants a streamlined billing platform for all apps to make it easier for their users. I can understand that and that is one reason I am on the fence on this issue. I understand both sides of the issue.

On one hand hosting an app on Apple's app store is a service that Apple provides to App developers. And Apple does not allow for much leeway because Apple wants it to be uniform and simple to use. This means that Apple takes care of a lot of stuff as you mentioned for the benefit of the customer. It benefiting the customer is one of the only reasons Apple has not been charged yet.

But on the other hand, Apple and Google have somewhat of an oligopoly on Phone OS platforms. And people are increasingly using their phones to listen to music. So the mere existence of the 'Apple tax' means that Apple can undercut anyone they please with any app they decide to create. And Apple makes it difficult for App developers to advertise cheaper prices elsewhere. This does create an issue. If you believe Apple possess this right, then you also have to believe that Google and every other phone company possess this right. So, lets say Google decided to close off Android and do the same thing Apple is doing. They start removing all other app stores from Android. That would mean that anyone (90+% of smartphone owners) who wanted to buy a Spotify subscription on their mobile phone (without going through the web browser) would have to pay $12.99. Spotify and every other service like it would go out of business because, like it or not, the majority of smartphone users are relatively dumb and would only go through in-app purchases. So this would mean that only companies with a successful Phone OS platform can get into the streaming music business. Which would make it nearly impossible to succeed in such a market.

An oligopoly, yes. That I agree with.

"And Apple makes it difficult for App developers to advertise cheaper prices elsewhere." If you mean within the app, yes. ToS, for sure.

Do I believe that a store has the right to not allow the broadcasting of a cheaper price via a different method? Yes, absolutely. The *only* recourse they have is to not stock the product. Consider it this way... imagine you have a box of cereal at one grocery for $6. Imagine on the front of that box, the printing on the front says "don't forget it's always $5 at Brand X store." Would you, as a store, not discontinue carrying that cereal? It isn't suggesting that you can't have competition. It's great that the other store offers it at $5. But that doesn't obligate all stores to carry the product.

So your more nuanced point of "is this bad for consumers" has some merit. Isn't it better to allow customers to get $5 cereal? Of course it is. But in that same sense, the store that had been charging a premium for whatever reason they were, is still under no obligation to stock the shelf.

Consider this... the margin on that cereal is based off of $4.50. This means of course that the margin of one store is $1.50, and the other is just 1/3 of that. So, why would you price it $6? Well, if you only had half the number of people buying it as the other store, you get more margin. AKA convenience store pricing. I'm sure you know this, but I'm putting it out there for completeness.

It's a "premium" pricing model based on ease of use. Effectively, it's another method of buying things, and being undercut by the product itself would be harmful to that kind of store. The store's recourse is to drop the product.

To me, that's what you have here. It's a premium service. Clearly Spotify feels its product is $10, and in order to make up for the Convenience store, the price has to be set at $13. Ok, that's reality. The analogy doesn't hold because Spotify is setting the price. But the additional part is that we do this all the time with credit card transactions. 1.5% for a swipe? That's hideous, price gouging, etc. etc., until you see that they also have large admin costs, fraud, billing, etc. etc. (and yes, most card companies are scummy, too, but i digress...)

So yes, I see your point here. It's a good point! But from the vendor's point of view, they should never have to advertise against their own revenue. I think that point is the most important one of all here.
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Yeah, actually it is. For Spotify to continue turning a profit that they easily earn on other platforms, they have to either raise prices, or require iOS users to sign up to their service through the website, instead of in the app like Apple provides. This makes Apple's own service more compelling than Spotify on their own platform.

It's the same for the Kindle store. Amazon doesn't want to give Apple 30% of every book sold through their own store that they host with their own bandwidth, requiring people to run to the website, buy it, then hop back over to the app and download it through Amazon Cloud instead of being able to buy it directly in app like you can Apple's own iBook app.

The only choice services like Kindle, Spotify, or Netflix have is to either pay Apple's exorbitant fee and raise prices to Apple customers to compensate, or make it more difficult to use the app in comparison to Apple's own offerings. It's pretty anticompetitive.

See the above point about not having to work against your own revenue collection. There's no restriction on offering the same products elsewhere at the rates they want to charge. The only thing these other companies are whinging about is that they can't advertise circumvention. As a store owner, you would want that same protection. This isn't price fixing; it is the convenience charge of Apple running the subscription and billing. You may think it is very high, and while I wouldn't disagree, it is Apple's right as a store owner to not be required to swallow the billing costs for another company for free, nor should they be required to allow advertisements that circumvent their purchase facility.

 

[Renzatic]

To me, that's what you have here. It's a premium service. Clearly Spotify feels its product is $10, and in order to make up for the Convenience store, the price has to be set at $13. Ok, that's reality. The analogy doesn't hold because Spotify is setting the price. But the additional part is that we do this all the time with credit card transactions. 1.5% for a swipe? That's hideous, price gouging, etc. etc., until you see that they also have large admin costs, fraud, billing, etc. etc. (and yes, most card companies are scummy, too, but i digress...)

If Apple only took 1.5% monthly from their 3rd parties no one would be complaining right now. Hell, I doubt anyone would complain if they took 10%. But 30% is too much. Lowering it to 15% after a full year doesn't help much.

Apple is forcing their 3rd parties to use their own billing infrastructure, then charging them far too much for the privilege.

 

[drumcat]

If Apple only took 1.5% monthly from their 3rd parties no one would be complaining right now. Hell, I doubt anyone would complain if they took 10%. But 30% is too much. Lowering it to 15% after a full year doesn't help much.

Apple is forcing their 3rd parties to use their own billing infrastructure, then charging them far too much for the privilege.

I hope you're hearing yourself... cutting the price in half doesn't help much, but you know, 67% and no one would complain?
[doublepost=1467416570][/doublepost]Also, one other point... it isn't Apple's responsibility to price their service in such a way that Netflix et al can turn a profit. Netflix has 100 different ways to get their product. The premium *is* its use on iOS. Why shouldn't Apple charge for running the subscription? That premium doesn't belong to Netflix.
[doublepost=1467416686][/doublepost]Specifically, Netflix could charge everyone $11 instead of $10 to cover those premiums. Again, that's Netflix's decision. Or they could eat the 30/15%. It's Netflix's choice as much as it's Apple's choice to charge the 30/15. Whether Netflix can profit is irrelevant to Apple, outside of collecting their cut.
[doublepost=1467416850][/doublepost]"Apple is forcing their 3rd parties to use their own billing infrastructure, then charging them far too much for the privilege."

Once again, no one is forced to be on the App Store. They submit apps under Terms of Service. They might be onerous terms, but the submitter is the one choosing here. They can leave any time they want. There's nothing illegal about it.

 

[Renzatic]

See the above point about not having to work against your own revenue collection. There's no restriction on offering the same products elsewhere at the rates they want to charge. The only thing these other companies are whinging about is that they can't advertise circumvention. As a store owner, you would want that same protection. This isn't price fixing; it is the convenience charge of Apple running the subscription and billing. You may think it is very high, and while I wouldn't disagree, it is Apple's right as a store owner to not be required to swallow the billing costs for another company for free, nor should they be required to allow advertisements that circumvent their purchase facility.

A. We're talking about things that happen beyond Apple's purview. A good portion of that $10 these services charge goes towards their own maintenance and upkeep. The amount of bandwidth that Netflix uses far, far outstrips what Apple uses through the App Store. That costs money. A lot of it. Add on top of that all the license fees and negotiations Netflix makes to give their customers the movies and TV shows they provide on their service. I wouldn't be surprised if they only make about $4 profit off that $10 they charge per month. On Apple's platform, they'd be only making $1 per customer, while Apple is making $3 simply for hosting their app.

The worst case scenario would be that Netflix has a lower profit margin than that, which would equate to them losing money on iOS, while Apple turns a profit at their expense.

B. If Apple made it a choice to use their billing service, rather than forcing everyone, big and small, to use them, this wouldn't be nearly so big of an issue. Why should Amazon, a much larger online retailer than Apple, use their billing services while on iOS?

So, once again, there's making money, and then there's gouging people. Apple looks suspiciously like they're gouging here.

 

[drumcat]

A. We're talking about things that happen beyond Apple's purview. A good portion of that $10 these services charge goes towards their own maintenance and upkeep. The amount of bandwidth that Netflix uses far, far outstrips what Apple uses through the App Store. That costs money. A lot of it. Add on top of that all the license fees and negotiations Netflix makes to give their customers the movies and TV shows they provide on their service. I wouldn't be surprised if they only make about $4 profit off that $10 they charge per month. On Apple's platform, they'd be only making $1 per customer, while Apple is making $3 simply for hosting their app.

The worst case scenario would be that Netflix has a lower profit margin than that, which would equate to them losing money on iOS, while Apple turns a profit at their expense.

B. If Apple made it a choice to use their billing service, rather than forcing everyone, big and small, to use them, this wouldn't be nearly so big of an issue. Why should Amazon, a much larger online retailer than Apple, use their billing services while on iOS?

So, once again, there's making money, and then there's gouging people. Apple looks suspiciously like they're gouging here.

A) Has nothing to do with Apple. Netflix's business model is up to Netflix, not Apple.
B) Why would Apple assume that every mom & pop would send them 30% each month? The honor system? You're kidding, right?