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

[Renzatic]

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?

A) Considering that only Apple does this to their 3rd parties, and the only reason they can get away with it is because they can throw the weight of their position and popularity around to beat them in line. It does come across as...yup...anticompetitive.

B) Please. It'd be cake for Apple to allow it so developers could choose to use their provided infrastructure before submitting their app. That's what Microsoft, Google, Amazon, and...hell, everyone else does.

 

[CarlJ]

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

Which 3rd party developers have been held at gunpoint and told they must submit an app to Apple's App Store, and it must include Apple-collected in-app purchases of any sort? You seem to have a funny notion of the meaning of the word, "forcing". Developers are free to collect money outside of the app, they simply are not allowed to advertise that inside the app.

 

[Renzatic]

Which 3rd party developers have been held at gunpoint and told they must submit an app to Apple's App Store, and it must include Apple-collected in-app purchases of any sort? You seem to have a funny notion of the meaning of the word, "forcing". Developers are free to collect money outside of the app, they simply are not allowed to advertise that inside the app.

The fact that it's so much more of a process to buy books for the Kindle app on the iPad than it is on any other platform, and the reasoning behind this should be proof enough.

Why can't you buy books directly from inside the Kindle app? Because Apple gets 30% of all Amazon's sales when it's ran through their billing system. Why can't Amazon set the Kindle app up to use their billing instead of Apple's? Because Apple doesn't allow that. Why can't they provide a link to their own billing service from within the app then? Because Apple doesn't allow that. Why doesn't Apple allow that? Because they want a 30% cut of all their competitor's sales and subscription fees.

So to avoid Apple's overhead on iOS, they have to inconvenience their own customers. Apple's apps, on the other hand, don't have to worry about that. You can buy everything through the app, and they get all the money. Hell, they don't even have to worry about that on their competitor's platform. Microsoft gets 0% of Apple's sales if you buy a movie through iTunes on Windows.

It's anticompetitive.

 

[drumcat]

So to avoid Apple's overhead on iOS, they have to inconvenience their own customers. Apple's apps, on the other hand, don't have to worry about that. You can buy everything through the app, and they get all the money. Hell, they don't even have to worry about that on their competitor's platform. Microsoft gets 0% of Apple's sales if you buy a movie through iTunes on Windows.

It's anticompetitive.

Actually, it's just inconvenient. It's not, by any legal bar, illegally inconvenient.

 

[Renzatic]

You can whinge about how things ought to be done. The fact is very simple. If your stance had *any* legal merit, Netflix, Spotify, et al, would all sue in Federal court and win. They would have done it years ago.

Apple's saving grace in this situation is that they don't have a controlling interest in their particular market, which does give them some leeway. If Apple had more than a quarter of the smartphone/tablet market, or if Apple's services were tremendously more popular than the competition, we'd have more than a single senator making a comment on this.

Though make no mistake, this is a very 90's Microsoftian move for them. They've engineered a situation where they can make at least as much money, if not more, off their competitors than their competitors do themselves while on Apple's platform.

 

[drumcat]

Though make no mistake, this is a very 90's Microsoftian move for them. They've engineered a situation where they can make at least as much money, if not more, off their competitors than their competitors do themselves while on Apple's platform.

In business, this is called a niche.
[doublepost=1467419637][/doublepost]

Apple's saving grace ...

So you concede it isn't illegal. Finally.

 

[Renzatic]

Actually, it's just inconvenient. It's not, by any legal bar, illegally inconvenient.

The inconvenience does make Apple's own alternative more compelling by comparison. It's a bit subjective, but I'm proof of that. When I had my iPad, I used iBooks far more often than Kindle, because I could buy directly through the app, and at the time, all ebooks were the same price no matter what storefront you bought them through.
[doublepost=1467419851][/doublepost]

In business, this is called a niche.

A niche is a subset of the market. Apple and their platforms are a little too general use to be considered as such.

So you concede it isn't illegal. Finally.

It's certainly dark grey, hence why Senator Warren is screaming about it. Whether anything comes of this has yet to be seen, though.

 

[drumcat]

The inconvenience does make Apple's own alternative more compelling by comparison. It's a bit subjective, but I'm proof of that. When I had my iPad, I used iBooks far more often than Kindle, because I could buy directly through the app, and at the time, all ebooks were the same price no matter what storefront you bought them through.
[doublepost=1467419851][/doublepost]

A niche is a subset of the market. Apple and their platforms are a little too general use to be considered as such.



It's certainly dark grey, hence why Senator Warren is screaming about it. Whether anything comes of this has yet to be seen, though.

That's a matter of perspective. I can argue that before in-app purchases existed, all were inconvenienced the same. In-app purchases simply made it more convenient for people to buy.

And if charging a premium for convenience is "dark grey", call up 7-11 and tell them they are about to get smacked down by Liz Warren.

 

[CarlJ]

The inconvenience does make Apple's own alternative more compelling by comparison. It's a bit subjective, but I'm proof of that. When I had my iPad, I used iBooks far more often than Kindle, because I could buy directly through the app, and at the time, all ebooks were the same price no matter what storefront you bought them through.

For another data point, I have an iPad and iPhone (and a Mac laptop), and buy most of my ebooks from Amazon - I don't personally feel hindered by using the browser to do so (most of the time I'm buying from my laptop anyway). Amazon's synchronization between ebooks and audiobooks is a big win for me, in the cases where it's offered. (And, further, most of the technical books I buy - from oreilly.com , informit.com , and pragprog.com are PDFs without any DRM - meaning I can read them on my laptop or out and about, with any reader I choose - currently Preview and PDF Expert).

 

[Renzatic]

That's a matter of perspective. I can argue that before in-app purchases existed, all were inconvenienced the same. In-app purchases simply made it more convenient for people to buy.

See, the difference there is that the inconvenience now is a manufactured one, rather than a technological shortcoming that's yet to be addressed.

I can buy books through the Kindle app on my SP4. I couldn't on my iPad 3. The only difference between the two apps is one Apple has imposed.
[doublepost=1467421009][/doublepost]

For another data point, I have an iPad and iPhone (and a Mac laptop), and buy most of my ebooks from Amazon - I don't personally feel hindered by using the browser to do so (most of the time I'm buying from my laptop anyway). Amazon's synchronization between ebooks and audiobooks is a big win for me, in the cases where it's offered. (And, further, most of the technical books I buy - from oreilly.com , informit.com , and pragprog.com are PDFs without any DRM - meaning I can read them on my laptop or out and about, with any reader I choose - currently Preview and PDF Expert).

It's hardly the end of the world that I couldn't buy books through the app on my iPad. iBooks was more convenient (nicer app, too), but if I wanted to get something through Kindle, that one extra hoop wouldn't kill me to jump through.

It's mostly the fact that I think Amazon's website is goddamn terrible.

Though in the end, to me, the best course of action would be one where Apple and all their 3rd parties can come out to an agreement, rather than take a my way or the highway approach to it. A situation where Apple can make some money, while Netflix, Spotify, blah blah can still maintain their profit margins would be the best solution. Not just because it's fair, but because it ultimately benefits all of us, the random consumers.

 

[drumcat]

See, the difference there is that the inconvenience now is a manufactured one, rather than a technological shortcoming that's yet to be addressed.

I can buy books through the Kindle app on my SP4. I couldn't on my iPad 3. The only difference between the two apps is one Apple has imposed.
[doublepost=1467421009][/doublepost]

It's hardly the end of the world that I couldn't buy books through the app on my iPad. iBooks was more convenient (nicer app, too), but if I wanted to get something through Kindle, that one extra hoop wouldn't kill me to jump through.

It's mostly the fact that I think Amazon's website is goddamn terrible.

Though in the end, to me, the best course of action would be one where Apple and all their 3rd parties can come out to an agreement, rather than take a my way or the highway approach to it. A situation where Apple can make some money, while Netflix, Spotify, blah blah can still maintain their profit margins would be the best solution. Not just because it's fair, but because it ultimately benefits all of us, the random consumers.

I'm curious. I completely disagree with you, but what percentage do you think is "fair", and what data do you have to support that?

 

[Renzatic]

I'm curious. I completely disagree with you, but what percentage do you think is "fair", and what data do you have to support that?

One that isn't grossly out of proportion to the rest of the market.

Taking 30% off the top of any app sold in the App Store is perfectly kosher.

Taking 30% off the top of subscription services you're acting as a bill collector for is way, way, way overpriced, considering the service being rendered.

 

[xSinghx]

Your argument is just a dumpster fire.

It's not that's why you don't address it and simply give an ad hominem and try to pivot the focus to your own comment.

Talk about dumb-ster fire - wah wah.

[doublepost=1467379803][/doublepost]
And *this* is precisely why any of you saying the word monopoly are 100% wrong.

Except the monopoly being discussed is with regard to software not hardware - genius.

"...Warren said the company has made it difficult for its rivals to offer competitive streaming services able to compete with Apple Music..."

Is that hardhat pic hiding a story or something? Like one involving an accident?

 

[drumcat]

It's not that's why you don't address it and simply give an ad hominem and try to pivot the focus to your own comment.

Talk about dumb-ster fire - wah wah.



Except the monopoly being discussed is with regard to software not hardware - genius.

"...Warren said the company has made it difficult for its rivals to offer competitive streaming services able to compete with Apple Music..."

Is that hardhat pic hiding a story or something? Like one involving an accident?

I addressed it. You chose to ignore it, and proceed to complain about ad hominem with ad hominems.

As I addressed several times, you might not like the competition, but it does not come close to being illegal. If it did, they'd be suing instead of publicly whining.
[doublepost=1467437945][/doublepost]

One that isn't grossly out of proportion to the rest of the market.

Taking 30% off the top of any app sold in the App Store is perfectly kosher.

Taking 30% off the top of subscription services you're acting as a bill collector for is way, way, way overpriced, considering the service being rendered.

I understand your position, but it is just an opinion. Let me put it this way... Since you believe the subscriptions should all be 15% instead of year 2? Or 10%? I have no data to say something is right or wrong. But I'm guessing there is no data. Maybe 30% is low? Maybe it should be 40% and Apple is already generous?

I dunno, and while common sense says that the allocation should be different and probably the way you suggest, but I think Apple should be slow to change and careful to change.

 

[Renzatic]

I understand your position, but it is just an opinion. Let me put it this way... Since you believe the subscriptions should all be 15% instead of year 2? Or 10%? I have no data to say something is right or wrong. But I'm guessing there is no data. Maybe 30% is low? Maybe it should be 40% and Apple is already generous?

I dunno, and while common sense says that the allocation should be different and probably the way you suggest, but I think Apple should be slow to change and careful to change.

I don't think there's a single billing company in the world that charges 30% per transaction for their large, steady customers, which is basically what Apple is doing in this instance. 2%-5% is about the average for that, I believe.

Apple could charge 5%-10%, and still make a healthy profit without making their 3rd parties too angry.

 

[drumcat]

I don't think there's a single billing company in the world that charges 30% per transaction for their large, steady customers, which is basically what Apple is doing in this instance. 2%-5% is about the average for that, I believe.

Apple could charge 5%-10%, and still make a healthy profit without making their 3rd parties too angry.

I understand what you are saying, but as a stockholder, I would be downright annoyed if they went to 5%. Why? Because you are cutting that revenue by 2/3 to 5/6ths. That's just giving money away, because they won't make 3x-6x to make up that profit. Anger doesn't enter that equation, of course.

 

[Renzatic]

I understand what you are saying, but as a stockholder, I would be downright annoyed if they went to 5%. Why? Because you are cutting that revenue by 2/3 to 5/6ths. That's just giving money away, because they won't make 3x-6x to make up that profit. Anger doesn't enter that equation, of course.

It shouldn't hurt your portfolio too much. The App Store is only a few percent of Apple's total yearly profits.

Though the plus side would be that the bigger services that are currently avoiding it might turn around and be willing to pay for the convenience at that more reasonable price. What you lose in the immediate could be gained back with dividends in the long term.

 

[drumcat]

It shouldn't hurt your portfolio too much. The App Store is only a few percent of Apple's total yearly profits.

Though the plus side would be that the bigger services that are currently avoiding it might turn around and be willing to pay for the convenience at that more reasonable price. What you lose in the immediate could be gained back with dividends in the long term.

I think a few things:

#1 you might be right, but
#2 Apple have some smart people, and have certainly considered that scenario
#3 if those people think that a change would benefit them, they would do it

So I hope they are as smart as I assume.

 

[Renzatic]

So I hope they are as smart as I assume.

Yeah. All we can do is wait and see how it all goes. As is, things are pretty good. I just think they could be better.

 

[dk001]

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...

Mountain lions, and chihuahuas and bears, oh my.
Sorry. We are locally short of bobcats (cool animal) but have an abundance of mountain lions, bears, and starlet blinged hand bagged things.
If you have a spare bc or two, we'll take them.
[doublepost=1467464940][/doublepost]

Yeah. All we can do is wait and see how it all goes. As is, things are pretty good. I just think they could be better.

They could be much better. Using Apple iOS products, my "shopping" habits have changed; just for iOS.
I no longer buy via the app. I now, by default, always go to the browser. It is a learned behavior specific to iOS.
What Apple should have is a negotiable percentage and negotiable service agreement. What I am waiting to see is just how bad Apple mucks up the mobile music industry.

In the long run, I feel this style of behavior will result in a declining Apple. Short term it is great for the cash flow due to their platform popularity. Apple needs to change. To exactly what I don't know.

 

[xSinghx]

I addressed it. You chose to ignore it, and proceed to complain about ad hominem with ad hominems.

As I addressed several times, you might not like the competition, but it does not come close to being illegal. If it did, they'd be suing instead of publicly whining.

lol. Unfortunately for you simply stating something does not make it so.

You have not addressed - at all - why a TV is a flawed analogy. You've simply stated it is - nothing more - because it benefits you do so.

In fact TV is the perfect analogy as you "stream" content via cable or airwaves (paid or free). It is content agnostic which is what you expect from a piece of hardware. As I said before the platform of a TV does not charge you or the providers for its content whether they are free or paid channels. That free platform then benefits the users as well as the content providers (i.e. the marketplace). Apple in it's actions does not benefit anyone but Apple and for this reason we have laws (though lax - which should be tougher) to prevent monopoly ownership. Even if the moves Apple is making aren't punishable yet (though Warren seems to say they are) this does not validate their existence. The reason for allowing business to exist in society is that it benefits society and not simply itself. For this reason even if Apple's actions aren't illegal they may be necessary to curtail.

Further whether suing Apple is viable (given the substantive resources and time it would take) does not at all determine guilt. But given the list of fallacies you've already engaged in - what's one more to throw on the pile.

 

[CarlJ]

They could be much better. Using Apple iOS products, my "shopping" habits have changed; just for iOS.
I no longer buy via the app. I now, by default, always go to the browser. It is a learned behavior specific to iOS.
What Apple should have is a negotiable percentage and negotiable service agreement. What I am waiting to see is just how bad Apple mucks up the mobile music industry.

FWIW, the experience Apple offers has never been about being the cheapest, it's been about ease of use and convenience. Looking for a good deal (as long as things important to you are not sacrificed along the way) is being a good consumer.

Latest numbers are, Apple has 13 million registered developers. You want Apple to negotiate, individually, with each of them? There are over two million apps in the App Store. You really want Apple to have two million separate negotiations? I think you may have overestimated the size and capabilities of the team that runs their App Store.

And as far as the mobile music industry goes, when Apple entered the picture, the music industry was busy shouting at everyone not to download music "for free" (e.g. Napster and the era of looting music), while steadfastly refusing to offer music in any form other than CDs, because that would be giving in to "the enemy" (aka their potential customers). Steve Jobs did a remarkable thing: he convinced the music industry not to drive over a cliff, and to try letting him sell their music online instead. He stared at a bunch of music industry execs, held out his hand, and growled, "come with me if you want to live!" And surprisingly they took that chance, and they're still here because of it. And people buy music downloads now, instead of just grabbing it and running off with it because the opportunity presents itself (that does sound like looting, doesn't it?). AND Apple got terms that were reasonable for customers (instead of what the industry was trying for), so, for instance, you can listen on any device that can handle the format, rather than music being tied to an individual device (the industry wanted very much to sell you separate copies for each device), and you can (mostly) buy individual songs, instead of being forced to buy an album to get the one song you like, and everything sold for the same price, instead of prices being crazily all over the board (yes, now there's a few prices - at one point that was traded to the music companies in exchange for getting them to drop the DRM requirements) - everything Apple coerced out of the industry made buying music online more popular with customers than it otherwise would have been. Profitable for Apple? Absolutely. But also profitable for the music industry, and infinitely better than their original plan of driving off a cliff while screaming at "those darn kids". So I don't think the music industry has much to complain about with respect to Apple.
[doublepost=1467480878][/doublepost]

You have not addressed - at all - why a TV is a flawed analogy. You've simply stated it is - nothing more - because it benefits you do so.

In fact TV is the perfect analogy as you "stream" content via cable or airwaves (paid or free). ...

You and others here keep arguing over which analogy best explains the current App Store subscription pricing, when all of the analogies are flawed, and the actual reason for the current pricing is really not that hard to understand, no analogies needed.

Apple made all methods of paying for apps and app content cost the same because if they did otherwise, if they had said, for instance, "purchases are 30% but subscriptions are 5%", then essentially all developers and all apps would have flocked to the avenue which allowed them to get the most money, and the other methods would have faded into obscurity. This is also the reason why Apple won't allow you to have your own subscription/IAP billing in your app, or advertise your "pay us on your website" plan in your app (this last being what Spotify tried to do) - if Apple creates a bunch of ways to sell an app that involve Apple getting a cut, and then also a way where Apple doesn't get a cut (an exception to the rule), the developers will naturally all end up choosing the way where Apple doesn't get a cut - at which point the App Store becomes unsustainable. That's why subscriptions were set at exactly the same percentage as purchases (in actual value-added terms, 30% for subscriptions seems rather high). So now you can all stop trying to invent elaborate analogies to explain the 30%.

 

[Renzatic]

Latest numbers are, Apple has 13 million registered developers. You want Apple to negotiate, individually, with each of them? There are over two million apps in the App Store. You really want Apple to have two million separate negotiations? I think you may have overestimated the size and capabilities of the team that runs their App Store.

To be fair, about 99% of those two million apps don't need to negotiate anything. They're all standalone games and apps that don't require much maintenance beyond the occasional bug fix and iOS compatibility update. All they have to worry about is adhering to Apple's quality guidelines, and nothing more.

It's the big multimillion/billion dollar services that have something to negotiate. A good chunk of their subscription fees go towards maintaining their services, and Apple's overhead on top of all that is probably too much to endure, leaving them with almost zero profit on iOS once all the bills have been paid. That's why they're the ones griping the most.

When you're a single developer making a cool little $10 app, Apple taking $3 is just the cost of doing business. You're still making $7 off every sale. But when you're a subscription service, and 60% of your $10 monthly charge goes towards making sure everything is up and running smoothly, that $3 Apple takes is 75% of your profit.

 

[CarlJ]

To be fair, about 99% of those two million apps don't need to negotiate anything.

To be fair, 1% of those two million apps is still twenty thousand individual negotiations. (At ten negotiation sessions per business day, that'd take 7.5 years.) And many of the other 99% are going to be pretty peeved that the 1% are getting special treatment. But I get your point.

I also get that 30% ongoing (keep in mind that it's now 15% if your customers like your service enough to continue after the first year) is an awfully big hit on the bottom line. See my followup post (which the forum software "helpfully" merged, likely while you were responding) as to why the charge on subscriptions is 30%.

Apple couldn't tell, when they set up the App Store, which sales model was going to win (indeed, I don't think anyone anticipated "free-to-play" becoming a thing), and they couldn't afford to make one way substantially cheaper than the others and keep the App Store sustainable - developers aren't dumb, they'll carefully look over the available methods and choose the one that gives them the best advantage. If Apple had made subscriptions 5% at the outset, and purchases 30%, developers wouldn't make their app "$15 up front", or "$10 up front plus $2 per month", they'd all go for "free upfront plus $5 per month" - and if all the developers went the free-with-subscription route, imagine the horrendous uproar/backlash if Apple had to come back and say, "sorry guys, the App Store isn't sustainable at 5%, since everyone went with the 5% choice, so we're going to have to raise it to 10%".

 

[redhawk87]

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.

I think to some degree this discussion is going around in circles.

Lets try to look at this in terms of economics and not add in politics and any bias for a second. With Apple's current policy, Spotify is at a disadvantage. If you sign up for Apple Music on iOS, it will always be $9.99 a month. If you sign up for Spotify on iOS, it will either be $9.99 or $12.99 depending on where you sign up. Yes, Spotify could just keep it simple at $9.99, but Spotify still has that 30% charge that Apple Music doesn't. That 30% charge automatically puts Spotify at a disadvantage on iOS.

Now, hopefully that point is a no-brainer and everyone can agree on it, so there should be no point to keep arguing over it. So, where the disagreement comes is whether Apple has the right to create this disadvantage or not.

On one hand, Apple has a very successful business model where it was to make products plain stupid to use. Streamlining the payment system for all apps in the app store is one way Apple can uphold this business model. If every App had you pay for things differently, it could be seen as confusing to some. This confusion would make it harder to use, which goes against Apple's business model. Now, streamlining the payments does come at a cost to Apple. So, theoretically Apple could pass this cost off to the app developers.

On the other hand, this practice in certain circumstances (i.e.. streaming services like Spotify) promotes anti-competitiveness. This practice makes it harder for streaming services to compete with Apple Music.

I personally think the only solution to this issue is some sort of compromise (that is if you agree with both sides as I do). One of those compromises is allowing Apple to charge the 30%, but also allow Apps to advertise cheaper prices elsewhere. I think this still would not make Spotify on an even playing field, but it would improve the competitiveness of Spotify. And on the other side, Apple is still able to charge its 30%.

I am sure there are other compromises that can work as well and I would love to hear them! This is just the one I thought up.