Spotify Accuses Apple of Using App Store Approval Process as a 'Weapon to Harm Competitors'

[LordVic]

The 30% is not just for music though. It's for any non consumable product sold within the apps including points, coins, level unlock and all the other IAP transactions.

I know what it encompasses. I'm not soley against having a fee for one time purchases. Apple is the payment processor and should receive something for the infrastructure and services of that and the App store. The question is, is 30% too much for the market (of developers not consumers) to bear? this isn't 2008 anymore with small(ish) volume and the need for larger margins to help get the infrastructure up and running. it's 2016 with a sheer mass of volume of billions of users. is 30% still reasonable? Keep in mind that the going rate alone for payment processing from most credit cards for merchants is roughly < 5%. Apple is asking 30% in the first year, and 15% ongoing after for doing nothing but payment processing (after the initial download).

We've already stated that Spotify needs to re-examine their business model. But that doesn't mean Apple isn't in a position either that they need to look at their own models as well.

 

[akash.nu]

I know what it encompasses. I'm not soley against having a fee for one time purchases. Apple is the payment processor and should receive something for the infrastructure and services of that and the App store. The question is, is 30% too much for the market (of developers not consumers) to bear? this isn't 2008 anymore with small(ish) volume and the need for larger margins to help get the infrastructure up and running. it's 2016 with a sheer mass of volume of billions of users. is 30% still reasonable? Keep in mind that the going rate alone for payment processing from most credit cards for merchants is roughly < 5%. Apple is asking 30% in the first year, and 15% ongoing after for doing nothing but payment processing (after the initial download).

Reasonable is a subjective thing though. But as a business they are trying to help by dropping it down to 15%. I'm sure they're the most profitable company in tech for a reason but then they're not sitting there to do charity either. At the end of the day it all comes down to cost and benefit.

 

[LordVic]

The 30% is not just for music though. It's for any non consumable product sold within the apps including points, coins, level unlock and all the other IAP transactions.

you're being pedantic.

if it's subscription based service, regardless of the content, what I've said still applies.

 

[MC6800]

There's no monopoly here by Apple. There IS an unfair advantage, But it's one that while I find morally / ethically questionable, is perfectly and reasonably legal.

Just curious: do you also find say Safeway's house brands morally / ethically questionable? (I get a mental picture of people picketing them with "Lucerne is the devil!" and "Nancy Jane's a slut!")

 

[LordVic]

Just curious: do you also find say Safeway's house brands morally / ethically questionable? (I get a mental picture of people picketing them with "Lucerne is the devil!" and "Nancy Jane's a slut!")

dont know who safeway is, but going to assume you're making an analogy to retail storefronts, which operate in a completely different business model entirely which if you had read this thread have been covered ad neauseum.

A store like Walmart, doesn't actually take a "cut" of sales. What they do is buy the products off the wholsaler and resell them on their shelves. shelf prominence usually based upon discounts / deals worked out between walmart and the wholesaler. Walmart does NOT take a % cut from every sale.

 

[akash.nu]

dont know who safeway is, but going to assume you're making an analogy to retail storefronts, which operate in a completely different business model entirely which if you had read this thread have been covered ad neauseum.

A store like Walmart, doesn't actually take a "cut" of sales. What they do is buy the products off the wholsaler and resell them on their shelves. shelf prominence usually based upon discounts / deals worked out between walmart and the wholesaler. Walmart does NOT take a % cut from every sale.

This is actually a very valid point. I've not thought of it like that.

 

[LordVic]

This is actually a very valid point. I've not thought of it like that.

And did forget to mention, WalMart isn't exactly "innocent"of anti-competitive behaviour either... and I don't shop there part of it

 

[akash.nu]

And did forget to mention, WalMart isn't exactly "innocent"of anti-competitive behaviour either... and I don't shop there part of it

I really don't think Apple is being anticompetitive here. They've set a charge for their platform and people are willing to pay for it. There's nothing wrong in that really. That's business and setting the right price that people will actually pay is part of the business strategy to be honest.

I've seen this first hand in sunglasses industry. Did you know every sunglasses brand you see on the market today is actually manufactured by the same company? Lexotica or something is their name.

 

[BaldiMac]

dont know who safeway is, but going to assume you're making an analogy to retail storefronts, which operate in a completely different business model entirely which if you had read this thread have been covered ad neauseum.

A store like Walmart, doesn't actually take a "cut" of sales. What they do is buy the products off the wholsaler and resell them on their shelves. shelf prominence usually based upon discounts / deals worked out between walmart and the wholesaler. Walmart does NOT take a % cut from every sale.

Completely different? Retail store keeps a certain percentage of sale for all goods sold through the store. Store brands undercut other products. Seems to be a reasonable analogy to me if you stick to the context of the argument.

You said it was unfair for Apple to have a price advantage on its own platform. Why does the same argument not apply to store brands?

 

[LordVic]

I really don't think Apple is being anticompetitive here. They've set a charge for their platform and people are willing to pay for it. There's nothing wrong in that really. That's business and setting the right price that people will actually pay is part of the business strategy to be honest.

I've seen this first hand in sunglasses industry. Did you know every sunglasses brand you see on the market today is actually manufactured by the same company? Lexotica or something is their name.

didnt know that. But, int he world of globalization and amalgamation of companies into conglomerates, it really doesn't surprise me. Its like headphones. there's really only a half dozen companies in the world that manufacture them. Despite hundreds of different brands that basically buy them from the same people

many of our industries today have gone this route of cutting costs, moving manufacturing and business to cheap economies to take advantage of low wage workers, while selling their services and products to multiple resalers and branders.

 

[akash.nu]

didnt know that. But, int he world of globalization and amalgamation of companies into conglomerates, it really doesn't surprise me. Its like headphones. there's really only a half dozen companies in the world that manufacture them. Despite hundreds of different brands that basically buy them from the same people

many of our industries today have gone this route of cutting costs, moving manufacturing and business to cheap economies to take advantage of low wage workers, while selling their services and products to multiple resalers and branders.

Luxottica (correct company name this time) not only manufactures them but some of the well known brands are owned by them and also some of the biggest sunglasses retail chains are under them. They're huge but nobody has ever heard of them.

 

[AsherN]

I wrote this in another thread yesterday, but I think it illustrates why what Apple is doing with Spotify is patently unfair and anti-competitive:

Imagine this:

• A landlord owns a strip mall and leases one store to a store owner that wants to sell widgets, where the store owner has to give the landlord 30% of all sales. The widget factory charges $1.
• Scenario 1: The store owner marks the widgets up to $2.50, where $0.75 (30%) goes to the landlord and $0.75 is net profit to the store owner.
  • This is fine.
• Scenario 2: The landlord opens up his own store right next door to the store owner and sells the same widgets for $1.75. The landlord still makes $0.75 from each widget sold.
  • This is now not fine. It is mathematically impossible for the store owner to compete with the landlord. If the landlord charges less than $1.43 for the widgets, the store owner cannot possibly make money under the circumstances.
  • It doesn't matter to the landlord if the store owner goes out of business. If either the store owner or the landlord make a widget sale, it's all the same to the landlord.
  • By acting as both a store and landlord, he has an unfair advantage. Typically, tenants of malls write language into their leases that prohibit the landlord from doing this. They can do this because there are thousands of commercial areas in the U.S. There are only 2 "digital" commercial areas of any value, and they don't negotiate. Instead, they offer unreasonable contracts of adhesion.

Nice try, but no. the store owner sells the widget in his own store for $2.50 and does not give anything to the landlord. The landlord has a store next door and sells his widget for $2.50. The store owner then asks the landlord to sell his widget in his store. The landlord agrees and takes a 30% cut for processing the payments. The store owner htells the landlord to sell his widget for $3.25 because he can't afford to lose the 30% cut. The store owner then cries unfair practice.
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People missing the point - If I buy a phone at Walmart, they do not get 30% of my Verizon contract for the service. Apple should get a cut of a purchase not of a subscription.

Because Walmart is not processing the recurring Verizon payment for you.

Spotify does not have to have IAP. It chooses to do so.
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Everyone should have a problem with Apple charging a 30% tax or even 15% for services it doesn't provide. At best, they should be getting miniscule Apple Pay level fees for facilitating subscription transactions. Anything more is crazy.

It does not charge the fee for the streaming service. It charges the fee for the payment processing. It may be too much for Spotify, but for smaller developpers, not having to maintain a PCI compliant infrastructure and process all those CC transactions every month is worth it.

 

[Cigsm]

No I'm not. Apple has developed and built an App Store and houses Spotify app giving over a billion people exposure to it.

You are confusing apps and music services/subscriptions. Apple has nothing to do with the latter yet collects money pretending that they do.

 

[LordVic]

Because Walmart is not processing the recurring Verizon payment for you.
.

Do you think 30% is fair for processing recurring payments? When you take into account that even major credit card companies with their payment processing and recurring payment processing only charge their customers <5%?

Apple is DEMANDING 25% MORE in return than they'd be paying if they were to use their own payment processor.

The problem here, is that Apple refuses to let them do this in app. They refuse to let the developers put a link to their site for their own payment processors. They refuse to let you even advertise that you can purchase the app or subscription elsewhere.

 

[BaldiMac]

Do you think 30% is fair for processing recurring payments? When you take into account that even major credit card companies with their payment processing and recurring payment processing only charge their customers <5%?

Apple is DEMANDING 25% MORE in return than they'd be paying if they were to use their own payment processor.

The problem here, is that Apple refuses to let them do this in app. They refuse to let the developers put a link to their site for their own payment processors. They refuse to let you even advertise that you can purchase the app or subscription elsewhere.

Despite the fact that some posters oversimplify, obviously the 30% isn't just for payment processing. The price that you charge doesn't have to be directly related to your marginal cost. It is simply a product of market forces. Supply and demand. Apple chose a price that balances their profits with the appeal of the platform to developers.

And despite Spotify's complaints, the results speak for themselves. The App Store is a robust ecosystem. Which doesn't mean to say that what worked for the last 8 years will work for the next decade. As Apple has shown recently, they are willing to make changes in order to keep developers happy as the market evolves and stabilizes.

 

[AsherN]

Do you think 30% is fair for processing recurring payments? When you take into account that even major credit card companies with their payment processing and recurring payment processing only charge their customers <5%?

Apple is DEMANDING 25% MORE in return than they'd be paying if they were to use their own payment processor.

The problem here, is that Apple refuses to let them do this in app. They refuse to let the developers put a link to their site for their own payment processors. They refuse to let you even advertise that you can purchase the app or subscription elsewhere.

It's for more than processing the payment. They need to hold the CC information. They process the payments, agregrate them and send them to the vendor. I've had to comply to PCI audits and build and maintain the infrastructure to do so. It ain't cheap. 30% is for the payment processor fee, the cost of building and maintaining that infrastructure and a service convinience fee to simplify your accounting.

Now, Spotify may not care about the infrastructure because they have their own, but plenty of smaller developpers do. If I have a susscription based app and I have 1,000 subscribers, it would be worth 30% for me to just get a single monthly transfer from Apple and not have to worry about it.

And it's been said many times, Spotify does not have to offer IAP for subscriptions. They just can't have a link that says "Go here to pay". But asking for a Spotify UserID and password during initial setup and having a statement that says "You need a valid Spotify account to proceed" is fine. That would tell me to go to Spotify and create an account.

 

[a.gomez]

Because Walmart is not processing the recurring Verizon payment for you.

Spotify does not have to have IAP. It chooses to do so.

Wait what? because Apple wont allow anyone to use any other payment option for a subscription - and processing a payment is 30% per user is Nonsense. Apple Music is using Apple ID account on Android to process payments - Google does not care.

Same crap they tried with Kindle - and that went to hell in a hand basket - you do not even hear about iBooks. They made an inferior product and tried to prop it up with new AppStore rules and side deals. Why I now also get my Popular Science and Popular Mechanics subscription on their website - Apple should not get 30% of that either.

I'm old enough to remember when Apple competed on merit - not some 1990s Microsoft BS.

 

[AsherN]

Wait what? because Apple wont allow anyone to use any other payment option for a subscription -

That is not true. What they do not allow is to be able to pay through the app without using IAP. Or to have a link in the app to enable payment outside the app. You can go to spotify.com, open an account and buy the subscription. Then download the app and login with your Spotify account. Works just fine. No payment to Apple.

 

[cmaier]

It's for more than processing the payment. They need to hold the CC information. They process the payments, agregrate them and send them to the vendor. I've had to comply to PCI audits and build and maintain the infrastructure to do so. It ain't cheap. 30% is for the payment processor fee, the cost of building and maintaining that infrastructure and a service convinience fee to simplify your accounting.

Now, Spotify may not care about the infrastructure because they have their own, but plenty of smaller developpers do. If I have a susscription based app and I have 1,000 subscribers, it would be worth 30% for me to just get a single monthly transfer from Apple and not have to worry about it.

And it's been said many times, Spotify does not have to offer IAP for subscriptions. They just can't have a link that says "Go here to pay". But asking for a Spotify UserID and password during initial setup and having a statement that says "You need a valid Spotify account to proceed" is fine. That would tell me to go to Spotify and create an account.

They also developed the iPhone, made it desirable, developed the App Store, developed public SDKs, and developed a giant market for Spotify. That cost billions of dollars in R&D.

Spotify is free to create its own smartphone platform if it isn't happy with Apple's rules.

 

[fmalloy]

Waiting for Apple to start charging iPhone users a monthly subscription to use the phone. Ridiculous? Then just spew the fanboy mantra of "you're always welcome to design your own phone and phone OS"