Spotify CEO Daniel Ek Speaks Out on Dispute With Apple Over App Store Policies

[paul4339]

Is it 15% or 30%?

It's 30% for the first year, and 15% thereafter.
Google Play store does the same. Windows store does roughly the same.
(with exception of amazon, maybe, I have no clue about other app stores or who really uses them)

They all also have competing products and services too.

 

[iSayuSay]

I think Apple should taking cut accordingly. The bigger the app or its subscription base, the smaller the cut

Total IAP below $250K per year = 30%
$250K - $750K per year = 20%
$750K - $1.5M per year = 10%
More than $1.5M per year = 5%

I mean Apple surely provides the platform for Spotify to sell their subscription, but more sales should enjoy incentives from Apple. I mean 5% of $1.5M is still huge cut for basically providing ad billboard for developers.

 

[Romeo_Nightfall]

The irony is that Spotify pay their artists an absolute pittance. Its virtually legalised piracy. So they've got a cheek to whinge about what Apple is up to..

What? Streaming revenues are sky high, artists drown in money, what are You talking about?

 

[schmidm77]

Pretty silly. Spotify wants to use Apple's platform and customer base, which they have worked hard to develop and cultivate for years, to make money. Yet, they don't want to pay Apple a cut for providing this platform and customer base? If you don't want to pay it, you don't have to, but don't expect to use their platform for free.

Spotify's customers don't belong to Apple such that Apple gets to play gatekeeper and extract a 30% toll for the privilege of selling them a service. Apple will eventually lose this for restraint of trade and other anti-competitive issues.

 

[ravenstar]

This right here is why I side with Spotify. I understand Apple enforcing the 30% rule because Apple provides billing management and other technical services for that 30%, but to not allow Spotify to let people know they can sign up elsewhere? That feels like a tight grip that has clear competitive implications.

Think of it like this: if you were a car dealer who sold Ford and Chevrolet products, and you wanted the Ford website to let you advertise the Chevrolet products, what do you think the response would be? If Apple were trying to prohibit advertising outside of the app store as a condition of participating, it'd be another issue entirely, but the app store itself is not a platform for free speech. As others have pointed out, Spotify is able to inform its customers of the ability to subscribe outside the app store, so it's really hard to see how Apple's being anticompetitive. Spotify's argument seems to be it somehow costs them more to place their product on the app store than it does for Apple and that's anticompetitive, but without data about the cost of running the store, that's really no more than speculation.

 

[trifid]

Apple isn't wrong. Apple is a business. They are offering up their app platform for a 30% cut. Netflix doesn't have to abide by it and neither does Spotify. If you don't want to use their app platform, you don't have to.

Before I lose years of experience and investments into the platform, I will speak up and ask for change. This isn't the first time Apple has been in the wrong, and they've many times changed course due to public outrage. A business also benefits from happy customers/vendors.

 

[Stella]

What I'm hearing from Spotify is: "Apple did a lot of work creating this fantastic distribution platform and Apple did a lot of work creating a fantastic integration between their Store and their devices and Apple amassed a huge database of satisfied returning customers, but now WE want to benefit from all that for nothing."

Apple should let developers opt out of Apple's in app payment mechanism.

Issue solved.

 

[Press22]

I think the problem is the 30% is too high. Also not being able to direct customers to your site to see further subscriptions is a lame way for Apple to take advantage of that 30%.
Imagine if comcast/cox/insert your internet provider here wanted to charge you 30% more to use Netflix.

And in my line of work we have a similar fee but it's at MAX 15%, usually 6-8% however.

EDIT: Also ridiculous that spotify is not allowed on siri, apple tv. If I don't want apple music please allow alternatives.

 

[daftpunker909]

What I'm hearing from Spotify is: "Apple did a lot of work creating this fantastic distribution platform and Apple did a lot of work creating a fantastic integration between their Store and their devices and Apple amassed a huge database of satisfied returning customers, but now WE want to benefit from all that for nothing."

If Apple is so great why are they not competing with the value of their product (Apple Music) instead of leveraging their platform?
The Apple store is great not only because of Apple but also due to all the contributions of the developers.
Really hoping that Spotify wins this one. I'm almost certain that the european union will not side with Apple. This is very similar to the MS situation and I bet you weren't defending them back then

 

[schmidm77]

What music streaming competitor did Apple buy? (Mentioned in the article). All I can find is Shazam recently, which certainly isn’t a competitor to Spotify.

Apple Music is a rebranded Beats music service.

 

[threesixty360]

But they don't offer a porn app. That's the big difference here. The fact Apple offers their own competing service is the crux of the issue. They are using their platform as leverage to get more of the customer's money without necessarily competing on the merits of the service. See also Apple Maps. The default map program is Apple Maps, even though it is nowhere near as good as Google Maps, and you can't change it. Apple isn't competing on the strength of its program/service, it is competing on platform lock-in, and that's wrong.

They had the 30% cut way before they had Apple Music. The point of the 30% cut is simply that if anyone, (not just spotify) is selling anything in their store they want a cut because they created eco-system, they bear the trust for the payment scheme if anything goes wrong, passwords, encryption, branding etc.. Its their devices that they spent billions making that brings the lucrative, high income customers that Spotify wants. Apple want compensation for building that eco system with their own money and risk.

Where you can add to apple's bottom line in a better way they cut a deal (Microsoft Office etc... pay less I believe, Amazon because of the Apple TV). Where you cant (spotify), hell no. If Amazon or MS pulled their apps thats a big problem. If spotify pull their app, so what, they will sell you Apple Music.

As for the maps, when google maps was the default map did anyone complain that Nokia maps wasnt default? No.
Then google asked for more data on people and Apple said no and had to build their own maps.
It wasnt something apple made to make money. Apple makes all its apps to make sure its own customers have a default level of service and expectation out the gate. Because you pay alot of money for apple and thats what you should have.

And they dont want customers getting used to default options that they cant even guarantee will be on their devices in a few years time (i.e google maps) or back in the day when Adobe wouldnt make some of their apps for mac or were destroying the performance with Flash.

There is a history and reasoning behind all of this.

 

[DNichter]

Spotify's customers don't belong to Apple such that Apple gets to play gatekeeper and extract a 30% toll for the privilege of selling them a service. Apple will eventually lose this for restraint of trade and other anti-competitive issues.

Correct, Spotify customers don't belong to Apple, but their App Store does. Customers don't need to absorb the 30% cut, Spotify does by utilizing their App Store and it's highly lucrative base of customers that Apple has garnered. Spotify doesn't need to host their app in Apple's App Store if they don't want to.

 

[78Bandit]

I think Apple should taking cut accordingly. The bigger the app or its subscription base, the smaller the cut

Total IAP below $250K per year = 30%
$250K - $750K per year = 20%
$750K - $1.5M per year = 10%
More than $1.5M per year = 5%

I mean Apple surely provides the platform for Spotify to sell their subscription, but more sales should enjoy incentives from Apple. I mean 5% of $1.5M is still huge cut for basically providing ad billboard for developers.

Spotify's basic premise is they don't want ANY in-app purchases. They have sufficient resources to handle all of their payment processes and content delivery. What they want is the ability to link to their own account sign-up page instead of being prohibited by Apple from even mentioning it exists.

Their arguments about the 30% fee to allow customers to upgrade to premium is pretty much a red herring. They are just throwing that in to draw attention to the fact that Apple applies the 30% fee to only selected industries where Apple is also a direct competitor in an attempt to garner sympathy from the EU. It is basically a club they are using to threaten Apple with the prospect of applying the 30% on an "all-or-none" basis.

 

[paul4339]

The problem is there is a huge base of installed Apple devices, and the companies can't offer their apps in another way.

If you have most of the market and start acting like a monopoly, you're probably a monopoly. Apple either needs to reduce their take or open iOS to alternative app stores.

Google's app store has the same fees. They have alternative app stores, but average people don't use them (i think).

Apple is more closed, but, even if they had alternative iOS app stores, it'll be the same adoption as Google Play alternatives.

If a user really wants to go outside to a competing app store, they can just as easy go to the existing Spotify's web page and get their discount. (i know, it's not exactly the same, but similar).

The gripe is if the developer goes outside of apple's ecosystem, you don't get the smooth Siri integration with Homepod (or maybe Apple watch).

So basically the argument boils down to: if you want use the extra benefits of the ecosystem, you gotta pay a fee; Spotify wants the benefits of the ecosystem but doesn't want to use the ecosystem payment system to save the extra 30/15% (even though other ecosystems have the about same fees).

 

[DNichter]

I think the problem is the 30% is too high. Also not being able to direct customers to your site to see further subscriptions is a lame way for Apple to take advantage of that 30%.
Imagine if comcast/cox/insert your internet provider here wanted to charge you 30% more to use Netflix.

And in my line of work we have a similar fee but it's at MAX 15%, usually 6-8% however.

EDIT: Also ridiculous that spotify is not allowed on siri, apple tv. If I don't want apple music please allow alternatives.

I agree with you here about the cut. 30% feels high, but it is consistent with Google and Microsoft. The redirecting though, I get, because it is basically a work around while still taking advantage of Apple's platform and customers. I don't think anything is stopping Spotify from making an Apple TV app, not sure on Siri.

 

[quietstormSD]

I don't know. I have to side with Spotify on this one. If you are in a keeping business with another company and you own the platform for distribution of this service, you should be required according to US anti-trust laws (or whatever you call them) to have a fair policy that does not put that competing service at a competitive disadvantage on your platform. The laws the law.

This isn't just for Spotify either. I would say the same for Amazon's digital bookstore as well as competing for video streaming services in about a month.

And it's not just Apple btw, any company that operates in the US should abide by the US anti-trust laws.

 

[DNichter]

Before I lose years of experience and investments into the platform, I will speak up and ask for change. This isn't the first time Apple has been in the wrong, and they've many times changed course due to public outrage. A business also benefits from happy customers/vendors.

I am not sure of your point here really. You have every right not to support it, but Apple is a business and so is their App Store. I don't feel like Apple is in the wrong here. If Spotify wants to make money of Apple's platform and customer base, there is a fee. Pretty simple. Spotify is the only one who is making the process harder for their customers, because they don't want to pay a fee to be on Apple's platform.

 

[schmidm77]

Think of it like this: if you were a car dealer who sold Ford and Chevrolet products, and you wanted the Ford website to let you advertise the Chevrolet products, what do you think the response would be? If Apple were trying to prohibit advertising outside of the app store as a condition of participating, it'd be another issue entirely, but the app store itself is not a platform for free speech. As others have pointed out, Spotify is able to inform its customers of the ability to subscribe outside the app store, so it's really hard to see how Apple's being anticompetitive. Spotify's argument seems to be it somehow costs them more to place their product on the app store than it does for Apple and that's anticompetitive, but without data about the cost of running the store, that's really no more than speculation.

No, the better analogy of this entire App Store situation is if you as a customer bought a Ford, and then you were only allowed to buy parts and service from a Ford dealer; or if you went to a third-party service center, they still had to pay Ford a 30% cut of their business. This is already illegal.

 

[ipponrg]

I agree with you here about the cut. 30% feels high, but it is consistent with Google and Microsoft. The redirecting though, I get, because it is basically a work around while still taking advantage of Apple's platform and customers. I don't think anything is stopping Spotify from making an Apple TV app, not sure on Siri.

The 30% argument is not a strong argument for Spotify.

In reality the core of this debacle is that Apple is bullying competition on their public platform. The same thing happened with Microsoft back in 2000s.

There are laws against this, so it doesn't matter if Apple "owns" their platform.

 

[Horselover Fat]

I've heard this before in the early years but I've yet to read any recent evidence to suggest this. Do you have sources that compares the two services and how much they pay artists?

I recommend the blog http://thecynicalmusician.com. You could start with this article: http://thecynicalmusician.com/page/7/

 

[ravenstar]

If Apple charged everyone 30% and doesn't itself compete in music streaming, that's fine. Everyone is playing on the same field and by the same rules. The problem is Apple is using its market strength in app stores to advantage itself in the market of music streaming because it isn't subject to the same 30% fee and restrictions on advertising.

Just think about the math: Let's say a Content Owners charges $2.50 to anyone who wants to offer it for download, and both Apple and Competitor offer it to download. Apple sets the price at $3. If Competitor sets the price at $3, it has to pay Apple $1, and thus only gets $2. Thus, at the $3 price point, Competitor loses $0.50 per download AND Apple makes $1 for each of Competitor's downloads, and Apple makes $0.50 for each of Apple's downloads. Competitor can't price it higher than Apple, because they would lose customers.

The competitor has no expenses related to the operation of the platform beyond the fee they pay to Apple. Apple assumes the entire cost of developing and operating the platform. Without knowing those costs, we cannot say that the competitor is at a disadvantage. Sure, I don't think Apple's losing money on the deal, but it's certainly not making 100% of the amount they charge the competitor. Anyway, shouldn't they be allowed to make a profit on a service (the App Store) they offer?

 

[cardfan]

Just want to point out that there’s no cutting the middleman. I guarantee you Apple Music pays the 30 percent as an expense Of course that goes to Apple but just saying.

Spotify can’t say it can get 100 percent of 9.99 by us paying them directly. There’s always a percentage taken out to account for billing management. I’d guess it’s not 30 percent but then again this is someone’s store and access to Apple customers they’re getting.

Still. Government will do what is best for consumers not necessarily what is fair for Apple. That’s the reason if your an Apple exec you should worry.

 

[BigDO]

Hate to admit it but Apple IOS, Apple Store, Apple Rules.

When people use words like "we just want to be fair …" sounds like soar losers.

Lol. That may be how a highschooler imagines commerce to work, luckily not how it is in reality. Apple is going to be smacked, hard.

 

[ravenstar]

In reality the core of this debacle is that Apple is bullying competition on their public platform. The same thing happened with Microsoft back in 2000s.

Please explain. I don't see they bullying. I don't hear Apple saying "if tell customers they can subscribe outside the app store you can't put your app in the store." They merely don't allow competing ads in their store. I just don't get how Apple's creation of a popular market imposes some kind of obligation on them to allow anyone to do whatever they want on the platform.

 

[TheShadowKnows!]

This brings a metaphor to mind:
"The Unheard Story of David and Goliath" by Malcolm Gladwell at TEDSalon, NY, 2013.

Malcolm closes his presentation with:
"And there is, I think, that, Giants are not as strong and powerful as they seem. And sometimes the shepherd boy has a sling in his pocket."

Worth the time to watch. A lesson to all.