How would you even propose that a company tax itself 30% for a product it sells? That Apple doesn’t isn’t nearly as crucial as the fact that it can’t.
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Spotify's CEO Expects Apple to Further 'Open Up' After EU Antitrust Complaint
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How would you even propose that a company tax itself 30% for a product it sells? That Apple doesn’t isn’t nearly as crucial as the fact that it can’t.
I know. But Apple Music uses superior codec and they master the music. I wish Apple Music would have a manual EQ too but that’s a problem only on iOS. I can tweak the music on Mac or Windows. But as I said, Spotify is better in every other ways.
Guess what? That's how retail works. You want someone to carry your product, you will give them a cut from sales; and 30% is not unusual fro items like games, books, etc. You don't want to give them a cut, don't use their channel.
As for Microsoft, WalMart or anyone else selling their own branded items they decide what margin the make, and it's probably higher than the cut they take from selling someone else's product.
What a short sighted view, which fortunately the FTC does not share. Setting your own terms when you are in a position of power does definitely not guarantee that it is in the customer interest. Good for Spotify to stepping up the pressure on Apple
There are more than 2 app stores for phones; the market is more than just Apple's; many phone manufactures have their own as well.
No one forces anyone to develop for a specific app store, or even develop anything. They decide wether or not they can live with the terms and either develop or do something else.
Great straw man you picked here.
Just because it's done in other industries, it doesn't mean it's lawful per FTC rules.
No one is saying they shouldn't take a cut from Spotify. The only point is that they should abide by the same rules with their own products, which they currently don't.
I don't get all this die-hard Apple fandom - what benefit does it bring you? Oh that's right - none at all
Subjective.
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Because Spotify is a POS company.
Does Apple charge itself 15% for its own subscription purchased through its own App Store?
I’m confused. If it shuffled 15% (or didnt) around in its accounting books does it even make much difference? How would that impact the consumer (there would be no price change) or service quality change.
It's retail, whether you sell clothes, electronics, or software.
You seem to misunderstand FTC rules, or how companies sell products. There is no requirement to make the same margin on products from a third party and their own products. If Apple did, they'd probably take a greater cut than 30% on many items. Apple also takes a cut from all the third party physical products they sell, just like any company, and the percentage varies, as does the margin on their own products.
Developers and others are probably better off, because under they old way of selling a product you had, in addition to inventory costs, had a distributor and retailer taking a cut. You'd probably get 50% of the list, if you were lucky, and had to pay for you inventory costs out of that. The App store cut out inventory as well as the middleman, meaning sellers on the App store get 70% without the associated costs of building and maintaining physical inventory.
As for subscriptions, instead of paying someone like Publishers Clearing house to push subscriptions, which you sell at a cut rate to get subscribers and bear all the costs of printing and distributing, you get 70% and the marginal cost of the extra subscriber is zero. Again, Apple has made their margins much better, even with a cut.
If Spotify finds Apple's pricing unreasonable, leave the App store. My guess is the get enough subscribers outside of in app purchase to want to stay, but whine because they want all of that money.
As for fandom, I use Apple products becasue they are the lowest TCO to run my business on; if another product had a lower TCO I'd use it.
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Companies often have internal hurdle rates that determine if a product is viable as well as pay for staff, etc. While it is a transfer payment it still has a P&L impact on the product's division. You don't make the needed margins, and your product gets dropped.
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Again, there are only two smartphone OS - iOS and Android, period. How do you know how the shopping world would behave if there were indeed only two chains in the whole world, as per your example?
From what I understand, correct me where I’m wrong, doesn’t google do the same thing?
Apple already charges a hefty premium for virtually everything they make, plus the developers fees, plus everybody paying for their iCloud storage plans - they are literally swimming in money. It is not like Apple runs a dedicated Spotify line on their AppStore - it is just one of many apps there and the whole AppStore process has been streamlined by now, requiring next to no effort on Apple’s part to run it. I agree that when the AppStore was introduced, it was something well worth the price, but as the time went on, they could have easily reduced their cut.
Actually, those are the largets two palyers in the phone iOS market, but not the only ones. In Android's case, there are multiple app stores since Google made it a sort of open platform, Apple has one as iOS is closed; unless you jailbreak in which case there are alternative app stores.
There are other ways for people to compete. Buy a different device. That is the option for the user. If the apps the user wants to use are not available, they can simply buy different hardware that has access to the apps people want to use. What's wrong with that? Now the government is going to get into the business of regulating what apps your hardware should be able to support. Yikes! I don't agree with that. That can lead to all kinds of non-sense the government wants to do "in the name of safety".
As an artist who gets aid royalties from Apple we were getting 5 times the payments from Apple vs. Spotify - Our label pulled all of our music from Spotify and we actually showing increased traffic on Apple Music and higher payments now that pulled everything off Spotify.
Spotify is pure evil when paying artists.
Spotify is pure evil when paying artists.
yeah they aren't profitable and created an unprofitable business and is looking for legal ways to screw the artists and creators from being adequately paid.
I think you'll find that most credit card processing fees come to around 2% to 3%, more or less depending on who you are dealing with and your volume. Base fees vary but in many cases the base Visa processing fees are measured in cents, not hundredths of a cent.
Here's a detailed article on the many fees that are charged by the various companies.
Normally because the cost of the credit card overhead is already baked into the cost of the item. In many cases you can get a small discount by paying cash, they've actually already increased the cost of the items ahead of time to include it. The Apple Pay transactions are defined by the card processors, generally Visa or Mastercard, who set those fees rather than Apple. It's not a matter of Apple not being able to get away with it, it's more that Apple doesn't define those fees.
Now comparing to other similar online market places is 30% uncommon? Not particularly, many folk have pointed out other platforms have a similar profit margin built in such as Google Play and Steam.
Is Spotify fully limited to the IAP to acquire subscriptions? Well no, people can buy it online directly through Spotify which absolutely should make them more money but they're also handling all of the other overhead. Apple does put in limits to making this readily apparent but Spotify are free to sign people up on a trial and guide them to their payment infrastructure via email or on their own site (which as I understand it, they do).
Is Apple likely covering the cost of running their infrastructure in that 30%? Most likely. That makes it hard to compare to just a payment processor charge like Visa or Mastercard who are generally just transferring bytes from one place to the other. The app store take is subsidising free distribution on their platform, review for all of the apps (including ones like Spotify that don't generally monetise via IAP or paid distribution). Spotify could build a web app on the iOS platforms to play music as well which wouldn't go through the App Store and would enable them, on device, to ask for money however they want though that is a subpar experience as well.
Does Spotify have a good case? Their case depends on their ability to define Apple's App Store as a monopoly that should be open to others and that because Apple doesn't enable third party app stores on their platform that this is illegal. Apple are obviously entitled to charge their 30% cut just as Google Play and Steam do on their platforms for purchase bought through them. The difference is the gating function on iOS that limits how apps get onto the device and what the app is authorised to ask for. The problem here is that Apple doesn't have a monopoly on the app distribution market or even the mobile device market, what is being argued is that Apple has a monopoly over devices that Apple itself sells. This actually mirrors a wider conversation around right to repair and the ability to use non "genuine" parts on stuff like John Deere tractors. I'm not so sure a case can be made the there is a market monopoly over app distribution and that there is a legal basis for compelling Apple to open up app distribution for their phone platform. Partially I wonder about the question of standing in this case though I guess in time all of this will be answered by the courts.
Not sure I understand. Because that is exactly what my previous post was about.
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That is a pretty good argument
Isn't this why Apple famously has only one P&L?
Everything contributes to their ecosystem, even if a specific service doesn't overall make as much money, Maps, iTunes, etc. This doesn't mean that failed products or services don't get cut, it means that it recognises that there are strategic products/services that are important to it's overall profitability or growth strategy and hence it's really important to keep it.
IMO, I would guess that Music is really important to Apple, I can't see them dropping music anytime soon. Nevertheless overall this doesn't directly impact the consumer if they charge or don't charge themselves internally.
As a side note, Amazon makes specific line of hardware (Fire) optimized for it's ecosystem and it's own app store (and has the same fees as Google/Apple). However, they out right block Google apps because it's competition. As an example, they even plow alot of money into Prime video (even if it competes again Netflix) so that it contributes to it's overall business (as Bezo's admits "We get to monetize [our subscription video] in a very unusual way, every golden globe won, helps sell more shoes" Prime members buys more than non-prime members)
The difference, is that Amazon, was selling books moving to ebooks/Kindle and then growing their ecosystem (Alexa, etc)... while Apple started with a mostly closed platform in mind, and then growing/adding more services to drive more people into their ecosystem. (eg, it helps them sell more iphones, airpods and vice versa).... All adding into single a P&L, so that divisions don't compete against each other.
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I would be surprised if Apple only has one P&L internally. Just because they do not breakout lines of business in their financial statements doesn't mean they don't do so for internal accounting of profit and loss. [/QUOTE]
True, they are looking to bind everything into one (supposedly) seamless whole.
And the way to identify failed services is to identify whether they are profitable. You do that by comparing costs and expenses vs revenue; which is a a P&L statement.
True. Sometimes you have loss leaders that draw in more profitable business; but you need opt know whether a product line is profitable.
What makes you think the App Store requires little effort to run? And are you suggesting that Apple run the App Store at a loss and subsidise it using profits from elsewhere? By what rationale?
That's actually what's happening right now with food delivery. Many food outlets are finding that after deducting the cut for Foodpanda or Deliveroo, they aren't really left with much earnings left, so they are passing part of that cost on to customers in the form of higher prices.
Though in your example, we really have no way of knowing whether prices would have been any lower had Apple lowered their 30% cut. Personally, I believe that since the App Store is supply-side driven, prices are dictated more by supply, meaning that they are priced at their current levels because that's what people are willing to pay for them.
Removing the 30% commission wouldn't lower the price. It just means the developer pockets the difference.
So if my convenience store wanted to pass on the added cost to me, I would just find another brand of bear which was willing to absorb the difference. Which in Apple's case, would be apple music, if I wanted to go through iTunes without having to pay a premium.
So the irony here is that Apple is actually offering me a cheaper, more convenient alternative, which is of course not to Spotify's liking, but hey, I am not the one with an unsustainable business model.
Apple has one P&L, it was an insistence of Jobs to prevent competition among division... this does not mean they don’t measure the profits (losses) of a product line - they do it so the manager doesnt focus on profits and focuses on making a ‘great’ product; and the profit focus should be more the responsibility of the CFO to track.
“Most companies view the P&L as the ultimate proof of a manager’s accountability”, Jobs considered it a distraction and wanted it the responsibility of the CFO, and let the managers focus on the product.
the only manager with a 'P&L' is the CFO, so as not to create fiefdoms: there is one bottom line at Apple. General managers are even avoided, VPs being generally specialized engineers that have been promoted — with sometimes little to no business acumen.”
Cook: “We manage the company at the top and just have one P&L, and don’t worry about the iCloud team making money and the Siri team making money ... (and blah, blah, blah - typical stuff about making great products)
It’s not that product performance is unimportant, any company measures product performance internally (you don’t want to lose money) but Apple stresses it’s contribution to overall strategy.
Regardless, I’m pretty sure Music is strategic to them, so i can’t find it likely that they will ‘just cut it’ if it doesn’t make much money because its still really important to the overall strategy.
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