Spotify's CEO Expects Apple to Further 'Open Up' After EU Antitrust Complaint

[one more]

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?

Little effort - it has been around for years now and is pretty much automated. Think about it as designing a complex website/platform - once it is up and running, tweaking it is much easier than the initial build-up phase.

Running App Store at a loss - App Store is a bunch of code on a bunch of servers. The app review/approval is where we still have some human input.

I was not suggesting Apple should not charge their App Store fee, but they could certainly review their cut by now. We also need to remember that Spotify were originally complaining about not being able to offer signing in to their premium plan by placing an external link to their website within their app, due to Apple’s restrictions. That was all.

This is just my take on it and I think right now both Apple & Spotify are quite happy with how things are going.

 

[Abazigal]

Little effort - it has been around for years now and is pretty much automated. Think about it as designing a complex website/platform - once it is up and running, tweaking it is much easier than the initial build-up phase.

Running App Store at a loss - App Store is a bunch of code on a bunch of servers. The app review/approval is where we still have some human input.

I was not suggesting Apple should not charge their App Store fee, but they could certainly review their cut by now. We also need to remember that Spotify were originally complaining about not being able to offer signing in to their premium plan by placing an external link to their website within their app, due to Apple’s restrictions. That was all.

This is just my take on it and I think right now both Apple & Spotify are quite happy with how things are going.

Which brings me back to my original point - why should Apple make it easy for Spotify (or any other company) to circumvent their payment methods and avoid paying Apple their cut while still leveraging on Apple’s distribution platform?

And I would argue the human input is where the App Store incurs the bulk of its costs. Seeing how the google play store constantly receives much complaints, it would appear that they don’t seem to put as much care into manning their App Store, which I suspect is due to heavy emphasis on automated vetting (which cuts costs, but clearly hasn’t been as effective).

So for the effort Apple puts into maintaining their App Store, I say Apple deserves the money, and companies like Spotify should pay their due.

 

[one more]

Which brings me back to my original point - why should Apple make it easy for Spotify (or any other company) to circumvent their payment methods and avoid paying Apple their cut while still leveraging on Apple’s distribution platform?

It is not about “circumventing” the payments, as Spotify is a free app, remember? It’s more about working out a way of not losing 30% of their subscription fees to Apple, as Apple are not storing the Spotify content on their servers. So it’s all about subscription service handling.

 

[Abazigal]

It is not about “circumventing” the payments, as Spotify is a free app, remember? It’s more about working out a way of not losing 30% of their subscription fees to Apple, as Apple are not storing the Spotify content on their servers. So it’s all about subscription service handling.

You do raise a very interesting point.

At this point, Spotify clearly believes that they are big enough that consumers are subscribing to them via the strength of their brand, and the iOS App Store no longer brings them any benefit with regards to attracting additional users.

As such, I do understand why Spotify feels that they are entitled to keep 100% of their subscription revenue. They don’t think that Apple is doing enough to justify that 30% or 15% cut any more.

That said, many subscription-based apps go through iTunes for billing. Fantastical, Todoist, Bear, Lockdown, just to name a few off the top of my head. Some make more use of Apple’s infrastructure than others, and many are smaller developers who rely on the App Store for discovery and user acquisition. Let’s say Apple ends up giving in to Spotify. Would they be expected to extend the same benefit to other subscription-based apps as well?

Should Apple make an exception for Spotify just because the latter is big enough to bring a lawsuit against Apple?

What about IAPs then? To me, it’s messy and opens a whole can of worms.

Then we come to the customer. Personally, I prefer using iTunes for billing purposes, not least because it means that the developers never get my payment information, and I think it would suck having to switch to an alternative just to save a few bucks.

My recommendation is for Apple to charge the following for third-party subscriptions:

Year 1: 30% of revenue (I still feel that Apple is justified in charging more for the perks of upfront discovery)
Years 2: 15% of revenue (no different from the current arrangement)
Years 3+: 5% of revenue (to reflect the shift in value from Apple to the third-party, and this is really to cover credit card processing costs at this point, which I think many developers would be happy to let a third-party manage).

Such a revenue share structure would serve as a great incentive for services to remain fully invested in the App Store over the long run. I understand that money is money and if possible, any developer would want to keep as much of the proceeds as possible, but I stand by my belief that Apple spends a lot of money on maintaining their App Store and it’s only reasonable that the stakeholders (ie: the app developers) pay where they can to help cover the costs involved, since the App Store is what allows them to even make a living in the first place.

 

[jlc1978]

It is not about “circumventing” the payments, as Spotify is a free app, remember? It’s more about working out a way of not losing 30% of their subscription fees to Apple, as Apple are not storing the Spotify content on their servers. So it’s all about subscription service handling.

Apple provides them the way to reach subscribers; for which they get paid. It's no different than say Publisher's Clearing House pushing magazines and taking a cut; except it's digital instead of paper.


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You do raise a very interesting point.

At this point, Spotify clearly believes that they are big enough that consumers are subscribing to them via the strength of their brand, and the iOS App Store no longer brings them any benefit with regards to attracting additional users.

If that is the case they should take their app off the App store; but my guess is they still gets subscribers and need an iPhone App to keep a significant part of their base.

I wonder what percentage of Spotify users switch from IAP to a subscription once they find out it is cheaper? My guess that is an important part of their revenue.

As such, I do understand why Spotify feels that they are entitled to keep 100% of their subscription revenue. They don’t think that Apple is doing enough to justify that 30% or 15% cut any more.

My guess is they are hurting for money and looking for ways to pump up revenue.

Should Apple make an exception for Spotify just because the latter is big enough to bring a lawsuit against Apple?

Apple can probably out last them in court. This is bigger than Spotify for Apple and will probably fight to the end.

My recommendation is for Apple to charge the following for third-party subscriptions:

Year 1: 30% of revenue (I still feel that Apple is justified in charging more for the perks of upfront discovery)
Years 2: 15% of revenue (no different from the current arrangement)
Years 3+: 5% of revenue (to reflect the shift in value from Apple to the third-party, and this is really to cover credit card processing costs at this point, which I think many developers would be happy to let a third-party manage).

While I get your point as long as they can keep charging 15% there is no reason to drop the prices. They'll charge what the market will pay.

 

[one more]

Apple provides them the way to reach subscribers; for which they get paid. It's no different than say Publisher's Clearing House pushing magazines and taking a cut; except it's digital instead of paper.


If that is the case they should take their app off the App store; but my guess is they still gets subscribers and need an iPhone App to keep a significant part of their base.

In both of your arguments you seem to miss one very important point - there is no way for Spotify to work on any iOS device if it is not on the App Store. So Spotify are not blackmailing Apple or begging it for any special deals, they just want to be able to function normally on an iOS device without being ripped off, that is all.

 

[Abazigal]

In both of your arguments you seem to miss one very important point - there is no way for Spotify to work on any iOS device if it is not on the App Store. So Spotify are not blackmailing Apple or begging it for any special deals, they just want to be able to function normally on an iOS device without being ripped off, that is all.

Except that in Spotify’s case, getting ripped off seems to entail paying Apple anything more than 0% of the subscription revenue.

 

[jlc1978]

In both of your arguments you seem to miss one very important point - there is no way for Spotify to work on any iOS device if it is not on the App Store. So Spotify are not blackmailing Apple or begging it for any special deals, they just want to be able to function normally on an iOS device without being ripped off, that is all.

Ripped off? Apple charges a fee to subscribe through them, a reasonable practice; a practice that predates in app purchases. 30% cut is not bad to give them access to Apple's user base, especially since many of those who d/l Spotify will subscribe outside of the App store. Spotify gets the same amount of money from an IAP as from other ways to subscribe. If Spotify doesn't want to give Apple 30%, don't offer IAP, just stream a free tier and only offer subscriptions outside of the app.

If Spotify doesn't like Apple's terms, don't have an Apple app. It's that simple.

 

[one more]

If Spotify doesn't like Apple's terms, don't have an Apple app. It's that simple.

Ok, let’s imagine that Spotify follows your advice and removes their app from Apple App Store altogether. What about Apple users who use Spotify, how would they use it on their iPhones or iPads? It is not that simple.

 

[V_Man]

still won't use apple music. make it free? so how would they pay royalties to musicians?

From their profits.

 

[one more]

Except that in Spotify’s case, getting ripped off seems to entail paying Apple anything more than 0% of the subscription revenue.

Let’s try not to take sides and just look at it. There are lots of free apps on the App Store that do not bring Apple a cent, right? Then there are apps with in-app purchases for their “premium” versions, etc., which unlock more features/content for a fixed one-off price of which 30% goes to Apple, as per App Store terms. So far, so good, and everybody is probably happy. The subscription-based apps, like Spotify, Tidal, Netflix, etc. is a different story, as Apple, essentially, just serves a frame/interface on their App Store, while the catalogues, etc. are managed on the back end by the service providers. So both Apple & service providers, Spotify in our case, ideally need to reach an agreement where both of them feel happy with the terms and I hope they do, eventually. 🙏

 

[DeepIn2U]

HAHA ... Spotify ... IN YOUR FACE!

Sonos cofounder calls out Spotify CEO Daniel Ek over Apple criticism

Sonos cofounder calls out Spotify CEO Daniel Ek over Apple criticism — Business Insider

The cofounder of smart speaker firm Sonos called out Spotify CEO Daniel Ek for his remarks on Apple's closed ecosystem. In a Wednesday interview with Bloomberg News, Spotify CEO Daniel Ek had said Apple has a long way to go before it's an "open and fair platform." Spotify is currently pursuing...

apple.news

Shortly after Ek's remarks, Sonos cofounder John MacFarlane said it was "significantly more difficult to work within Spotify's 'closed' ecosystem than Apple's."

And yet Daniel Ek is using AirPods during his interview with Bloomberg on Wednesday.

Spotify CEO Expects Apple to Further Open Up After Complaint — Bloomberg

Spotify Technology SA Chief Executive Officer Daniel Ek said he expects Apple Inc. to further open up its platform a year after the Stockholm-based music streaming company filed an antitrust complaint with the European Union.

apple.news

Talk about the egg calling the chicken foul.

 

[jlc1978]

Ok, let’s imagine that Spotify follows your advice and removes their app from Apple App Store altogether. What about Apple users who use Spotify, how would they use it on their iPhones or iPads? It is not that simple.

They wouldn’t unless Spotify decided to find another way to access a stream. Spotify would either lose those subscribers or develop a web based streaming option. My guess is they can’t risk losing iPhone users so choose to whine and sue because they have a bad business model.

 

[JKAussieSkater]

> JKAussieSkater said:
> Let’s be honest here: payment processing and APIs cost nothing per transaction. Maybe a hundredth of a cent. So yes, it’s nothing.

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.

Actually, I was talking about the actual cost of the transaction itself (e.g. electricity, internet costs, computational processing energy usage). I was not referring to the fees that VISA or other providers charge their merchants. Of course, the value of the goods purchased will never alter the actual transactional costs, so percentage-based fees are irrelevant to my argument (e.g. Buying a $2000 ring doesn't cost Apple more to process than buying $20 of rice.)

I've edited my original post for clarification, thank you for bringing that potential confusion to my attention.

 

[jlc1978]

Actually, I was talking about the actual cost of the transaction itself (e.g. electricity, internet costs, computational processing energy usage). I was not referring to the fees that VISA or other providers charge their merchants. Of course, the value of the goods purchased will never alter the actual transactional costs, so percentage-based fees are irrelevant to my argument (e.g. Buying a $2000 ring doesn't cost Apple more to process than buying $20 of rice.)

I've edited my original post for clarification, thank you for bringing that potential confusion to my attention.

The cost of a transaction, or to produce something, is irrelevant to its price. Price is determined by what people will pay; and despite Spotify's whining they are willing to pay 30% for the value they get. Apple lets them set a price and they chose to price it so they still get the same amount of money as they do from the direct purchases. They basically want Apple to drive subscribers to them for free.

If anything, artists should sue them for depressing royalty rates for streaming.

 

[Ethosik]

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

That was my point with Microsoft and Valve. If I wanted to compete with Portal in the Steam platform, I get a 30% cut. Valve does not. So they do not abide by the same rules either. But I guess since it is Apple, its okay to bash on them.

 

[JKAussieSkater]

The cost of a transaction, or to produce something, is irrelevant to its price.

This is difficult to believe… Sustainable business models must offset expenditure somehow; the usual method is setting a minimum price that's larger than the costs to produce it. The cost cannot be an irrelevant factor to the final price of said product.

Price is determined by what people will pay

Perhaps in the short-term. If people pay less than the product costs, then there's no financial incentive to produce more of said product. Or to put it another way, if a product spends years on the shelves at cost-price and the only way to move the product is to reduce the price below its cost, well, the product is basically facing extinction.

So long-term, if the pricing is less than the cost-to-produce, manufacturing will cease. The product will cease to exist.

Assume that $9.99 is the happy-compromise for Spotify to offer a compelling product at a compelling price with enough profit to be sustainable long-term. Now further assume that $12.99 is the difference which changes the product from having a compelling price to a repelling price.

Hey! Want to subscribe? It's only $9.99/month from our website! Click here to go there.
Or you can do it from the convenience of this app for $12.99/month. Click here to pay in-app.

It seems fair to let people vote with their money. But right now Spotify isn't allowed to advertise honestly (or fairly) like in the above example I've provided. The problem is less about the $$$ fee and more about Apple forcing developers to keep secrets from Apple users:

Hey! Want to subscribe? It's $12.99/month from the convenience of this app! Click here to pay in-app.
Also, we have secret pricing. It isn't really a secret but Apple have literally told us to not tell you about it.

^They might actually be able to say this at the moment, I'm not sure if it's revealed "too much information". But it certainly shines light on why Apple isn't playing fair right now.

But so many people here are willing to fight so hard to defend the worst of capitalism and walled gardens. It's truly bizarre.

 

[jlc1978]

We're using price in slightly difeerent manners here. I am refering to the market clearing price and you are refering to a manufacturers suggetsed retail proce, as I see it.

This is difficult to believe… Sustainable business models must offset expenditure somehow; the usual method is setting a minimum price that's larger than the costs to produce it. The cost cannot be an irrelevant factor to the final price of said product.

While they would like to be able to price and sell at a price that covers costs plus profit; it's market demand that determines the price. Consumers do not care what it costs to produce, they will pay what they see is a price that provides the value they expect.

Perhaps in the short-term. If people pay less than the product costs, then there's no financial incentive to produce more of said product. Or to put it another way, if a product spends years on the shelves at cost-price and the only way to move the product is to reduce the price below its cost, well, the product is basically facing extinction.

So long-term, if the pricing is less than the cost-to-produce, manufacturing will cease. The product will cease to exist.

True, which is why I said costs do not determine price, demand does. Supply is determined by costs to produce since you won't produce at an ongoing loss.