Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
So what if Spotify is making a loss on each subscriber. EK’s cunning plan is to make up for it in volume.
It’s nice isn’t it when you have a service you don’t need to make money on because other parts of your business subsidize it.
The only reason there are no Spotify users on the 30% rate is because Spotify removed the ability to pay via Apple's payment system back in 2016. This also explains why there are relatively few (680,000) users on the 15% rate, since only long-term subscribers who haven't migrated to paying with Spotify directly are still paying via Apple.
While it is misleading for Spotify to gloss over how the 30% rate decreases to 15% after a year, Apple's defence is even more misleading.
If Spotify still offered payments via Apple's in-app payment system, it would undoubtedly have many more subscribers paying that way, and any new subscribers would be paying the 30% rate.
And even though the 680,000 number is small compared to Spotify's overall paid subscription base, it is by no means insignificant.
680,000 users x 12 months x $12.99/month x 15% = $15,899,760
So that means Spotify is currently paying Apple (a direct competitor) roughly $15 million a year to process some payments. And that's only for users still utilising a payment method that was discontinued 3 years ago.
Are you bit**ing that Spotify has to pay Apple to use their service? Heck, only .5% of their users at that?
Of course. That's what this whole issue is about. Just because the number of users is relatively small, doesn't mean that the issue becomes irrelevant. And the number of users would be much larger if payment via Apple was still a possibility for new subscribers.
Should Spotify have to pay Apple something to use its payment system? Absolutely.
But should it be 30%, then going to 15% after a non-stop year? I'm not so sure.
And should Spotify be forced to use Apple's payment system if it wants to allow people to subscribe to its service from within its app? I don't think so.
As Spotify's Daniel Ek notes, apps that provide physical products or services (like Uber or Deliveroo) can use their own payment systems. Yet apps that provide digital services (like Spotify) have to use Apple's payment system and follow Apple's rules. It's a complicated issue.
You’re goddamn right they should pay 30%, then 15% after a year. Apple set the rate and it’s on Spotify to figure out how to make money.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Since Spotify is a public company, their quarterly reports detail their revenue and they also share the number of "Premium Subscribers". Spotify define this as anyone who is not using ad-supported listening, including the individual members on a family plan and those on free or steeply discounted promotional plans.
Let's look at their latest report: 100M "Premium subscribers" earning 1,385M. Dividing this out, that is 4.62 EUR per "Premium subscriber" per month. This is less than half of their advertised monthly subscription fee, and still less than their 4.99 EUR educational subscription fee. The only way to explain this is a huge number of family subscriptions or those on promotional offers, such as the current promotional offer of 3 months @ 1EUR per month offer, or 6 months free when using the app preloaded on Samsung S10 devices. However Spotify's quarter to quarter earnings show that the average earning per "Premium Subscriber" is a relatively stable number, meaning that there is little historical upwards conversion after the various promotional offers end. This also seems to be the case as the ad-supported user growth% has gone from being smaller than "Premium Subscribers" to now having overtaken "Premium Subscribers" - that's not a good sign. This means that the short term offers aren't resulting in conversion, rather these users are down-converting from those "Premium Subscribers" offers into the free Ad-Supported tier. The Ad-supported business is a leech on the business, this is a dangerous and unsustainable trend for Spotify.
There is also another issue at hand: When we review the number of users across any category on their platform we can see that the growth rate has slowly significantly from last year, which seems to be the result of exhausting ways of introducing new users to the service, especially those which are introduced as "Premium Subscribers." (All promotional offers are counted as Premium Subscribers.)
Basically the next few quarters will reveal just how bad this is looking for Spotify, as there would be some seasonality to subscriber numbers which I've glossed over here because seasonality effects are reduced in these kinds of categories.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Because an in-app payment system for an app that sells digital media in direct competition to Apple's own service becomes a parasite that benefits from Apple's investments while incurring none of the costs of those investments. This is not as difficult to understand as you're trying to make it.
Spotify doesn't exist without smartphones. Android makes its money by collecting data on its users and selling that data for targeted marketing. On Android, Spotify can participate in that unholy data sharing alliance, and everyone makes money.
Apple makes money not from selling its customers' data, but from selling devices in a tightly designed three-legged stool where the legs are hardware, software and services.
Spotify competes directly with the service component. Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone.
Coming from the other direction, however, it would be irresponsible management for Apple not to use that slight inconvenience for a digital media competitor in order to give Apple a slight edge when an Apple customer is choosing whether to use the Apple service or the competitor. It would be irresponsible business management to do otherwise. They are acutely aware that doing a task in fewer steps is of considerable value to the user. They could simply leave it at that, and it's fair. You can choose Spotify on your iPhone; just handle your account in a browser. Instead, Apple offers an additional option: gain an equal competitive stance on the platform by having in-app payments; just give Apple its cut of the revenue to pay for the privilege. That is not unreasonable. Apple is the one that spent billions of dollars to develop the hardware and the OS platform. They should be able to benefit financially from that investment.
Spotify competes directly with Apple Music, and they can even do so on the iOS platform. It is only a minor inconvenience for its customers to open a browser to handle Spotify transactions. Spotify claims that having its payment system function in-app is both of no value, and of critically important value. They claim it has no value when they say Apple should allow it to happen on iOS, free of charge. At the same time, they claim it has significant value, because they assert that not having that feature puts them at a competitive disadvantage. Their "no value" argument is of course complete nonsense. Much as they want to, they can't have it both ways. If the feature is of value, then it's reasonable that they should pay for that value.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Because an in-app payment system for an app that sells digital media in direct competition to Apple's own service becomes a parasite that benefits from Apple's investments while incurring none of the costs of those investments. This is not as difficult to understand as you're trying to make it.
Spotify doesn't exist without smartphones. Android makes its money by collecting data on its users and selling that data for targeted marketing. On Android, Spotify can participate in that unholy data sharing alliance, and everyone makes money.
Apple makes money not from selling its customers' data, but from selling devices in a tightly designed three-legged stool where the legs are hardware, software and services.
Spotify competes directly with the service component. Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone.
Coming from the other direction, however, it would be irresponsible management for Apple not to use that slight inconvenience for a digital media competitor in order to give Apple a slight edge when an Apple customer is choosing whether to use the Apple service or the competitor. It would be irresponsible business management to do otherwise. They are acutely aware that doing a task in fewer steps is of considerable value to the user. They could simply leave it at that, and it's fair. You can choose Spotify on your iPhone; just handle your account in a browser. Instead, Apple offers an additional option: gain an equal competitive stance on the platform by having in-app payments; just give Apple its cut of the revenue to pay for the privilege. That is not unreasonable. Apple is the one that spent billions of dollars to develop the hardware and the OS platform. They should be able to benefit financially from that investment.
Spotify competes directly with Apple Music, and they can even do so on the iOS platform. It is only a minor inconvenience for its customers to open a browser to handle Spotify transactions. Spotify claims that having its payment system function in-app is both of no value, and of critically important value. They claim it has no value when they say Apple should allow it to happen on iOS, free of charge. At the same time, they claim it has significant value, because they assert that not having that feature puts them at a competitive disadvantage. Their "no value" argument is of course complete nonsense. Much as they want to, they can't have it both ways. If the feature is of value, then it's reasonable that they should pay for that value.
Well then Apple can spend millions on time and legal costs defending the notion that they’re not a monopoly or don’t exhibit anti-trust behaviors. But as far as I know Apple has never defended the 30% and 15% fee by saying they deserve it because these companies compete with services they provides. I mean Kindle e-books existed before iBooks. Netflix and Amazon original programming existed before Apple’s did. Going by your logic if Apple gets into the ride sharing business they should start taking a cut of Uber and Lyft transactions. Also if Apple deserves this fee because these companies are competing with them then couldn’t one ask why Apple allows reader apps on the store? The only difference between signing up via the web and via in-app is a slight inconvenience for the customer. Yet Apple is supposed to be all about the best customer experience. The fact that Apple allows reader apps says they need these apps to be in the App Store as much as these companies need Apple.
My argument would be Apple has benefited enormously from having a vibrant and robust App Store full of hundreds of thousands of great apps. Netflix and Spotify removed IAP and yet Apple still earns tens of billions in profit every quarter. Allowing these companies to use their own payment processing in-app would be a goodwill gesture and Apple saying they’re going to compete on the service/product not take advantage of their platform status.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Because an in-app payment system for an app that sells digital media in direct competition to Apple's own service becomes a parasite that benefits from Apple's investments while incurring none of the costs of those investments. This is not as difficult to understand as you're trying to make it.
Spotify doesn't exist without smartphones. Android makes its money by collecting data on its users and selling that data for targeted marketing. On Android, Spotify can participate in that unholy data sharing alliance, and everyone makes money.
Apple makes money not from selling its customers' data, but from selling devices in a tightly designed three-legged stool where the legs are hardware, software and services.
Spotify competes directly with the service component. Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone.
Coming from the other direction, however, it would be irresponsible management for Apple not to use that slight inconvenience for a digital media competitor in order to give Apple a slight edge when an Apple customer is choosing whether to use the Apple service or the competitor. It would be irresponsible business management to do otherwise. They are acutely aware that doing a task in fewer steps is of considerable value to the user. They could simply leave it at that, and it's fair. You can choose Spotify on your iPhone; just handle your account in a browser. Instead, Apple offers an additional option: gain an equal competitive stance on the platform by having in-app payments; just give Apple its cut of the revenue to pay for the privilege. That is not unreasonable. Apple is the one that spent billions of dollars to develop the hardware and the OS platform. They should be able to benefit financially from that investment.
Spotify competes directly with Apple Music, and they can even do so on the iOS platform. It is only a minor inconvenience for its customers to open a browser to handle Spotify transactions. Spotify claims that having its payment system function in-app is both of no value, and of critically important value. They claim it has no value when they say Apple should allow it to happen on iOS, free of charge. At the same time, they claim it has significant value, because they assert that not having that feature puts them at a competitive disadvantage. Their "no value" argument is of course complete nonsense. Much as they want to, they can't have it both ways. If the feature is of value, then it's reasonable that they should pay for that value.
Well then Apple can spend millions on time and legal costs defending the notion that they’re not a monopoly or don’t exhibit anti-trust behaviors. But as far as I know Apple has never defended the 30% and 15% fee by saying they deserve it because these companies compete with services they provides. I mean Kindle e-books existed before iBooks. Netflix and Amazon original programming existed before Apple’s did. Going by your logic if Apple gets into the ride sharing business they should start taking a cut of Uber and Lyft transactions. Also if Apple deserves this fee because these companies are competing with them then couldn’t one ask why Apple allows reader apps on the store? The only difference between signing up via the web and via in-app is a slight inconvenience for the customer. Yet Apple is supposed to be all about the best customer experience. The fact that Apple allows reader apps says they need these apps to be in the App Store as much as these companies need Apple.
My argument would be Apple has benefited enormously from having a vibrant and robust App Store full of hundreds of thousands of great apps. Netflix and Spotify removed IAP and yet Apple still earns tens of billions in profit every quarter. Allowing these companies to use their own payment processing in-app would be a goodwill gesture and Apple saying they’re going to compete on the service/product not take advantage of their platform status.
1. Apple holds a minority of the phone market. That negates them being a monopoly. By definition.
2. You’ve just repeated the no-value/significant-value argument that I dispelled above.
3. I’ll offer a simple metaphor to spell it out for you. There is a small chain of sandwich shops. They are not a monopoly, because you can buy sandwiches elsewhere. At these sandwich shops, they sell chips to go with the sandwiches. They have an array of house-brand chips, as well as some name brands, like Lay’s and Doritos. You can choose to buy any of those chips with your sandwich. If you choose the house brand, the shop makes money. If you choose the Doritos, the sandwich shop takes a cut and the shop makes money. There is no option where you pick the Doritos and the shop sells them and takes no cut. That does not make the shop a monopoly. There is no option where Doritos installs a vending machine in the sandwich shop, selling chips with no payment to the sandwich shop. That does not make the sandwich shop a monopoly. Doritos could publish coupons for free chips, and the sandwich shop could honor those, if they choose, I suppose.
It would not be reasonable, however, for Doritos to expect to sell their chips in the sandwich shop, competing with the house brand, and paying nothing to the shop for the opportunity. That would be nuts.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Because an in-app payment system for an app that sells digital media in direct competition to Apple's own service becomes a parasite that benefits from Apple's investments while incurring none of the costs of those investments. This is not as difficult to understand as you're trying to make it.
Spotify doesn't exist without smartphones. Android makes its money by collecting data on its users and selling that data for targeted marketing. On Android, Spotify can participate in that unholy data sharing alliance, and everyone makes money.
Apple makes money not from selling its customers' data, but from selling devices in a tightly designed three-legged stool where the legs are hardware, software and services.
Spotify competes directly with the service component. Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone.
Coming from the other direction, however, it would be irresponsible management for Apple not to use that slight inconvenience for a digital media competitor in order to give Apple a slight edge when an Apple customer is choosing whether to use the Apple service or the competitor. It would be irresponsible business management to do otherwise. They are acutely aware that doing a task in fewer steps is of considerable value to the user. They could simply leave it at that, and it's fair. You can choose Spotify on your iPhone; just handle your account in a browser. Instead, Apple offers an additional option: gain an equal competitive stance on the platform by having in-app payments; just give Apple its cut of the revenue to pay for the privilege. That is not unreasonable. Apple is the one that spent billions of dollars to develop the hardware and the OS platform. They should be able to benefit financially from that investment.
Spotify competes directly with Apple Music, and they can even do so on the iOS platform. It is only a minor inconvenience for its customers to open a browser to handle Spotify transactions. Spotify claims that having its payment system function in-app is both of no value, and of critically important value. They claim it has no value when they say Apple should allow it to happen on iOS, free of charge. At the same time, they claim it has significant value, because they assert that not having that feature puts them at a competitive disadvantage. Their "no value" argument is of course complete nonsense. Much as they want to, they can't have it both ways. If the feature is of value, then it's reasonable that they should pay for that value.
Well then Apple can spend millions on time and legal costs defending the notion that they’re not a monopoly or don’t exhibit anti-trust behaviors. But as far as I know Apple has never defended the 30% and 15% fee by saying they deserve it because these companies compete with services they provides. I mean Kindle e-books existed before iBooks. Netflix and Amazon original programming existed before Apple’s did. Going by your logic if Apple gets into the ride sharing business they should start taking a cut of Uber and Lyft transactions. Also if Apple deserves this fee because these companies are competing with them then couldn’t one ask why Apple allows reader apps on the store? The only difference between signing up via the web and via in-app is a slight inconvenience for the customer. Yet Apple is supposed to be all about the best customer experience. The fact that Apple allows reader apps says they need these apps to be in the App Store as much as these companies need Apple.
My argument would be Apple has benefited enormously from having a vibrant and robust App Store full of hundreds of thousands of great apps. Netflix and Spotify removed IAP and yet Apple still earns tens of billions in profit every quarter. Allowing these companies to use their own payment processing in-app would be a goodwill gesture and Apple saying they’re going to compete on the service/product not take advantage of their platform status.
1. Apple holds a minority of the phone market. That negates them being a monopoly. By definition.
2. You’ve just repeated the no-value/significant-value argument that I dispelled above.
3. I’ll offer a simple metaphor to spell it out for you. There is a small chain of sandwich shops. They are not a monopoly, because you can buy sandwiches elsewhere. At these sandwich shops, they sell chips to go with the sandwiches. They have an array of house-brand chips, as well as some name brands, like Lay’s and Doritos. You can choose to buy any of those chips with your sandwich. If you choose the house brand, the shop makes money. If you choose the Doritos, the sandwich shop takes a cut and the shop makes money. There is no option where you pick the Doritos and the shop sells them and takes no cut. That does not make the shop a monopoly. There is no option where Doritos installs a vending machine in the sandwich shop, selling chips with no payment to the sandwich shop. That does not make the sandwich shop a monopoly. Doritos could publish coupons for free chips, and the sandwich shop could honor those, if they choose, I suppose.
It would not be reasonable, however, for Doritos to expect to sell their chips in the sandwich shop, competing with the house brand, and paying nothing to the shop for the opportunity. That would be nuts.
You still haven’t explained why Apple allows reader apps in their store. I’ll explain it for you: having Netflix, Spotify, Amazon etc. in the App Store is more important to Apple than collecting 30% or 15% of those apps digital media sales. To which I argue then what’s the point of forcing a worse user experience by forcing people to sign up/set up payment outside the app? Because Apple thinks some people will not bother and that’s good for them? If they’re going to allow these apps in the store regardless then just let them use their own payment processing if they want. Heck Apple could still force them to offer iTunes processing as well and those who prefer to have all their subscriptions with Apple or think Apple is more secure could use iTunes billing and pay 30% more. I’m sure some people would do it.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Because an in-app payment system for an app that sells digital media in direct competition to Apple's own service becomes a parasite that benefits from Apple's investments while incurring none of the costs of those investments. This is not as difficult to understand as you're trying to make it.
Spotify doesn't exist without smartphones. Android makes its money by collecting data on its users and selling that data for targeted marketing. On Android, Spotify can participate in that unholy data sharing alliance, and everyone makes money.
Apple makes money not from selling its customers' data, but from selling devices in a tightly designed three-legged stool where the legs are hardware, software and services.
Spotify competes directly with the service component. Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone.
Coming from the other direction, however, it would be irresponsible management for Apple not to use that slight inconvenience for a digital media competitor in order to give Apple a slight edge when an Apple customer is choosing whether to use the Apple service or the competitor. It would be irresponsible business management to do otherwise. They are acutely aware that doing a task in fewer steps is of considerable value to the user. They could simply leave it at that, and it's fair. You can choose Spotify on your iPhone; just handle your account in a browser. Instead, Apple offers an additional option: gain an equal competitive stance on the platform by having in-app payments; just give Apple its cut of the revenue to pay for the privilege. That is not unreasonable. Apple is the one that spent billions of dollars to develop the hardware and the OS platform. They should be able to benefit financially from that investment.
Spotify competes directly with Apple Music, and they can even do so on the iOS platform. It is only a minor inconvenience for its customers to open a browser to handle Spotify transactions. Spotify claims that having its payment system function in-app is both of no value, and of critically important value. They claim it has no value when they say Apple should allow it to happen on iOS, free of charge. At the same time, they claim it has significant value, because they assert that not having that feature puts them at a competitive disadvantage. Their "no value" argument is of course complete nonsense. Much as they want to, they can't have it both ways. If the feature is of value, then it's reasonable that they should pay for that value.
Well then Apple can spend millions on time and legal costs defending the notion that they’re not a monopoly or don’t exhibit anti-trust behaviors. But as far as I know Apple has never defended the 30% and 15% fee by saying they deserve it because these companies compete with services they provides. I mean Kindle e-books existed before iBooks. Netflix and Amazon original programming existed before Apple’s did. Going by your logic if Apple gets into the ride sharing business they should start taking a cut of Uber and Lyft transactions. Also if Apple deserves this fee because these companies are competing with them then couldn’t one ask why Apple allows reader apps on the store? The only difference between signing up via the web and via in-app is a slight inconvenience for the customer. Yet Apple is supposed to be all about the best customer experience. The fact that Apple allows reader apps says they need these apps to be in the App Store as much as these companies need Apple.
My argument would be Apple has benefited enormously from having a vibrant and robust App Store full of hundreds of thousands of great apps. Netflix and Spotify removed IAP and yet Apple still earns tens of billions in profit every quarter. Allowing these companies to use their own payment processing in-app would be a goodwill gesture and Apple saying they’re going to compete on the service/product not take advantage of their platform status.
1. Apple holds a minority of the phone market. That negates them being a monopoly. By definition.
2. You’ve just repeated the no-value/significant-value argument that I dispelled above.
3. I’ll offer a simple metaphor to spell it out for you. There is a small chain of sandwich shops. They are not a monopoly, because you can buy sandwiches elsewhere. At these sandwich shops, they sell chips to go with the sandwiches. They have an array of house-brand chips, as well as some name brands, like Lay’s and Doritos. You can choose to buy any of those chips with your sandwich. If you choose the house brand, the shop makes money. If you choose the Doritos, the sandwich shop takes a cut and the shop makes money. There is no option where you pick the Doritos and the shop sells them and takes no cut. That does not make the shop a monopoly. There is no option where Doritos installs a vending machine in the sandwich shop, selling chips with no payment to the sandwich shop. That does not make the sandwich shop a monopoly. Doritos could publish coupons for free chips, and the sandwich shop could honor those, if they choose, I suppose.
It would not be reasonable, however, for Doritos to expect to sell their chips in the sandwich shop, competing with the house brand, and paying nothing to the shop for the opportunity. That would be nuts.
You still haven’t explained why Apple allows reader apps in their store. I’ll explain it for you: having Netflix, Spotify, Amazon etc. in the App Store is more important to Apple than collecting 30% or 15% of those apps digital media sales. To which I argue then what’s the point of forcing a worse user experience by forcing people to sign up/set up payment outside the app? Because Apple thinks some people will not bother and that’s good for them? If they’re going to allow these apps in the store regardless then just let them use their own payment processing if they want. Heck Apple could still force them to offer iTunes processing as well and those who prefer to have all their subscriptions with Apple or think Apple is more secure could use iTunes billing and pay 30% more. I’m sure some people would do it.
I did explain that, actually. I've clipped the relevant text from my earlier post: "Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone."
Apple's choices here are not binary. Not having Netflix, Spotify, Amazon, etc., on iOS at all would be a deal breaker for some customers. Having those apps available, but keeping the slight edge of in-app payment convenience for themselves and for those who will pay for it is just enough to preserve the integrity of their investments in the platform, hardware and services. As I wrote earlier, this is not as difficult as you're making it out to be.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
So what if Spotify is making a loss on each subscriber. EK’s cunning plan is to make up for it in volume.
It’s nice isn’t it when you have a service you don’t need to make money on because other parts of your business subsidize it.
Maybe you should run Apple. You could cut off their services arm and anything that may compete with developers.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
You meant "digital goods" but here's the problem:
If Apple allows crybaby Spotify to get everything for free, IAP and games will be next in line crying for a free pass. Eventually Apple will be making nothing from their invention that cost them billions to create. I'm glad Apple is standing their ground and not allowing crybabies to get everything free.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Because an in-app payment system for an app that sells digital media in direct competition to Apple's own service becomes a parasite that benefits from Apple's investments while incurring none of the costs of those investments. This is not as difficult to understand as you're trying to make it.
Spotify doesn't exist without smartphones. Android makes its money by collecting data on its users and selling that data for targeted marketing. On Android, Spotify can participate in that unholy data sharing alliance, and everyone makes money.
Apple makes money not from selling its customers' data, but from selling devices in a tightly designed three-legged stool where the legs are hardware, software and services.
Spotify competes directly with the service component. Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone.
Coming from the other direction, however, it would be irresponsible management for Apple not to use that slight inconvenience for a digital media competitor in order to give Apple a slight edge when an Apple customer is choosing whether to use the Apple service or the competitor. It would be irresponsible business management to do otherwise. They are acutely aware that doing a task in fewer steps is of considerable value to the user. They could simply leave it at that, and it's fair. You can choose Spotify on your iPhone; just handle your account in a browser. Instead, Apple offers an additional option: gain an equal competitive stance on the platform by having in-app payments; just give Apple its cut of the revenue to pay for the privilege. That is not unreasonable. Apple is the one that spent billions of dollars to develop the hardware and the OS platform. They should be able to benefit financially from that investment.
Spotify competes directly with Apple Music, and they can even do so on the iOS platform. It is only a minor inconvenience for its customers to open a browser to handle Spotify transactions. Spotify claims that having its payment system function in-app is both of no value, and of critically important value. They claim it has no value when they say Apple should allow it to happen on iOS, free of charge. At the same time, they claim it has significant value, because they assert that not having that feature puts them at a competitive disadvantage. Their "no value" argument is of course complete nonsense. Much as they want to, they can't have it both ways. If the feature is of value, then it's reasonable that they should pay for that value.
Well then Apple can spend millions on time and legal costs defending the notion that they’re not a monopoly or don’t exhibit anti-trust behaviors. But as far as I know Apple has never defended the 30% and 15% fee by saying they deserve it because these companies compete with services they provides. I mean Kindle e-books existed before iBooks. Netflix and Amazon original programming existed before Apple’s did. Going by your logic if Apple gets into the ride sharing business they should start taking a cut of Uber and Lyft transactions. Also if Apple deserves this fee because these companies are competing with them then couldn’t one ask why Apple allows reader apps on the store? The only difference between signing up via the web and via in-app is a slight inconvenience for the customer. Yet Apple is supposed to be all about the best customer experience. The fact that Apple allows reader apps says they need these apps to be in the App Store as much as these companies need Apple.
My argument would be Apple has benefited enormously from having a vibrant and robust App Store full of hundreds of thousands of great apps. Netflix and Spotify removed IAP and yet Apple still earns tens of billions in profit every quarter. Allowing these companies to use their own payment processing in-app would be a goodwill gesture and Apple saying they’re going to compete on the service/product not take advantage of their platform status.
1. Apple holds a minority of the phone market. That negates them being a monopoly. By definition.
2. You’ve just repeated the no-value/significant-value argument that I dispelled above.
3. I’ll offer a simple metaphor to spell it out for you. There is a small chain of sandwich shops. They are not a monopoly, because you can buy sandwiches elsewhere. At these sandwich shops, they sell chips to go with the sandwiches. They have an array of house-brand chips, as well as some name brands, like Lay’s and Doritos. You can choose to buy any of those chips with your sandwich. If you choose the house brand, the shop makes money. If you choose the Doritos, the sandwich shop takes a cut and the shop makes money. There is no option where you pick the Doritos and the shop sells them and takes no cut. That does not make the shop a monopoly. There is no option where Doritos installs a vending machine in the sandwich shop, selling chips with no payment to the sandwich shop. That does not make the sandwich shop a monopoly. Doritos could publish coupons for free chips, and the sandwich shop could honor those, if they choose, I suppose.
It would not be reasonable, however, for Doritos to expect to sell their chips in the sandwich shop, competing with the house brand, and paying nothing to the shop for the opportunity. That would be nuts.
You still haven’t explained why Apple allows reader apps in their store. I’ll explain it for you: having Netflix, Spotify, Amazon etc. in the App Store is more important to Apple than collecting 30% or 15% of those apps digital media sales. To which I argue then what’s the point of forcing a worse user experience by forcing people to sign up/set up payment outside the app? Because Apple thinks some people will not bother and that’s good for them? If they’re going to allow these apps in the store regardless then just let them use their own payment processing if they want. Heck Apple could still force them to offer iTunes processing as well and those who prefer to have all their subscriptions with Apple or think Apple is more secure could use iTunes billing and pay 30% more. I’m sure some people would do it.
I did explain that, actually. I've clipped the relevant text from my earlier post: "Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone."
Apple's choices here are not binary. Not having Netflix, Spotify, Amazon, etc., on iOS at all would be a deal breaker for some customers. Having those apps available, but keeping the slight edge of in-app payment convenience for themselves and for those who will pay for it is just enough to preserve the integrity of their investments in the platform, hardware and services. As I wrote earlier, this is not as difficult as you're making it out to be.
Is Apple really maintaining an edge though? All they’re doing is inconveniencing customers and for what? To punish Spotify for not giving Apple a cut of their revenues? Seems kind of petty to me especially considering there’s no evidence Spotify and Netflix abandoning IAP is really hurting Apple financially. But so long as Apple continues to say there can only be one store (ours) and our products/services get preferential treatment they’re going to be scrutinized.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
The difference is that it takes away an advantage that Apple Music offer, a seamless payment method. To the subscribers, both Apple Music and Spotify cost the same per month, for what is basically the same streaming music service. Though both offer early exclusives to some music, they are essentially the same in the long term for the vast majority of streaming music listeners. But all Apple Music subscribers enjoy the ease of seamlessly paying for their subscription with their iTunes account, while only the relatively few early subscribers to Spotify, can do the same.
So why should Apple allow Spotify to have for free, to what might be the only reason why many Apple Music subscribers might have, to stay with Apple Music?
Apple don't want Netflix, Amazon and Spotify to leave their app store? The last I check, these companies wants to be in Apple App Store. Apple has no fear of them ever leaving. These companies wants access to iOS consumers, they just don't want to pay the "Apple tax" to have access to them. The fact that they are willing to set up payment outside of the Apple App Store, shows how much they want to reach iOS consumers. Right now, it's Apple, with their iOS environment, that has the upper hand. Google isn't paying Apple, what is reported to be of over $10B (for just 2019) to be the default search engine in Safari, just for the Hell of it.
How about this, Apple allows Spotify to use iTune payment system for free in the Apple App Store but Apple drop the cost of an Apple Music subscription by 15%. That's a win-win for Apple Music subscribers and Spotify Music subscribers, right? After all, Apple can make up the 15% difference with the shit ton on money they making from games and non-digital goods.
The bottom line it this. There is NOTHING special about Spotify. Netflix is way more valuable to Apple iOS consumers than Spotify. Where as Apple offer a similar or better service for the same price as Spotify, Apple don't offer anything like Netflix. And Apple is not doing anything special for Netflix, to keep them in their app store. To Apple, Spotify is just another developer in their Apple App Store. Why should Spotify get any special treatment over other developers? All developers has to go by the same rules and if Apple charges games developers a 30% commission of sales to iOS consumers, Spotify should have to do the same. If Spotify wants to be like Netflix and set up a payment system outside of the app store, they are allowed to and still be allowed to have a free app in the Apple App Store. What Spotify really what is to take away an advantage that Apple Music subscribers have, that is a seamless payment method using their iTunes account. An advantage that might be keeping a lot of Apple Music subscribers from subscribing to Spotify. And they don't want to pay Apple a dime, for that advantage.
You don't see Google giving away the data they collected on their users, to their advertisers. Those users data belong to Google and advertisers have to pay Google in order to reach any of those Google users for targeted ads.
If Duracell wants to sell their batteries to Costco customers, inside a Costco store, then they will have to pay Costco a cut of their revenue to do so. Plus they will have to compete with Costco cheaper Kirkland batteries, in the same store. That is the price Duracell will have to pay, to have access to Costco loyal customers. Costco is not going to risk losing the revenue from selling their Kirkland brand batteries, by also selling Duracell batteries and getting nothing in return. Costco might end up making less from the sale of Duracell batteries than their own brand, but that might be a small price to pay so that their customers that are loyal to Duracell batteries, can buy discounted Duracell batteries in a Costco store. But no way Costco is going to be making nothing, from allowing Duracell to sell batteries to Costco customers. Even though they still making a shit ton of money selling other stuff in their stores.
It the same with Amazon. You want to sell items to Amazon shoppers, in the Amazon Marketplace and have the ability for those Amazon shoppers to seamlessly pay with their Amazon account? Then you have to pay Amazon a commission on all the items you sell.
Basically, Spotify is shitting their pants over Apple Music and are doing everything they can to try and survive since they don't make much of a profit. Apple Music has got to be slowly eating into their revenue stream. I think once investors start pulling out, it's game over for Spotify.
The thing is, Apple Music isn’t their problem.
Every user added costs them money, and they’re not making a profit on every user.
Their problem is their business model.
Exactly. I've been saying this for years. Spotify was founded on an unsustainable business model. You'd think the folks running that company would have figured it out by now.
And the only reason Apple’s isn’t is because they can subsidize it by the profit they make on other things, like hardware. We’re getting to a point where only a few big companies will own everything.
What is stopping Spotify from making “other things” it can make a profit?
Other things like what exactly? Netflix went the route of original programming, I’m not sure whether that would work in the music industry. An industry where most of the money is made off touring and merchandise.
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Because an in-app payment system for an app that sells digital media in direct competition to Apple's own service becomes a parasite that benefits from Apple's investments while incurring none of the costs of those investments. This is not as difficult to understand as you're trying to make it.
Spotify doesn't exist without smartphones. Android makes its money by collecting data on its users and selling that data for targeted marketing. On Android, Spotify can participate in that unholy data sharing alliance, and everyone makes money.
Apple makes money not from selling its customers' data, but from selling devices in a tightly designed three-legged stool where the legs are hardware, software and services.
Spotify competes directly with the service component. Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone.
Coming from the other direction, however, it would be irresponsible management for Apple not to use that slight inconvenience for a digital media competitor in order to give Apple a slight edge when an Apple customer is choosing whether to use the Apple service or the competitor. It would be irresponsible business management to do otherwise. They are acutely aware that doing a task in fewer steps is of considerable value to the user. They could simply leave it at that, and it's fair. You can choose Spotify on your iPhone; just handle your account in a browser. Instead, Apple offers an additional option: gain an equal competitive stance on the platform by having in-app payments; just give Apple its cut of the revenue to pay for the privilege. That is not unreasonable. Apple is the one that spent billions of dollars to develop the hardware and the OS platform. They should be able to benefit financially from that investment.
Spotify competes directly with Apple Music, and they can even do so on the iOS platform. It is only a minor inconvenience for its customers to open a browser to handle Spotify transactions. Spotify claims that having its payment system function in-app is both of no value, and of critically important value. They claim it has no value when they say Apple should allow it to happen on iOS, free of charge. At the same time, they claim it has significant value, because they assert that not having that feature puts them at a competitive disadvantage. Their "no value" argument is of course complete nonsense. Much as they want to, they can't have it both ways. If the feature is of value, then it's reasonable that they should pay for that value.
Well then Apple can spend millions on time and legal costs defending the notion that they’re not a monopoly or don’t exhibit anti-trust behaviors. But as far as I know Apple has never defended the 30% and 15% fee by saying they deserve it because these companies compete with services they provides. I mean Kindle e-books existed before iBooks. Netflix and Amazon original programming existed before Apple’s did. Going by your logic if Apple gets into the ride sharing business they should start taking a cut of Uber and Lyft transactions. Also if Apple deserves this fee because these companies are competing with them then couldn’t one ask why Apple allows reader apps on the store? The only difference between signing up via the web and via in-app is a slight inconvenience for the customer. Yet Apple is supposed to be all about the best customer experience. The fact that Apple allows reader apps says they need these apps to be in the App Store as much as these companies need Apple.
My argument would be Apple has benefited enormously from having a vibrant and robust App Store full of hundreds of thousands of great apps. Netflix and Spotify removed IAP and yet Apple still earns tens of billions in profit every quarter. Allowing these companies to use their own payment processing in-app would be a goodwill gesture and Apple saying they’re going to compete on the service/product not take advantage of their platform status.
1. Apple holds a minority of the phone market. That negates them being a monopoly. By definition.
2. You’ve just repeated the no-value/significant-value argument that I dispelled above.
3. I’ll offer a simple metaphor to spell it out for you. There is a small chain of sandwich shops. They are not a monopoly, because you can buy sandwiches elsewhere. At these sandwich shops, they sell chips to go with the sandwiches. They have an array of house-brand chips, as well as some name brands, like Lay’s and Doritos. You can choose to buy any of those chips with your sandwich. If you choose the house brand, the shop makes money. If you choose the Doritos, the sandwich shop takes a cut and the shop makes money. There is no option where you pick the Doritos and the shop sells them and takes no cut. That does not make the shop a monopoly. There is no option where Doritos installs a vending machine in the sandwich shop, selling chips with no payment to the sandwich shop. That does not make the sandwich shop a monopoly. Doritos could publish coupons for free chips, and the sandwich shop could honor those, if they choose, I suppose.
It would not be reasonable, however, for Doritos to expect to sell their chips in the sandwich shop, competing with the house brand, and paying nothing to the shop for the opportunity. That would be nuts.
You still haven’t explained why Apple allows reader apps in their store. I’ll explain it for you: having Netflix, Spotify, Amazon etc. in the App Store is more important to Apple than collecting 30% or 15% of those apps digital media sales. To which I argue then what’s the point of forcing a worse user experience by forcing people to sign up/set up payment outside the app? Because Apple thinks some people will not bother and that’s good for them? If they’re going to allow these apps in the store regardless then just let them use their own payment processing if they want. Heck Apple could still force them to offer iTunes processing as well and those who prefer to have all their subscriptions with Apple or think Apple is more secure could use iTunes billing and pay 30% more. I’m sure some people would do it.
I did explain that, actually. I've clipped the relevant text from my earlier post: "Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone."
Apple's choices here are not binary. Not having Netflix, Spotify, Amazon, etc., on iOS at all would be a deal breaker for some customers. Having those apps available, but keeping the slight edge of in-app payment convenience for themselves and for those who will pay for it is just enough to preserve the integrity of their investments in the platform, hardware and services. As I wrote earlier, this is not as difficult as you're making it out to be.
Is Apple really maintaining an edge though? All they’re doing is inconveniencing customers and for what? To punish Spotify for not giving Apple a cut of their revenues? Seems kind of petty to me especially considering there’s no evidence Spotify and Netflix abandoning IAP is really hurting Apple financially. But so long as Apple continues to say there can only be one store (ours) and our products/services get preferential treatment they’re going to be scrutinized.
There’s nothing petty here. Apple created the model that put a smartphone in everyone’s pocket. Then they invented the App Store. Since they were already in the digital media business, Apple drew a line when they invented the App Store: they get a cut of digital media sales made through the App Store. They’re not punishing anyone. They’re just not going to give away the store.
Comments
Here’s the question I have though: what difference does it make to Apple if one signs up for Spotify via the Safari web browser or in-app (using Spotify’s payment processing)? The support Apple is providing in terms of app hosting, developer tools, etc. is exactly the same. If it’s a matter of security then Apple wouldn’t allow any in app payment that didn’t go through Apple. It’s clear Apple allows reader apps because they don’t want Netflix, Amazon, Spotify etc. to leave the App Store. So solve this issue once and for all by allowing digital media apps to offer their own payment processing in-app if they want to. Or at least a re-direct in-app to a website where users can sign up. Apple will still make a shit ton of money on IAP from games and non-digital goods.
Let's look at their latest report: 100M "Premium subscribers" earning 1,385M. Dividing this out, that is 4.62 EUR per "Premium subscriber" per month. This is less than half of their advertised monthly subscription fee, and still less than their 4.99 EUR educational subscription fee. The only way to explain this is a huge number of family subscriptions or those on promotional offers, such as the current promotional offer of 3 months @ 1EUR per month offer, or 6 months free when using the app preloaded on Samsung S10 devices.
However Spotify's quarter to quarter earnings show that the average earning per "Premium Subscriber" is a relatively stable number, meaning that there is little historical upwards conversion after the various promotional offers end. This also seems to be the case as the ad-supported user growth% has gone from being smaller than "Premium Subscribers" to now having overtaken "Premium Subscribers" - that's not a good sign. This means that the short term offers aren't resulting in conversion, rather these users are down-converting from those "Premium Subscribers" offers into the free Ad-Supported tier. The Ad-supported business is a leech on the business, this is a dangerous and unsustainable trend for Spotify.
There is also another issue at hand: When we review the number of users across any category on their platform we can see that the growth rate has slowly significantly from last year, which seems to be the result of exhausting ways of introducing new users to the service, especially those which are introduced as "Premium Subscribers." (All promotional offers are counted as Premium Subscribers.)
Basically the next few quarters will reveal just how bad this is looking for Spotify, as there would be some seasonality to subscriber numbers which I've glossed over here because seasonality effects are reduced in these kinds of categories.
Spotify doesn't exist without smartphones. Android makes its money by collecting data on its users and selling that data for targeted marketing. On Android, Spotify can participate in that unholy data sharing alliance, and everyone makes money.
Apple makes money not from selling its customers' data, but from selling devices in a tightly designed three-legged stool where the legs are hardware, software and services.
Spotify competes directly with the service component. Apple would not benefit by simply barring a digital media competitor like Spotify from the iOS platform. Doing so could cause some significant number of customers to choose Android over Apple just to get Spotify. On the other hand, setting up accounts and payments in a browser is a slight inconvenience for that consumer, but that's not likely enough by itself to keep them from choosing an iPhone.
Coming from the other direction, however, it would be irresponsible management for Apple not to use that slight inconvenience for a digital media competitor in order to give Apple a slight edge when an Apple customer is choosing whether to use the Apple service or the competitor. It would be irresponsible business management to do otherwise. They are acutely aware that doing a task in fewer steps is of considerable value to the user. They could simply leave it at that, and it's fair. You can choose Spotify on your iPhone; just handle your account in a browser. Instead, Apple offers an additional option: gain an equal competitive stance on the platform by having in-app payments; just give Apple its cut of the revenue to pay for the privilege. That is not unreasonable. Apple is the one that spent billions of dollars to develop the hardware and the OS platform. They should be able to benefit financially from that investment.
Spotify competes directly with Apple Music, and they can even do so on the iOS platform. It is only a minor inconvenience for its customers to open a browser to handle Spotify transactions. Spotify claims that having its payment system function in-app is both of no value, and of critically important value. They claim it has no value when they say Apple should allow it to happen on iOS, free of charge. At the same time, they claim it has significant value, because they assert that not having that feature puts them at a competitive disadvantage. Their "no value" argument is of course complete nonsense. Much as they want to, they can't have it both ways. If the feature is of value, then it's reasonable that they should pay for that value.
My argument would be Apple has benefited enormously from having a vibrant and robust App Store full of hundreds of thousands of great apps. Netflix and Spotify removed IAP and yet Apple still earns tens of billions in profit every quarter. Allowing these companies to use their own payment processing in-app would be a goodwill gesture and Apple saying they’re going to compete on the service/product not take advantage of their platform status.
2. You’ve just repeated the no-value/significant-value argument that I dispelled above.
3. I’ll offer a simple metaphor to spell it out for you. There is a small chain of sandwich shops. They are not a monopoly, because you can buy sandwiches elsewhere. At these sandwich shops, they sell chips to go with the sandwiches. They have an array of house-brand chips, as well as some name brands, like Lay’s and Doritos. You can choose to buy any of those chips with your sandwich. If you choose the house brand, the shop makes money. If you choose the Doritos, the sandwich shop takes a cut and the shop makes money. There is no option where you pick the Doritos and the shop sells them and takes no cut. That does not make the shop a monopoly. There is no option where Doritos installs a vending machine in the sandwich shop, selling chips with no payment to the sandwich shop. That does not make the sandwich shop a monopoly. Doritos could publish coupons for free chips, and the sandwich shop could honor those, if they choose, I suppose.
It would not be reasonable, however, for Doritos to expect to sell their chips in the sandwich shop, competing with the house brand, and paying nothing to the shop for the opportunity. That would be nuts.
Apple's choices here are not binary. Not having Netflix, Spotify, Amazon, etc., on iOS at all would be a deal breaker for some customers. Having those apps available, but keeping the slight edge of in-app payment convenience for themselves and for those who will pay for it is just enough to preserve the integrity of their investments in the platform, hardware and services. As I wrote earlier, this is not as difficult as you're making it out to be.
Maybe you should run Apple. You could cut off their services arm and anything that may compete with developers.
You meant "digital goods" but here's the problem:
If Apple allows crybaby Spotify to get everything for free, IAP and games will be next in line crying for a free pass. Eventually Apple will be making nothing from their invention that cost them billions to create. I'm glad Apple is standing their ground and not allowing crybabies to get everything free.
So why should Apple allow Spotify to have for free, to what might be the only reason why many Apple Music subscribers might have, to stay with Apple Music?
Apple don't want Netflix, Amazon and Spotify to leave their app store? The last I check, these companies wants to be in Apple App Store. Apple has no fear of them ever leaving. These companies wants access to iOS consumers, they just don't want to pay the "Apple tax" to have access to them. The fact that they are willing to set up payment outside of the Apple App Store, shows how much they want to reach iOS consumers. Right now, it's Apple, with their iOS environment, that has the upper hand. Google isn't paying Apple, what is reported to be of over $10B (for just 2019) to be the default search engine in Safari, just for the Hell of it.
How about this, Apple allows Spotify to use iTune payment system for free in the Apple App Store but Apple drop the cost of an Apple Music subscription by 15%. That's a win-win for Apple Music subscribers and Spotify Music subscribers, right? After all, Apple can make up the 15% difference with the shit ton on money they making from games and non-digital goods.
The bottom line it this. There is NOTHING special about Spotify. Netflix is way more valuable to Apple iOS consumers than Spotify. Where as Apple offer a similar or better service for the same price as Spotify, Apple don't offer anything like Netflix. And Apple is not doing anything special for Netflix, to keep them in their app store. To Apple, Spotify is just another developer in their Apple App Store. Why should Spotify get any special treatment over other developers? All developers has to go by the same rules and if Apple charges games developers a 30% commission of sales to iOS consumers, Spotify should have to do the same. If Spotify wants to be like Netflix and set up a payment system outside of the app store, they are allowed to and still be allowed to have a free app in the Apple App Store. What Spotify really what is to take away an advantage that Apple Music subscribers have, that is a seamless payment method using their iTunes account. An advantage that might be keeping a lot of Apple Music subscribers from subscribing to Spotify. And they don't want to pay Apple a dime, for that advantage.
You don't see Google giving away the data they collected on their users, to their advertisers. Those users data belong to Google and advertisers have to pay Google in order to reach any of those Google users for targeted ads.
If Duracell wants to sell their batteries to Costco customers, inside a Costco store, then they will have to pay Costco a cut of their revenue to do so. Plus they will have to compete with Costco cheaper Kirkland batteries, in the same store. That is the price Duracell will have to pay, to have access to Costco loyal customers. Costco is not going to risk losing the revenue from selling their Kirkland brand batteries, by also selling Duracell batteries and getting nothing in return. Costco might end up making less from the sale of Duracell batteries than their own brand, but that might be a small price to pay so that their customers that are loyal to Duracell batteries, can buy discounted Duracell batteries in a Costco store. But no way Costco is going to be making nothing, from allowing Duracell to sell batteries to Costco customers. Even though they still making a shit ton of money selling other stuff in their stores.
It the same with Amazon. You want to sell items to Amazon shoppers, in the Amazon Marketplace and have the ability for those Amazon shoppers to seamlessly pay with their Amazon account? Then you have to pay Amazon a commission on all the items you sell.