Holding Apple Accountable: The Future of the Internet Economy Depends on It
newsroom.spotify.comIf I write an app for the app store and sell it for $10, apple gets $3. If I sell it for $5, apple gets $1.5. If I sell a subscription for $10/month they get $3 a month. Apple's work is the same for all of these. Their monopolistic position is how they can demand a pretty exorbitant 30% cut. Walmart, Costco, et al wish they had a 30% profit on everything the sold.
For the record I don't even really like Spotify that much, I don't use the app nor am I subscribed. I do like my iphone but Apple is in the wrong here.
> Walmart, Costco, et al wish they had a 30% profit on everything the sold.
Is the work the same for them too? They all charge a percentage of sticker price. Oh and none of those stickers say free.
The tension I see is that Apple’s work is correlated with number of developers and number of users. They very much have a long tail of developers and apps with effectively no users or income, but who still cost Apple money. Maybe this is actually covered by the $99/yr fee but maybe not. Then at the other end, the top 0.001% of apps get so much use (downloads, IAP api calls, support requests) that account for the majority of App Store costs. Apple runs a CDN just for apps like facebook and YouTube to make the downloads faster. Support staff will tell you how many people blame Apple for what happens in apps - famously when Snapchat was A/B testing videos Apple support was swamped with FOMO’d teenagers wondering why they couldn’t download the latest update. Apple probably loses money on the facebook app (ignoring downstream revenue).
My point is that Walmart costs are pretty linear with the number of boxes on the shelf, and none of them are “free”. As long as we have free apps and it’s cheap to be a developer, companies will need to over compensate by using higher fees.
Edit: Spotify is the collateral damages caused by Apple needing Snapchat, but also needing to fund that support costs somehow.
Also Spotify - the company in question - has a terrible price structure where they give their first margin to Apple and the rest of their money - and then some - to record labels. That basically means they’ll always lose money to record labels but they also can’t win if they pick a fight with them - just ask Taylor Swift.
I shouldn't be as surprised as I am that people contact apple support for issues in apps.
This would all make sense but why doesn’t Apple get 30% of software subscriptions on MacOS or subscriptions initiated through the Safari browser.
The dev work is the same for building those thing as iOS and Apple fields support questions about those things from naive users like the Snapchat users you described.
If the iOS 30% cut is justified then it makes no sense not to charge say Notion or OpenAI for subscriptions transacted from Safari. If that seems ridiculous then maybe it’s time to question the iOS cut because it’s inconsistent.
Genuinely, the answer is that Apple can’t enforce it. They totally would if they could but website makers don’t sign contracts with the browser companies.
What's the principle you're advocating? That the number of 30% is too high, but 20% would be ok? How are we to decide what number is right? Isn't the principle that parties entering into an agreement voluntarily and with competition get to set their own prices?
Do you follow the same rule you're advocating for? When your app some day makes more than 30% margin on customers revenue, you're going to lower your prices, right?
> Isn't the principle that parties entering into an agreement voluntarily and with competition get to set their own prices?
Yes. Though since this is voluntary in the same way that having internet access is "voluntary", I'm going to say that isn't relevant here. Similarly, there is competition in the same sense that you have a choice of more than 2 parties to vote for.
> How are we to decide what number is right?
Don't know, but I do know that 30% is wrong.
If there really was competition, and this was voluntary, there would be no way they could charge 30%.
I guess developing an app on iOS for sale at a healthy profit margin just became a fundamental human right.
No. Though I _would_ like to live in a world where there is true free market — i.e. not the way capitalism is practised in the U.S.A. When you don't regulate the market, you end up monopolies like Apple. Nobody is able to compete fairly, and we lose out.
I don't know how you came to "I guess developing an app on iOS for sale at a healthy profit margin just became a fundamental human right.".
Apple is not a monopoly, and the court agreed with that.
Maybe you should more carefully examine what exact market you're talking about.
> Isn't the principle that parties entering into an agreement voluntarily and with competition get to set their own prices?
The only change of pricing ever made within a decade was made because of a threat of an anti-trust lawsuit and copied word for word by Google almost instantly after that.
Safe to say that the competition is dead.
I think your understanding of competition is a little warped or flawed. The mark of competition isn't that a company's price changed. It's that other people/companies were free to enter the market.
You are absolutely free to go and develop your own phone ecosystem and app store, or go provide your app development services elsewhere. That is competition. And that is what the court has found.
Competition is not that I need to give you more shelf space or a better price for selling something on my marketplace.
How about allowing competition and different app stores? Or hell, allowing someone to download an app from their website and run it like we do on desktop.
Apple chooses not to do that, to be able to give a controlled experience, to be able to review apps and screen them, and to, yes, benefit from the pricing power that allows them.
They don't have to allow more competition in their own store. There are other stores you can sell apps through.
> If I write an app for the app store and sell it for $10, apple gets $3.
Keep in mind that, for the vast majority of developers, Apple gets $1.50.
Apple gets $3 only if/when you hit $1 million in annual App Store earnings.
> Walmart, Costco, et al wish they had a 30% profit on everything the sold.
You should see the markup these retailers charge on accessories. If 30% revenue upsets you then 300% on HDMI cables, USB cables, game accessories is going to blow your mind.
Indeed, but that's why you can buy those items at different stores. With Apple, not so much.
30% is not exorbitant when comparing to say, Walmart, who purchase products wholesale for up to 50% less then retail pricing (depending on the product category).
In fact, when 30% was announced, it was considered generous compared to what developers were paying Best Buy, CompUSA, mobile carriers, etc before that.
Physical store comparison makes no sense. To stock your product it actually takes up physical space in a store that is limited and could be used to sell something else, if it doesn’t sell they have to pay to destroy it or send it back to you.
I understand storing/downloading binaries isn’t free. But it’s nowhere near the same logistically.
Sure, but when the 30% was announced most software for the Mac was purchased on the developer's website with a credit card. Not bought at retail store in a cardboard box.
Margins on digital goods are not bound by the same rules of economics as margins for physical retail sales.
To be precise it is 30% revenue.
They have costs. And they allow free apps! Every free app that gets downloads and doesn’t monetize at all is pure cost for them.
> To be precise it is 30% revenue.
15% until you hit $1M in annual App Store revenues. Most developers will only ever pay 15%.
Apple charges 99$ per year to publish apps.
Apple has ads in the App Store.
I am not asking for a PhD thesis. I am asking for five minutes of middle school level googling.
The already cheap cost of distributing data gets cheaper by the day. For an entity like Apple, with its vast economies of scale, distribution costs are negligible.
What is the percentage or part that spotify takes from the songs we listen to? I mean, not what they pay eventually to the artists, but before that.
Aren't you free to use Android instead?
Just potentially throw away hundreds or thousands of dollars in purchases for apps/IAPs and related things! FFS there isn't even a way to watch videos purchased on iTunes on Android so if I want to watch my copy of Futurama on a phone, it has to be an iPhone ( and for those in the U.S, "Movies Anywhere" doesn't exist outside it and I have no idea if that even applies to TV).
Which has the exact same pricing structure?
Which suggests it is not in fact an Apple problem.
Sort of. One can use an alternate store on Android. Otherwise I would see google in the same boat. Apple could allow such side-loading but I kinda get the feeling they don't want to take the revenue hit. (I know arguments appealing to user security; it's hard to ignore the convenience of these arguments with regard to them retaining revenue.)
Well no, it's a duopoly problem.
I don’t know. Everyone wants the good audience, aka the audience that spends money, aka the iOS audience, but for cheaper.
It used to be that you got to that audience by doing something deplorable for a Hollywood film producer or a newspaper publisher in New York. Now you “just” have to pay a 30% fee. It turns out that deplorable acts scale a lot worse than eCommerce. And in my opinion, the deplorable approach denied us a lot more unique creative output than the 30% model does.
Spotify is right, sure. But these sorts of monopolies on audiences have existed forever.
Wait is this seriously spotify complaining? Spotify who is fucked every band and musical act on the planet. They can fuck, and I mean this, all the way off.
> Spotify who is fucked every band and musical act on the planet.
I have not really thought about this much until you brought it up, could you share some data in this regard? How much has the revenue of record labels declined since Spotify became prominent? I can't find good stats about that, I can just see the recorded music industry revenue has grown quite substantially and consistently since they came on the market, and was in decline before they came on the market [1].
[1]: https://www.statista.com/statistics/272305/global-revenue-of...
The labels aren't the musicians
They are not Spotify either though and I am not sure how Spotify is responsible for their relationship with musicians.
Labels ARE shareholders in Spotify. There is absolutely a conflict of interest regarding how Spotify handles its rights/royalties negotiations when the licensees are an oligopoly, who derive value from both sides of the transaction, and represent downstream beneficiaries who have no say in the deal struck or prices paid. Spotify and Labels together screw musicians, acting separately, and together.
> Labels ARE shareholders in Spotify.
As with the previous claim, it would be very helpful if you could cite data to this effect. When I googled myself I found a report[1] which does not seem to indicate that Spotify is majority owned by Labels. What percentage of Spotify is owned by record labels then? And why do they (less than 1/3 according to the source I found ) control Spotify and how does it make their relationship with artist's Spotify's problem?
Also, you know who the record labels own 100%? The record labels. Seems like if they wanted to fleece their artists they could just do it by fleecing their artists with fewer steps than buying minority stakes in Spotify and then hoping Spotify fleeces them, so they have no choice but to fleece their artists (seriously can't believe I just wrote something so dumb out).
And if it is record labels Fleecing their artists, why point fingers at Spotify? Again I'm going to point out that since they became prominent, revenue for the music industry has grown while before Spotify, it was declining. Do the artists prefer the decline that came before Spotify?
[1]: https://www.musicbusinessworldwide.com/who-owns-spotify-toda...
> Via a combination of ‘Statement Of Ownership’ SEC filings plus its 20-F annual report – all filed this year – we’ve been able to paint a picture of Spotify’s ownership cap table today.
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> That cap table continues to be dominated by Spotify’s two founders, Daniel Ek and Martin Lorentzon, along with a number of institutional investors, many of whom have been major shareholders for much of the time that Spotify has been a publicly-traded company.
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> Among them are investment management firm T. Rowe Prices & Associates, investment firm Baillie Gifford, banking giant Morgan Stanley, and tech and multimedia giant Tencent Holdings (partly through its subsidiary, Tencent Music Entertainment). > > All the ups and downs of Spotify’s share price story hasn’t scared these investors away – clearly, they’re in for the long run.
It would be wrong to dismiss an argument just because of who is making it. Spotify's argument here has merit.
It is also wrong—though in a different sense—for Spotify not to acknowledge the irony of them complaining about Apple being a middleman who takes a cut of the work of creative people when that is also their own business model.
I don’t see Spotify making any suggestion of a solution that addresses their concerns without boxing Apple out of the payment process entirely.
I get why what Apple has in place is onerous. I also see that Apple needs to get paid somehow. So what’s the third option?
Edit: My vote for the third option has always been, and remains, allowing of side loading apps. And this can be only for users who enable it. But it seems like this solves every complaint people have about the App Store.
> I also see that Apple needs to get paid somehow.
What makes Apple entitled to a cut of Spotify's revenue?
Because they do the expensive work of marketing and making a phone that appeals to rich people, who actually spend money on stuff.
Spotify isn’t giving Apple a cut of revenue per se, so much as it’s spending money on ads for a specific audience in a specific way.
I suppose Google too could make Android phones more attractive.
I had no idea Apple advertises on behalf of Spotify. Thanks for this. Do you have any examples?
I think the parent was implying that they advertise for Spotify in the same way that your local grocery advertises bags of Doritos, not that there is some explicit advertising relationship going on.
They're not entitled, and neither is Spotify entitled to sell on the app store on terms they want. It's just a business transaction. It either works for both sides, or it doesn't.
It's understandable that Spotify doesn't want to pay that cut, and they can try what they're trying, or also just leave the app store.
Speaking of entitlements, they're also not entitled to influence on small countries law makers, but they can try what they're trying with that too: https://www.bloomberglinea.com/english/spotify-threatens-to-...
What makes Spotify entitled to be on Apple’s App Store?
I think the third way is to allow side loading apps.
don't really see how spotify are different to apple
it's another middleman taking a cut
What makes Walmart entitled to a cut of General Mills revenue?
Walmart is to General Mills as is Spotify to artists.
Apple is to Spotify as is the construction company which made the building Walmart is using to Walmart.
I have not heard of construction companies claiming entitlement to a cut of Walmart's turnover.
Apple is a retail store that charges a fee to place an item on one of their shelves.
Every grocer in the USA does this. Want shelf space? Pay me.
Digital assets don’t preclude this transaction.
Slotting fees are just at contentious as Apple's 30% cut but the comparison is not apt as it would only work if Walmart were the only outlet available to any supplier to sell their goods. Walmart does not have a monopoly whereas Apple does when it comes to selling to Apple users. If Walmart were to demand a 30% cut for your product there are many other venues you can turn to up to and including opening your own store. This does not work in the company town of Appleton where only one retailer - Apple - is allowed to sell goods. Want to sell in Appleton? You'll have to go through Apple who gets to set the rules.
I'm pretty sure retailers pay wholesalers, not the other way around.
Look up "slotting fees".
Behold.
They're a retailer...?
So without Walmart they wouldn't sell as much product? Kind of like Spotify and iOS devices?
And what do you think the App Store is?
It's not a retail store. The App Store does not purchase, hold, and resell inventory from wholesalers. These are necessary functions to be considered retail.
You do not seem to know how retail works, and have created an arbitrary definition of it to exclude the App Store.
What is your definition of retail?
I checked Wikipedia and it had a pretty terse definition: the sale of goods and services to consumers. I have to agree with GP that another definition seems to have been selected for the sake of excluding the App Store.
Whether or not one thinks they deserve a 30% cut, Apple definitely works to make sure the App Store can at least deliver the application to the hardware and their interfaces ultimately bring Spotify's interface to the user. That fairly reasonably fits in with "the sale of goods and services to consumers". In-app purchases are more arguable (keep in mind it necessarily uses Apple Pay) but this thinking that the App Store is not comparable to retail seems to be a little narrow-minded.
I side with you. A bit tongue in cheek, the 3rd option will probably this here: sooner or later this is going to end in another anti-trust trial or at least here in Europe, in a another regulation attempt.
Maybe they can look at how much spotify pays the artists who are literally their only product as well. They want to complain about apple rent seeking with part of their businees when their entire business is rent seeking.
They can fuck off.
Spotify does the exact same thing to its third party developers. They took away the possibility to play their content in third party apps without having to bounce back and forth to the Spotify app. That too is a horrible user experience, yet they didn't have any problem with it. They also leave reasonable questions and bug reports unanswered on their developer forums for _years_.
While I agree with some of their points, it really is hard to root for them as a company.
The biggest issue is that Apple can compete directly with companies like Spotify without playing by any of the rules they force on their competitors.
The owner of a marketplace should not be able to compete on that marketplace without strict separation of power. Apple has huge advantages compared to Spotify when it can advertise any way it wants, doesn't pay commission fees, and can give itself priority for integration with systems like Siri.
You’re treading on thin ice here.
Every retail chain has in house brands.
Your rule change would affect every retailer, grocer, technology company in the USA; negatively.
Profits in other areas don’t come close to profits from their own brands.
Yet when you go to your local Walmart you don't need to go through extra hoops to buy non-house brand stuff.
In fact, the non-house brand stuff is actually displayed MORE prominently.
Because, and hear me out here, those companies /pay$/ Wally for that opportunity, that end cap, that big glowing sign…
Which do you think nets them more money in that case? The one time Wally- tissue purchase, oooor…. The contract with Charmin?
See, Wally gets to feed from both troughs. Oink oink.
Sounds like a lot of complaining. For the record, Apple Music pays artist more.
Yes, but they still pay more than sportify
I think you missed where her albums weren't on Spotify either?
>-Tell customers what our prices are to upgrade Premium membership options;
surely if I upgrade it tells me the price before I purchase the upgrade? they are complaining that they can't advertise it in the app?
>-Let our customers request an email or other communication telling them about the ways they can save money;
seems like "let our customers request" is doing a lot of work here
>-Provide our customers with different payment options beyond what Apple mandates (e.g. a credit card or PayPal, etc.); or
ah, so no crypto?
>-Deliver new product enhancements or introduce new features to our customers without Apple’s explicit approval.
so they don't want to have to be approved to be on the app store... aside from the fee, these are the fundamental complaints they list. seems a bit whiny imo.
> surely if I upgrade it tells me the price before I purchase the upgrade? they are complaining that they can't advertise it in the app?
You're basically not allowed to list your prices or describe how to subscribe (unless it's via Apple's in-app purchases, where they take 30% for doing nothing).
> ah, so no crypto?
No, and no credit/debit cards, PayPal, etc. either. Only Apple's in-app purchases are allowed on Apple platforms. You're not allowed to hint that other payment options are available, either.
>You're basically not allowed to list your prices or describe how to subscribe (unless it's via Apple's in-app purchases, where they take 30% for doing nothing).
I'm not here to argue the app store pricing, it's been discussed to death. that being said, I disagree with you that they do nothing.
>No, and no credit/debit cards, PayPal, etc. either. Only Apple's in-app purchases are allowed on Apple platforms. You're not allowed to hint that other payment options are available, either.
How do you think people pay for things on the app store if not with a credit or debit card? You can also use paypal (https://support.apple.com/en-us/HT202631). Seems like you are just going off your own misunderstanding of Spotify's phrasing. As to the other options, that seems consistent with not being able to market off-app purchase options. What would those other payment options be, btw? I just checked and on their website they only take credit cards and paypal...
> How do you think people pay for things on the app store if not with a credit or debit card? You can also use paypal (https://support.apple.com/en-us/HT202631).
No, I understand that Apple will take many payment methods, which are then used when purchasing an in-app purchase.
What I object to is why this is the only way apps are allowed to take payment. Why can't they take card payments themselves, without having to go via Apple?
> Seems like you are just going off your own misunderstanding of Spotify's phrasing.
No, I understand the issue. It's been around since long before Spotify's PR campaign. Just because I don't share the same viewpoint as you, it does not mean I 'misunderstand' the issue.
>What I object to is why this is the only way apps are allowed to take payment. Why can't they take card payments themselves, without having to go via Apple?
That's a pretty obvious answer, no? because apps would be full of these attempts to charge customers and apple would still need to make standards about how it would have to work.
>No, I understand the issue. It's been around since long before Spotify's PR campaign. Just because I don't share the same viewpoint as you, it does not mean I 'misunderstand' the issue.
It's not because you disagreed, it's because you genuinely seemed confused as to whether or not you can use a credit card, debit card, or paypal to pay for spotify premium in the app, which you can do.
Spotify is pulling an Epic-Fortnite here.
Whine and cry that the contract they have with Apple is egregious.
Hopefully a federal judge stuffs Spotify just like Epic was stuffed.
Corporate tears are so salty.
Was the 30% of everyone's revenue ever explained? Why not 90%? Were they looking at common tax fractions, Laffer curve, etc?
It was the same split they took selling music, movies, TV shows and ringtones in iTunes.
Steve Jobs just came up with the number. There was no deep reasoning behind it.
Oh what? Pot meet kettle. Pretending to not be in it for the dough is ingenuous. They don't pay artists well and they have a near monopoly hold on music streaming such that they have no impetus to fix their abysmal software. Just admit you want a bigger slice of the pie and not like you're saving the internet.
Spotify… poor, we don’t fairly pay the artists, Spotify.
Don’t like the market? Build one. Don’t like the devices? Build one.
Don’t like Apple’s walled garden? Build your own.
Just like the federal judge told Epic: ‘The marketplace allows you to build a competing service, do so. Also, you signed a contract. Heed it.’
Pay the artists properly, stop spending money on military tech, then I might listen. I release music on every platform except Spotify, they're a nasty, grubby little company.
Something something Joe Rogan.