Spotify made changes to their app that violate the App Store rules they've been playing along with for many many years. Specifically around App Store subscriptions and advertising out-of-app purchase options inside your app.
I'm not defending or denigrating the App Store rules here, but make no mistake - this is a deliberate move on the part of Spotify to cause a controversy.
What's with iMusic in the title? That's not a product, it's not in the linked article, and it's not common shorthand for Apple Music.
Yeah, amusingly, even Google Play has rules against third party payment processors. So Apple's behavior cracking down on directing app users to go pay somewhere else than the app store isn't even Apple specific.
Edit: Relevant section:
"Developers . . . must use Google Play In-app Billing as the method of payment, except [when] . . . payment is for digital content that may be consumed outside of the app itself (e.g. songs that can be played on other music players)"
Edit 2: To clarify, Spotify services are available outside of the app itself so I'm fairly certain they can avoid using Google Play's In-app Billing if they so desired. I have no idea if they actually do or not or if Google would actually have a problem with this or not.
What Spotify would like is to be able to not pay Apple for use of its store.
It would be as if a product inside a Walmart demanded to be allowed to put up a display INSIDE Walmart of their product with a large sign saying instead of buying our mop for $13 here, come out to the parking lot and I'll sell it to you for $10.
Not exactly. The problem is that you're not paying for the Spotify app itself, you're paying for a subscription service that Spotify provides, not Apple. Apple (corporation) doesn't store or stream the content that Spotify is providing, Spotify does. And Spotify streams it over the network connections the user (typically) pays for.
It may make sense for Apple as payment processor to take a cut, but not the 30% that they are for subscriptions. Subscriptions aren't actually adding features to the app, as demonstrated by the fact that you can subscribe outside the app (through Spotify's website), and still get the same content.
This is different than, say, my purchase of OmniFocus or another app. I'm not subscribing to anything, it's a one-time purchase enabling the app, perhaps more purchases later to enable more app features through in-app purchases.
The same problem, for me, exists with other subscriptions like, for instance, newspapers/magazines. Apple takes a big cut if I subscribe through the app, but going to their website I can subscribe and they retain more of the purchase price, and I can still access the content through the app.
TL;DR: Apple is acting as a payment processor and thinking they can get away with a 30% cut. Unlike apps which are hosted and vetted by Apple before making it into the app store, subscriptions to content are neither hosted nor vetted (beyond content type/suitability like porn being blocked - still?). The cost they impose on Spotify or any other subscription service is absurd.
The unfortunate part is that because of iOS's restrictions, it's also a bit like, "if you coincidentally buy your frozen pizzas from Wal-Mart, we're not allowed to sell you our product anywhere but Wal-Mart". Spotify doesn't want to pay for use of the store because they have no need for the store.
That analogy is a bit tortured, but you get what I mean. Spotify, Netflix, Amazon, and other extremely popular services don't need that "we'll get you in front of customers" service that Apple touts as a reason why the 30% cut makes sense. And if you're a relatively unknown developer, you do get value from the App Store that you pay for with that 30% cut. However, I'd rather have Netflix than an iPhone. I'd have Netflix with or without an iPhone. Apple provides negligible value to Netflix or Spotify, in that while there are millions of customers of those companies using Apple devices, if Apple went away tomorrow, those customers would just buy a different phone and continue to subscribe to Netflix or Spotify.
I don't think there's anything necessarily anti-competitive to the level of thinking its legally actionable, but I certainly do find it a bit distasteful. The Kindle app is just better on my Android devices than it is on my iPad. It's a better user experience because there's no one putting arbitrary inconveniences in my way. And I dislike giving money to useless middle-men. I'm happy to pay Apple for the iPad -- they made a thing that I enjoy. I'm happy to pay Amazon for the incredible store and ebook infrastructure they've set up. I might like more of the money to go to the author, but at least Amazon is providing me some value in the transaction. Apple provides me nothing of value in that ebook transaction. They're just a leech.
The App Store is not a Wal-Mart. Wal-Mart doesn't let people use its store to give stuff away for free, for example, while Apple has no problem with free apps that never require payment for anything. Wal-Mart also isn't the sole source for products which work with another kind of product, they're just a store, little different from other big stores. The App Store is the sole source for software that runs on iPhones, and it exists mainly to drive iPhone sales, the revenue from the App Store itself is insignificant.
Apple requires all developers to pay $99/yr to publish any applications, even free ones. They are strictly pay to play. Also, App Store revenue is certainly not "insignificant", we're talking $Billions of dollars for Apple here... https://techcrunch.com/2014/01/07/apple-10b-in-app-store-sal...
Good point on the $99/year. Still, good luck convincing Wal-Mart to let you user their stores as a distribution point for your free stuff for a low annual payment.
Apple is big enough that billions can easily be insignificant. According to that article, they've paid out $15 billion total to developers. That means that Apple's cut has been about $6.5 billion. That's over a period of eight years, so somewhat less than $1 billion in revenue per year. Currently Apple is making $10-20 billion per quarter in profit, with yearly revenues beyond $200 billion.
As an Apple and Spotify customer I will quickly stop being an Apple customer if they try to control / influence Spotify. I use it all day at work and at home on my Sonos. I never knew that if challenged I would be more loyal to a music streaming company then my main hardware providing company, but, it would be a non negotiable issue for me.
As a customer, that is literally of no concern to me. I'm not taking a position on who is right or wrong. I don't care who did what and to who, the only thing that matters to me is how my service(s) are interrupted. As the customer, I will first choose the provider that I perceive as providing me with greater benefit and then remove any resistance to that provider services. Anything outside of the equation ultimately doesn't matter and therefore won't enter into my individual purchasing power.
I think you're right--Apple shouldn't control/influence Spotify. The issue here sounds different: Spotify has to play by the same rules as everyone else on the App Store, and Spotify seems not to like that.
No they don't! There's no reason Spotify can't pull their app, run an ad campaign, put pressure on Apple, negotiate a better deal, any number of other things. If Spotify thinks they can claw back part of the 30% apple tax, more power to them.
I agree. My issue is they're getting the Senate involved and going for regulatory capture, which in general isn't usually ideal for long term competition.
What you're calling for is preferential treatment because they're an established player, which is quite humerous to me given how much HN loves "disrupters"
What's more likely, that people will give up their iPhones to use Spotify or that people will choose one of the other available streaming music services?
I share the sentiment. Apple has done enough stupid things already so that I considered switching away from it many times. Spotify for me is big enough to get me over the fence.
It's kind of amazing how well it works. I completely understand consumers being upset about anti-consumer behavior from businesses, but competitors using every tactic they can get away with to out-compete each other, especially enforcing established contracts, is expected behavior. Nobody wants monopolies, but the phenomenon of people swearing off a brand forever because they try to make use of their business advantages is fascinating. It might be a sign of a need for someone to intervene to level the playing field, but I'd never be personally offended by it.
I agree. The follow-up question is whether to applaud or deride them for it.
Uber and Airbnb, for example, do the same in their markets, and get applause for doing it, at least from some people.
Apple/iOS is a weird case, on the one hand Apple's market share is small, which would mean that one could say Spotify is playing mean (for example, would it allow Apple to advertise on their platform?)
On the other hand, Apple is in the same market as Spotify, and has more of the wealthy customers.
For now, I side with Apple in this case, but that may be because I do not know enough details of what this is about.
When you start an article telling me to read an awful book that tries to tell me it's allegorically easy for a company to turn into a dystopian ruler of all, you seem more than a little alarmist. Regardless of the rest of the content.
Amazon does something similar regarding stepping around the 30% Apple fee with Comixology and their ebook offerings- you can access them on the app, but you have to buy them on a web browser. I can't recall if they explicitly say "go outside the app store to buy" or not though.
> work with a company that can shut down your entire business on a whim, with no recourse
Except, the "whim" here was Spotify deciding to deliberately break the rules they've been following thus-far, in order to create a media circus, at a time when Apple has announced a huge reduction in the effective costs they'd have (15% instead of 30% cut of subscription fees)
But yeah, Apple just said "fuck you Spotify" on a whim.
Yeah, if your entire product's strategy relies on someone elses platform and you don't have multiple income streams, or ways to acquire customers, you'll be exposed to these sorts of things.
I wonder how big Spotify's android base is. I know they get my $10 a month.
That's very different. You can exist without a good SERP, you can buy ads, acquire users elsewhere, but you can't exists outside the Appstore on the scale Spotify plays.
It's not much different to businesses that make products which are sold at big box stores like WalMart or Home Depot, which have the final say on which products they want to sell in their own stores.
One difference here is that by following the rules, anyone could have their product sold in the Apple Store. Meanwhile Target or WalMart would only offer mens socks from a very small number of different suppliers.
Another difference is that you can sell your product in Wal-Mart or Target or K-Mart or Sears or independent shops or even set up shop yourself.
With Apple, you spend a bunch of effort building an app, and then your (legitimate) options are to distribute it through the App Store, or give up.
It's easy to understand why companies are willing to enter into the App Store even though Apple can potentially sink them at any time. The reward is, to them, worth the risk. How much money has Spotify made over the years from iOS users that they wouldn't have made if they had decided not to even risk Apple's displeasure? And of course this current problem will be resolved quickly enough without wrecking Spotify's business.
They have a big market share, they protect the IP, and they are technically beholden to their clients. Why wouldn't you do business? The cost-benefit for Apple probably always leans towards "Hope competitor X fails".
Can you explain why you're surprised? Are you surprised that companies have long worked in/with non-democratic countries as well, where some or all of their operations could be shut down or taken at the whim of someone in power? It all ultimately just comes down to another risk/benefit analysis, simple as that. Every player evaluates how likely they are to face problems with their given business model, how potentially valuable the market in question is, and what levers they have to exert, then tries to price in a premium to reflect that. If they make more money in the end then it costs it's a win, and the iOS platform represents a very large set of users with a relatively uniform platform (good for costs) and greater-then-proportional economic power (iOS users aren't a random sample of the population, by virtue of the cost of entry they're likely to have higher amounts of disposable income). Of course businesses will see profit potential there, even with Apple's many, many issues.
>with no recourse
Isn't quite correct either. As in other closed markets, there are more levers then just official rules to pull on, particularly for large organizations with significant resources and followings. Apple as a business has their own cost/benefit and risk/reward assessments to make too. The first, as Spotify is doing right here (and as other app developers under iOS have done before), is to simply try to make it a significant public relations issue. Apple is not an actual country, and their stickiness is in fact limited. People can leave, or perhaps of more concern to Apple given their growth goals, people can simply never sign up in the first place (earning a first customer is always more difficult then keeping an existing one, and most of the low hanging fruit has long since been picked). Significant backlash can and has caused policy changes or at least individualized reversals in the past. This is more feasible precisely because of the arbitrary nature of Apple's decisions: if they wanted to create an individualized exception for Spotify nothing stops them.
Second, Spotify is a big enough player that they can flat out threaten to degrade service or leave if the cost becomes too much, which may be an influencer for future purchasers. They can multiply this if they can get other similar services to do the same, work to fight Apple Music (via exclusivity deals etc), and so on. That leaves Apple to do math on whether the (frankly minimal) revenue stream they get from their 30|15 cut on subscription revenue is worth even a minor blemish on their hardware sales and the network effects they get from a bigger platform in general.
Third, the spectre of government regulators absolutely lurks in the background for something like this. Not all jurisdictions have the same rules or enthusiasm when it comes to monopoly investigations, but Apple is global and can't afford to fully retreat from any major market unless it represents an existential threat to them. Even if they'd ultimately be victorious, the mere threat of the EU for example going after them is something they have to take seriously. Apple historically has seen software & services primarily through the lens of driving hardware/platforms rather then a core revenue source in their own right, which means the upside for them vs a nasty judgement are much more limited.
I personally feel like exclusively closed platforms like iOS should be flat-out illegal, that users should have the ability to opt-in to a sideloading key (with risks therein accounted for of course), but that's beside the point here. There may always be markets where major players have the ability in principle to stomp on players beneath them, but in practice other players will aim for them anyway.
1. Apple's market share is a lot lower than Android worldwide but since Apple's customers are disproportionately wealthier with a higher willingness to spend, it would be suicidal for Spotify the iOS user base - especially in the U.S. If Spotify degrades iOS users service that will just push them to Tidal, Apple Music, Rhapsody, etc.
As far as getting exclusive content, do you really think Spotify has either the money or the marketing power to out compete Apple? Apple can market a musucian both on iTunes (pay per song) and Apple Music. The only way you can listen to a certain artist on Spotify is by paying a monthly fee - the free service will only let you shuffle a playlist.
