Comment by simonh | Hacker News Reader

Comment by simonh | Hacker News Reader

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Subscription services like Spotify only pay 30% for the first year of each subscription. After that they pay 15% and this has been the case since 2016.

Apple has done a lot to revise the App Store charging policy over the last few years, and I think they deserve credit for that. Also their hosting of free apps for only a nominal developer registration fee is a huge boon to users and a lot of iOS developers.

So I don’t think those criticisms are entirely accurate or fair. I am ok with regulators looking into this though. Apples revisions to their charging structure probably wouldn’t have happened without the threat of regulatory review. It’s important they be held accountable. However Apple invested many, many billions of dollars to develop the technologies in iOS over many decades and took huge commercial risks. iOS and these devices are their product and they have the right to decide how they work and what features they have. Those who don’t like that do have alternatives. The fact is an awful lot of people do like the way Apple does things.

> "Subscription services like Spotify only pay 30% for the first year of each subscription. After that they pay 15%."

That's still pretty extreme imo when you control the only store and you directly compete with them/undercut them.

> "Also their hosting of free apps for only a nominal developer registration fee is a huge boon to users and a lot of iOS developers."

They charge a fee for it, I wouldn't consider it nominal - the ecosystem of apps also obviously benefits apple.

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I'm a huge Apple fan which is why I find this racket irritating, it worries me that it'll blow up in their face and we'll end up worse off.

I'd probably charge a (low) flat annual fee for app store distribution and that's it. Apple should be focused on making money with great products, not taxing devs they force through their channel.

Keep the rules, lose the tax.

> That's still pretty extreme imo when you control the only store and you directly compete with them/undercut them.

Regulators don’t (yet I suppose) care about this because of opportunity cost. If I’m making $3/user/mo off your $10 subscription and I decide to enter the market and compete with you at then every user I steal and every user if not for me would have gone with you costs me $3/mo plus cost of providing them service. So if I’m able to still undercut you then either I’m ridiculously more efficient than you or you have fat margins.

Neither of these are true so something else is going on here. Either I’m bleeding money and this is some strategic play in which case it might be unfair for different reasons, or the market is segmented and we actually have two different customer bases with insignificant cross pollination.

If Spotify is $10/month and paying $3 to Apple they get $7/month.

If Apple enters with Apple Music and charges $10/month - they're undercutting Spotify while charging the same.

How many billions of dollars, over how many decades did Spotify spend developing that platform, OS and app distribution system? How many times did they almost go to the wall over the commercial risks that took?

Anyway as I already pointed out it’s effectively 15%, not 30%. Also the vast majority, over 99% (literally, I looked it up) of Spotify app users earn Apple nothing because they use it add supported and all the add revenue goes to Spotify.

My impression is that the ad revenue from that 99% is users is still less than the subscription revenue from the 1%.

Also the vast majority, over 99% (literally, I looked it up) of Spotify app users earn Apple nothing because they use it add supported and all the add revenue goes to Spotify.

They bought the phone from Apple, so Apple made their money.

This is the comment that lost me. I'm sorry, how should more of the pie go to Spotify here using that argument?

Apple 'made their money' on the hardware, therefore Spotify is entitled to a larger ratio on the software? Is that the correct interpretation?

Edit: I'll take your downvote as being it was the correct interpretation. It's okay, I didn't expect a reply.

Assuming you’re asking in good faith - Apple sells the hardware, they don’t make the software of other company’s apps.

They force companies to ship through their store, I think that is okay because it enables them to enforce quality standards for users.

I think it’s wrong for them to force this distribution model and then take a cut from every software company.

In the Spotify case Apple forces them to pay a tax and then Apple shows up in their own store priced the same where they obviously don’t have to pay a tax to themselves.

Spotify is entitled to an even playing field.

This is already way off topic to my post I'm wondering if I'm the right person you replied to. Let's stay focused on this, because I agree with most of your points in this thread.

Apple makes money off the sale of their iPhone from the user, with Spotify's existence here being completely irrelevant. Should Spotify be granted increased monetary entitlement to their app creation because of this physical material sale between Apple and the user?

I'd argue your question is a warped framing that confuses the issue in an attempt to be leading.

iPhone sale to user is irrelevant.

Apple forces distribution via their store and they force companies to pay a cut.

I think this is bad, but at least it's across all people that participate in the store.

Then Apple itself enters the market via the store selling the same product at the same price, but without the tax.

That's cheating. It has nothing to do with the 'physical material sale' - it has to do with requiring store distribution and taking a cut of competitors margins, but then entering yourself. It's not Spotify 'getting more of the pie' it's Spotify not having to pay an anti-competitive tax to the platform controller.

They can either allow distribution outside of the store (which I would not want) or they can remove the tax on apps that they directly compete with.

I'd prefer they remove the cut entirely and replace it with some low yearly fee for distribution.

> iPhone sale to user is irrelevant.

Thank you. I agree. The iPhone sale to the user is irrelevant to Spotify's return.

The rest of the post is yelling at a cloud. I have not given my position on any of that so I have no clue to whom you are arguing with.

When Apple created the iOS SDK and opened the App Store did they increase or decrease developer freedom?

You're ignoring opportunity cost which was the whole point here. You didn't say how much Apple was getting.

If Spotify charges $10 and pays Apple $3 then Spotify makes $7 and Apple makes $3.

If Apple enters the market and charges $10 then consider a user that would have otherwise went to Spotify. Spotify makes $0 and Apple makes $10 from the subscription but loses $3 from what they would have been paid from Spotify so Apple makes $7.

Apple has lots of advantages stemming from their control of the platform but "not having to pay the 30% fee" isn't one of them.

Apple gets $10 or $3 from a user

Spotify gets $7 or $0 from a user

How is this not an advantage?

When the average subscription to just about any online service is 3.3 months, the 15% after 12 months is simply PR. Nothing more. Apple crunched their numbers and knows exactly what they are doing. What's more amazing is that everyone, including you, has fallen for it.

Considering most cancelled subscriptions are cancelled within a trial period, the average subscription duration is heavily weighted down. Your point would be something worth considering if you had an average that excluded all cancellations within, say, the first month.

The idea that subscriptions are the main issue is just fluff. Under 1% of Spotify app users subscribe, for the rest all the add revenue goes to Spotify. Apple distributes the app and gets nothing.

As someone else pointed out in a different comment, Apple benefits from the app ecosystem even when they aren't getting cash for an app so they aren't getting nothing. Apple also has their own ad network so they can profit directly on iOS apps that are ad supported [0].

[0] https://www.forbes.com/sites/johnkoetsier/2020/08/07/apple-a...

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