Spotify: ‘30 Percent Is Fucking Bullshit’

Micah Singleton, writing for The Verge:

Regardless of the pressure, Spotify isn’t married to its free tier, according to sources, but it does strongly believe it drives users to its premium service, and currently has no intentions of giving it up. The free service also draws a significant amount of revenue — much of which goes to the music labels — and attempting to cut off a revenue stream goes against the music labels’ usual practices. “You would never dry up that revenue stream unless someone is making promises they ought not to be making,” a music industry source said.

You can never be certain with unnamed sources, but it seems pretty clear that someone from Spotify is the “music industry source”. What they seem to be doing is preemptively seeding the idea that Apple’s approach to their upcoming streaming music service is analogous to what they did when they entered the e-book market. That they’re colluding with music labels to eliminate free streaming tiers the same way they colluded with publishers to switch to the agency pricing model.

Given how that turned out for Apple, who knows, maybe there’s something to this. But this stuff about Apple’s 30 percent cut of subscriptions through the App Store is amusing:

Apple charges a 30 percent fee toward any sales through its App Store, and that includes subscription services. That means if Spotify wants to sell its premium subscription service — which usually costs $9.99 a month — through the App Store, it has to raise the price 30 percent higher to $12.99 to pull in the same revenue, while Apple can still offer Beats at a lower price. Spotify and many others in the music industry believe Apple’s App Store tax gives them an unfair advantage over the competition.

To make things worse, Apple’s rules disallow companies from redirecting users to the browser to get the lower subscription price. “Apps that link to external mechanisms for purchases or subscriptions to be used in the app, such as a ‘buy’ button that goes to a web site to purchase a digital book, will be rejected,” Apple wrote in its App Store review guidelines. That means if you tried to sign up for Spotify or Rdio or Tidal through their apps in the App Store, you would think they raised their prices, much like what happened last week. “I get that there’s some administrative burden so they should get some kind of fee, but 30 percent is fucking bullshit,” one music industry source said.

Welcome to 2008. What’s interesting to me about this line of argument is how it’s predicated on the assumption that in-app purchasing is essential. The fact that Spotify can sign up customers on the web, without one penny going to Apple, isn’t really part of the discussion because the convenience advantage of IAP is so overwhelming.

★ Saturday, 9 May 2015