If a company like Spotify sells subscriptions both in the app and on the web, they have to charge 43% more to the in-app purchaser to get the same revenue, even though the user gets exactly the same experience.
I would call that a tax (informally; I know it strictly doesn't meet the definition) and as a customer I would like to know about it.
As a Spotify subscriber, I don’t really care, because it’s their job to handle their overheads, in the same way that John Lewis on Oxford Street pays different rent to John Lewis in Kingston (probably) but the prices stay the same. Cost of doing business is a thing. Capex and Opex are well-understood by businesses, or should be.
If the Spotify web store is more profitable than the Spotify iOS store, because Apple wants ITS CUSTOMERS to get the same deal and Spotify wants those customers, then this is good and fair for customers at the point of purchase.
> this is good and fair for customers at the point of purchase.
I think it is widely accepted in commerce that a deal is only fair if both parties have the relevant information.
If customers know they're paying more because of Apple's fees and are comfortable with it because they feel they get adequate benefits in return, that's fair.
If they are unaware of this however, am not sure how the deal can be considered fair, since not all parties have the relevant information to make an informed purchase.
You can see this in action on Twitch sometimes in the chat. People ask why the subscription for a streamer via mobile app is $5.99 when it's $4.99 via the web app when there is no difference in what is being provided.
It is noticed and often people actively avoid the higher price once they are aware. Some are frustrated and unsubscribe.
This is understandable since they realize they've been paying an on-going 20% premium every month for a one-time convenience by originally pressing the subscribe button from the mobile version. And none of the extra 20% goes to the streamer they wanted to support.
It would be fare if it wasn’t a monopoly. Only if other companies could create their own app stores that worked on iPhone the customers would be optioning. In the current state of affairs there is no option.
Remember there was a time you could only phone people in the network you were a subscriber. It is not the same, but a similar situation here.
But it’s not a monopoly, it’s one of many, many devices. There are, at time of writing, many games platforms and many application platforms: XBox, PlayStation, Nintendo, IOS, Android, Windows, MacOS, Linux, with Google Stadia too.
Developers make a choice and everything sold on those platforms has distribution costs. Fortnite is available on most if not all of those platforms. AND, players play against one another through the internet not through a private developers network. So there’s plenty of competition. Why Epic aren’t demanding Nintendo and Sony take a lower cut is a mystery. Or maybe not?
Epic have massively, massively, overplayed their hand here. Instead of creating an amazing new game and using THAT as leverage to platform owners for a deal, they’ve made a satirical video, broken a contract, had their bluff called, and cemented their place in future business school classes as how not to go about a negotiation.
Nintendo, Sony, and Microsoft are creating a game ecosystem by selling hardware at a loss or near loss, footing R&D, supporting devkits, and running promotions mutually beneficial for developers. The value of creating and enabling an entire ecosystem is found to be worth 30%.
An iPhone is sold for a substantial profit regardless of gaming entirely, and offers none of those services or promotional benefits to developers/publishers.
This may have used to be true to a degree, but the console makers don't really sell consoles at a loss anymore, or a minor loss at launch knowing that they will turn a profit soon enough on the hardware once they reach volume.
Not sure what the point is supposed to be with "The value of creating and enabling an entire ecosystem is found to be worth 30%", and making the judgment that Apple hasn't done the same. Without some harder numbers on both sides, it's not a conclusion that anyone is in the position to make. It's also worth remembering that Apple has amassed an extremely loyal customer base that has shown that they are willing to spend an immense amount of money on App Store purchases over the period of decades - Apple does deserve to cash in on that value created such as being the single point of contact for easily addressable issues with app purchases, fraud, & such for the customer, secure & frictionless payments, and most of all, creating the situation where users want to go and spend $ on their platform over alternatives.
The value created is in developers/publishers being able to make more $, which is the ultimate value.
This is true, but until Free-to-play arrived, the companies would get a cut from every single piece of software that was published through licensing. The advent of downloads reduced the trade in used-games, meaning higher revenue.
The selling at a loss is just another business strategy to drive hardware sales of a limited-functionality device (ok, you can watch videos and surf the net, but it's hardly an actual computer) compared to the iPhone, where other factors drive sales and increase the user base.
I mean, I love my Switch and I'm definitely a profitable customer but it's a specialized device. If Nintendo's loss-leader strategy is worth 30%, why isn't Apple's strategy? Or really, who gets to decide what the correct % is? And how?
That seems like an incredibly arbitrary distinction for why consoles are justified in taking 30% but Apple isn't. Apple created a software platform that has made developers billions of dollars, it seems to me there has been value created there.
Actually MS isn't doing just fine as they would gladly that everyone migrates to Windows Store, which was also part of Windows 10X plans, store only installations including Win32.
Now that Windows 10X seems to go nowhere [1], and Project Reunion is still trying to find out how to merge Windows 7 and 10 worlds [2], one more reason not to do just fine.
I'm sure Apple would be just fine as well, I just found it a little funny that the previous poster claimed Nintendo/Sony/Microsoft were justified in taking 30% because of the "value of creating and enabling an entire ecosystem"... as if Apple hadn't done the exact same thing.
You compare a company ( Apple) who invested billions of dollars in ecosystem, hardware etc. In dev tools. It's not even fair to compare it with parasitic company Epic. That is leveraging platform been developed and pretty much created a market to leverage human weaknesses ( gaming). They don't bring any real in this world. And yet they dare to say they not happy with market that brought them billions. Such kind of ideas can only appear in such kind of company, that don't bring any value to the world and thinks that the world owns them something. Huge part of Epic success is apple marketplace that users trust. Even google play is a derivative from Apple's ideas due to Eric copy pasted while been a board member of apple. You got access to billions of people thanks to apple and google, using their tools. I think it's logical apple and google want their cut for that.
I find it rich that a company that bleeds tons of money just so they have exclusive titles on their platform is suing someone else for anti competitive behavior.
How is it remotely similar? If you want to argue their fee is predatory or too high that might make more sense but the concept of charging a fee to use a distribution channel is present in every single aspect of selling a product. Epic wants to make more money, fine. It’s not a noble endeavor with our best interest at heart. It is a calculated business move to allow them to cut down the distribution fee or remove it entirely. What is a reasonable fee for Apple to impose on the imaginary third party stores? None?
There should be some acknowledgement that the people that manufacture the hardware of your phone shouldn't be able to control every aspect of your digital life related to the phone. Choice is a thing that Apple does not provide as a business policy.
It appears there may be some pushback to that as a corporate policy. I guess it could even be suggested that maybe not everything Apple does as policy should be golden law.
It’s fine to want that but to force it is an entirely different issue. The entire premise of the law suit is that Apple is in violation of anti trust laws and actively harming the customers. Apple has been literally criticized every year for a decade regarding their restrictions and yet people still buy it. Is the thought process here that we are all naive consumers who don’t know Apple only plays nice with Apple? The damn cords clued us in years ago.
I don’t want to rob people of being able to have open hardware but I also don’t want that need to dictate all platforms. Luckily, there are a lot of phones which fit the needs of that market. If I want a phone with one App Store with authoritarian control of the system should I not be able to buy it without fear that one day it will be too popular and deemed too draconian in policy?
This sounds interesting, but not convinced since we could say that fairness mainly exists in the circumstances and rarely in the courts. At some point there is an upper limit to the relevant information available for any decision.
We could test this, I mean, suppose the invoices or even the details at the checkout broke down the total into developer’s fee, apple’s fee, government tax, and so everyone could see that, would that be sufficient to fix the problem? I suspect not, because Epic, in this story, are seeking to pay Apple less, and give themselves more - that’s really their bottom line.
Are they really going to all this trouble on my behalf?
Well, hotel bills do routinely break out not just taxes but individual taxes. And it does matter. I just got back from a hotel where I was rather irritated to find that local taxes for just a 6 day stay added up to the cost of a very nice restaurant meal for two. That's worth knowing next time a politician talks about tax.
The hotel could treat such taxes as overheads and incorporate it into the price, but that's not really useful because they can't change it, only the customer can. Most business overheads aren't like that. If only a customer can affect a charge it makes sense to break it out and highlight it.
What if the shoe were on the other foot? What company would hire me if I negotiated a salary and then after we shook hands and everybody had the warm and fuzzies, I said, "Well now, you'll understand this is just the rate I charge, so it is exclusive of federal and state income tax. These are additional fees that I am responsible, by law, for collecting from you on behalf of the government. I've broken the numbers down this way in the interest of full transparency."
That's pretty much how it happens in Romania. All (or almost) salaries are negotiated post tax (so what gets payed out to me) and the employer is responsible for paying the appropriate taxes to the government.
In that case you have to go to the tax office and file out some documents and then you pay the taxes for the investments separately.
There is a single income tax rate, 10%, so it doesn't matter how much you earn. If your investments make more than the annual minimum wage, you also have to pay the health insurance tax and "social security" tax.
Hotel bills are broken out like that because the tax system allows many write-offs and reimbursements of many of those fees. They're broken down because they often go to different parts of the local, state and federal governments, and it's important that those seeking write off or reimbursement know who they need to claim those against.
Interestingly, many large companies use services for this kind of thing, much like Apples walled garden, where their employees can spend without worrying about tracking all these details, and the service takes care of all the (significant) legal wrangling and deal negotiation to make this simple.
That's essentially what Apple does for their money: makes it possible for users to buy things across a host of jurisdictions from an ecosystem of vendors, without risking their device security or payment security. There is a significant amount of legal and infrastructural wrangling involved, most of which the end customer, and many of the vendors don't fully understand.
But yeah, let us focus on the least important part: price.
Knowing that a city has a high hotel tax has driven me immediately to Airbnb in the past. Knowing the amount that I am overpaying for a service is a valuable capitalist function.
That's a valid opinion about what Spotify should do, but the fact is for a time Spotify did pass some of the fee on to iOS customers by charging a higher price for IAP.
The question is, should Spotify be able to tell customers that they are getting a higher fee because they are making the purchase on an iOS device?
To me, it requires massive contortions of logic to believe that customers are better off not having this disclosed.
Yes, I had to check they were not still doing this. I don’t believe they are allowed to charge a higher fee on iOS, or is there some loophole?
Customers ought to know, but whether companies are compelled to tell them is problematic - just see the prices of fuel or snacks at motorway service stations - which reflect a local monopoly, not the true cost. Ultimately, it seems the answer over time is that nobody is forced to buy Spotify or a WHSmith sandwich. The music you can go and buy in the shops, or from Amazon, Googly, Tidal, Bandcamp. Spotify is like WHSmith at a service station and wants to use the local monopoly as an excuse to put up their prices and push the cost onto the consumer rather than factoring it into their business.
It was never disallowed for developers to charge a higher fee on iOS app store purchases. They just aren’t allowed to make the user aware that they are paying more than required or explain why.
Spotify could make a web app and bypass this whole issue. They chose not to: let them pay the Apple Tax (if you must call it that. Personally, I think it’s just a distribution cost).
> If the Spotify web store is more profitable than the Spotify iOS store, because Apple wants ITS CUSTOMERS to get the same deal and Spotify wants those customers, then this is good and fair for customers at the point of purchase.
Are you saying you think Spotify should just charge everyone extra and take extra profit from Android customers? As an Android user, why should I pay extra so you can use an iPhone?
Assume me and you are the only 2 users on Spotify and they need $10 per user in revenue. As far as I'm concerned, I should pay $10 and you should pay $14.29. Apple gets $4.29 (14.29 * .3) and Spotify gets $20.
If Spotify can't differentiate and has to charge every user the same, they won't charge everyone $14.29 because they're in a competitive industry and keeping the cost to the customer as low as possible is important. It's more likely they'll charge us both $12.15 and call it $10 average revenue per customer.
If Epic's lawsuit accomplishes only one thing, I hope Apple is forced to allow developers to advertise and charge different prices for iOS users. If you think iOS is worth +43% on everything you buy on your phone you're welcome to pay that IMO. I don't want to and I'm happy with Android.
> "If the Spotify web store is more profitable than the Spotify iOS store, because Apple wants ITS CUSTOMERS to get the same deal"
I am surprised how this unprecedented practice is not widely discussed - I am not aware of any situation in real life where you rent a store and you are told you cannot charge what you want.
There are established limits on what a contract can enforce, an outrageous terms are not considered valid in court. For instance a phone operator could not have penalty of £10,000 for a going over your credit.
I believe this term should be considered outrageous - if apple wants to charge 100% tax, thats fine, but their customers will pay 100% more and then they might have questipms for Apple.
Revenue share and price parity are standard clauses in most department store lease contracts and not at all unprecedented, at least in my experience. My company is routinely told that if we want the lease, we must pay a fixed percentage on sales (usually 25%) as rent, must not list a price higher than can be found elsewhere for an identical item, and all payments must be handled by the department store themselves.
I assume there's a minimum required so the landlord has all upside and no risk. That sounds like a super bad deal. The only way I can see that being practical is if you're getting space in a super exclusive location where the clientele are mega rich and the margins are insane.
I misinterpreted the rules - developers are actually allowed to charge whatever they like, they're just not allowed to say "Actually you can save five quid if you go -> HERE".
Back in the real world, sales assistants may not be allowed to offer deals unless asked first - I know that my partner was basically given very heavy hints to ask if the sales assistant "had any special offers" before he could offer a deal on a new motorbike. I guess this is the same, without the helpful hints. Some people scour the web for coupons and deals, other people pay the full price (and then get extremely cross when the first screen they see in their new app offers a 25% off coupon, yes you, Capture One, you bastards)
John Lewis pay a different rent (again presumably) based on the more desirable location, but it's also reasonable to assume their payment provider is the same.
In this case, I would argue that Apple have the monopoly on the App Store, which is fine if they are reasonable about it. However, there's no optionality on the payment processor: they insist it's them and take 30% (from what I've read; not actually an iOS dev).
Would it not be more reasonable for them to charge a small revenue fee (rent) and allow you to choose a payment provider? They could audit the payment provider to achieve the security features that they seem to be presenting as an excuse for their charges.
If a company sells coffee both in a shop and on the street it would have to charge 43% more to the in-shop purchaser to get the same revenue, even though the user gets exactly the same experience.
Would you call that a tax or would you call that rent?
If there was only one entity owning all the houses, and to operate a business you needed space, then the terms rent and tax would be practically interchangeable
One entity doesn’t own all the buildings though. Google, Microsoft, Nintendo, Sony, etc all have their own malls and properties you can go to to get your Fortnite. It’s up to the customer which they go to.
If iOS was a monopoly, how is it possible to get Fortnite on all these other platforms? That just doesn’t make any sense. The only monopoly Apple has is on selling and licensing their own products.
Fair Point but I from the viewpoint of someone who has already purchased an iOS device, Apple is the only mall. That is the problem, not the existence of the stores themselves. In the case of Sony, Microsoft and Nintendo they do operate the same kind of platforms which are equally scummy in my opinion, but honestly not on my Radar as I don't really play console games.
In the case of Google I would like to disagree, if only for the fact that I have options as where to procure my software and run it in a manner that is intended, but I must concede that it is more cumbersome that I would like. That is the key difference that makes what Apple does so egregious, and why I don't really have much problems with Google at the current time.
For me it is not about the fees or the stores, its that Apple in practice forbids anyone in the digital marketplace to do business with any of their consumers unless it goes through them, as they own the app store and for the average user, their devices only run apps that are on the app store.
Epic is in no position to reject the proposition of using Apple's payment service or their store entirely and still do business with the million of customers that are playing Fortnite.
Apple should be definitely be able to charge for the access to their App store customer base, but Epic should be allowed to reject that price and still be allowed to do business with the iOS user base on their own terms, just like they did on Android with side loading before striking a deal to be on the Google Play store.
It’s just seems to me that supporting the installation of software on a computer and managing installed applications is a feature of the system. Those features are products of the manufacturer or software vendor. What would legislation restricting or mandating those features look like? Who would draw up and certify compliance with the requirements? What impact would that have on innovation or the development of new products? How would compliance against a standard set of requirements work for new and different platforms?
I’m personally opposed to Apple locking down MacOS to run only signed binaries. If they go too far with that I’ll stop buying Macs, but to what extent do I get to dictate to Apple what software they develop, what products they choose to sell and how they decide to implement them?
On balance I think it’s a good thing the US and EU are looking at these issues. Clearly at the moment there is at a consensus and I think there is a legitimate role for oversight of how these companies operate and enforce the rules on their systems. I’m not convinced though at forced openness on every platform of any kind is tenable.
I agree that it is finally good that not only the governments but us as consumers are looking at this issue. I would hope that this entire debacle will result in a shift in perspective for enough people and legislators that Apple will just give us the right to run sideloaded applications without more (or hopefully less) effort than on the Android platform. If i remember correclty, microsoft tried to emulate Apple by only allowing windows store downloaded applications on their ARM version of windows initially but yielded after backlash (and probably poor sales).
I wouldnt call it trying to dictate what Apple does.Also I would like to specify that I don't really wanna dictate what software Apple develop or what products they want to sell in their store(atleast beyond whatever code is necessary for sideloading). What I do take issue with, is Apple dictating which companies are allowed to do business with "me" as a consumer, should I be on their platform.
Walled Gardens has not been the norm of Hardware/operating system platforms in the pc/laptop market, and I don't think it should be that way on mobile either. All of the major OS vendors could have implemented similar walled gardens if they wanted to, they just couldn't get away with it. I hope this leads to Apple not getting away with it either.
Conventionally, rent-seeking is a poor quality activity which doesn’t generate any new wealth, it just transfers it.
But that’s not the case here, at least from my perspective, as Apple invests huge amounts in developing their hardware and software and millions of developers around the world (ok, maybe thousands, I don’t know) and their families have benefited from this.
It’s not like they’ve inherited a vast real-estate portfolio that was amassed through violence and war (see British aristocracy, est. 1066) and have invested relatively little into it.
It kind of is like rent seeking though. Apple has developed a product with some software but not the software we call Fortnite. They are now acting similar to a company like ExpressScripts, who created an organization in the form of a platform so they could extract rents from both the drug makers and the (insurance company) buyers. If Epic keeps the game off iPhone, there’s some overall loss to consumers. If they keep prices the same but pay the Apple fees, they pay rent to Apple. If they raise prices across the board to compensate, consumers pay rent to Apple and there is some deadweight loss because of a likely reduction in demand.
I’m not sure why this is being downvoted. A huge consideration into whether Apple is truly anti-competitive should be if this has caused harm to consumers.
> I’m not sure why this is being downvoted. A huge consideration into whether Apple is truly anti-competitive should be if this has caused harm to consumers.
Prior to the 1980s, monopolies were considered bad (or at least extremely dangerous and suspicious) by default, and leveraging one to privilege your entry into another market was a huge no-no (though I'm not sure leveraging a monopoly to create a monopolized adjacent market would always have been seen the same way).
Robert Bork's theory of "consumer harm" as the guiding light of anti-trust enforcement (and further conceiving of "harm" mostly in the form of higher prices, or at least "value for money") has given corporations too much wiggle room and consequently led to a lot of contorted legal and economic arguments, substantially reducing antitrust scrutiny and enforcement (which was the whole point, AFAICT).
I'd say the difference is that the tax is not uniformly charged by a middleman. If a mall made its profit by charging 43% on every purchase, I would think of it (informally) as a tax.
But suppose that mall didn't charge for anything else? Electricity, water, security, gravity all came free, and you just paid only if you made a sale? (Ok, there's a $100 developer fee and the cost of a Mac and iOS device.)
Maybe Apple should offer two deals to publishers:
1) Pay £1,000,000 up front and keep all the revenue
2) Pay As You Earn.
I don't think that works: The customer gets vastly different experiences because in a shop you're benefitting from the rented space's protection from weather, etc.
The same is true in the case of the iPhone vs. Desktop + web experience: it's different. One way that highlights the added benefit of the iOS app store is that it's safer than the open web.
But you can purchase a Spotify subscription on a different platform (say, Web), and then use your account on iOS, enjoying the same experience as every other iOS user. The only part of the experience that's different is the one time sign-up process, for which Apple wants to charge a permanent 30% fee for the entire duration of the subscription (even if after that you happen to primarily use Spotify on Desktop or Android).
This puts Spotify in a weird spot. Their only options are:
1) Charge more to iOS users. This seems unfair to them and of course they will complain and blame Spotify when they find out they've been overcharged since Apple explicitly forbids informing customers about their fees.
2)Charge ~10-20% (depending on the share of iOS subscribers) to users of all platforms to compensate for Apple's fees. Why should I as an Android user pay extra so that someone else can make purchases on an iPhone?
3) Status quo - disable subscriptions on iOS entirely, make customers jump through the hoops to figure out how to purchase a Spotify subscription.
I don't have the exact figure, but I imagine that quite a few Spotify customers use their subscriptions on multiple platforms. Apple just wants to take a permanent 30% cut if the the initial subscription was handled through an iOS app. Maybe this isn't such a huge problem for game DLC where there is no fixed unit cost, but companies like Spotify need to pay royalties to music labels, etc.
If you don't like it then don't set up payment through Apple. Just set it on the web. Multiplatform subscriptions outside the Apple ecosystem are explicitly allowed. The reality is that users don't get to save money so they don't care.
It seems Apple prevents you from embedding the website, linking to the website, directing users to that website from the app, or giving a FAQ that includes information about how the user is expected to pay via the website. Users have to guess, or already know.
Watch the struggles LTT have gone through with the Floatplane app.
I would call that a tax (informally; I know it strictly doesn't meet the definition) and as a customer I would like to know about it.