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Comment by RayVR | Hacker News Reader

They’re not milking anything. Apple has, as far as I know, always charged 30%. What has changed is the way we buy and pay for apps and services.

Everyone wants to move to the subscription service model and Apple has developed rules accordingly.

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The issue I see is this, Apple Music does not play fair, it is similar priced with the competition but it is in fact subsidized by Apple, any application or service it is in danger because if Apple wants and it is competent it can create an Apple version of it and give itself smaller prices(or free), native integrations that the competition does not have. This is not fair for the users (it may be fair f5rom other POV but not for the users, fair competition is better look like IE as an example)

Apple Music is priced about the same AND they pay the artists more. Sorry but what's the scam?

Consumers pay the same price. Artists earn more. Who cares how Apple shuffles fictional numbers in their internal accounting?

The thing is obvious and I will explain it again, using a made up example so less emotions are attached

1 I have an app or service say X and I sell it for 5$ and this is the lowest price I can afford

2 Apple wants a 30% cut, so I will have to make my app 7$ .

all is fine so far, the problem is at step 3

3 Apple clones my app names it iX(my original app was named X), makes it 5$ (or bundles it with some gift cars or other deals if you give them more money).

4 Apple's iX gets access to private APIs, is cheaper(or free) since is subsidized, Apple also forces me not to remove from my X app any links to my webpages if I sell things there

Now, please, consider THE USER, what does the user get:

- the user gets less options if my app X is killed or I remove it from the store

- the user pays more if I raise the prices

- the user does not see m,y sale pages because I can't show it in the app

- the X app that some(a big number of ) users consider it better can't access native features like iX can

So, get 30% or whatever you want but compete fair.

I get your point. I got your point the first time. But there are a lot of "ifs" in your hypothesis.

Meanwhile Apple is not attempting to undercut Spotify in the retail space. And they are paying artists substantially more than Spotify for the music so they're clearly not attempting to run a more profitable business.

There is no IF, all Apple apps have unfair advantages, not only financial but I also mentioned access to private APIs.

The user looses when there is not enough competition, like you get stuck with a worse browser (but in this case this may be a deliberate thing to protect the app store)

With that idea, we should forbid grocers from charging less in-store for their brand name items that compete directly with mainstream brands (Safeway Select, WholeFoods 360, etc)

Can you comment on my point and not add an "What about x" ? My point is about the user, do I benefit is a supermarket makes it own products cheaper, Yes , but if it makes my preferred product more expensive to force me to buy the product they want, this does not benefit me,

again, tell me about what the benefit is for the user/consumer not what about x, the market shares, the laws in US, free market ....

The consumer gets an equivalent service for cheaper, that is like literally the definition of consumer benefit in economics. If you truly believe that X is better than iX than you can pay the extra money for X, but if iX is just as good and is cheaper than X the consumer benefits because they can spend less to get the same service.

This is wrong, because you get it cheaper because the better product price was inflated.

I thought the problem was, that their own apps do not have to pay 30%, so they can easily replace any app with their own, if they choose to.

But that's a too simple way to look at it. I am not trying to defend the 30%, but just saying 'their own apps do not have to pay 30%, so they can easily replace any app with their own' doesn't go far enough. They got two options: a) make a 30% on $10/month from Spotify -> $3 in Apple's bag for no work or effort at all. Almost pure profit. b) sell their own music solution for $10/month (INSTEAD of that customer going to Spotify) and have to pay out X to musicians, companies, younameit. Higher hosting and streaming costs too. If X>$7/month Apple loses. If it's $7 Apple earns as much but no more than with option a), if it's less than $7/month only then Apple wins.

  $3 in Apple's bag for no work or effort at all

I agree with most of what you said, but come on. Running (one of?) the biggest software distribution and payment processing systems on the planet is hardly "no work or effort at all".

This is the same sort of rhetoric that calls dropbox a weekend project.

True that. I agree with you. I overstated.

There's credit card costs etc associated with that as well. Doubt it's $3/user per month though and the distribution costs are minimal (only downloads of app updates) compared to the streaming costs (which could be multiple GBs every month).

Apple: $ to build the app, $ to maintain the music label relationships, $ to manage paying royalties, $ to manage server infra, $ for bandwidth.

Spotify: $ to build the app, $ to maintain the music label relationships, $ to manage paying royalties, $ to manage server infra, $ for bandwidth, $ to Apple for the "privilege" of being listed on the App Store and using Apple's payments system (which they have no choice over).

Both companies have the exact same base costs to operate their service. But Apple gets to charge for subscriptions through the app for free, whereas Spotify does not. That's literally the only difference cost-wise, and IMO Spotify is correct to consider that anti-competitive. Whether or not Apple would make more or less money shuttering Apple Music and transferring all their customers to Spotify is completely irrelevant.

And no, I don't consider "creating and maintaining an iOS payments system" to be a part of Apple's costs here. That would exist even if Apple Music did not, and the marginal cost of having Apple Music use that system is virtually nil, certainly not 30% of Spotify's subscription fee.

From what you're saying it sounds like Spotify should have built a smartphone platform. It's not free for Apple to build and maintain the App Store and everything that entails—from API documentation to the rock solid software platform that is being kept up to date and is astonishingly robust compared to any internet-connected consumer platform that came before it.

Some apps pay for that effort with a cut of the app's retail price. Spotify pays for it with the tiny fraction of their users which (a) pay for it at all and (b) pay for it through their iOS device.

It's not free to build a platform, but I believe the cost has already been paid by the users when they buy their device.

No reason to have users pay twice, when they buy their device and when they try to use services on the device they already have.

The cost for the hardware platform is paid by the customer when they buy the phone.

The cost for the store platform is paid by the developers when they sell the app.

There is zero evidence that Apple does not pay the 30%.

We don't see the internal accounting but it's quite likely they do. Internal revenue distribution is standard practice in almost all enterprises.

There’s clearly a difference between moving money from one internal balance sheet to another, and moving it to an entirely different company’s balance sheet.

>> Internal revenue distribution is standard practice in almost all enterprises.

This is both true and generally irrelevant for business, except for the particular matter of taxation.

You couldn't be more wrong.

What has changed is Apple has a direct competitor product.

Firstly, that competitor product has technical advantages as it can access APIs that Spotify cannot (SiriKit, background audio on earlier versions of WatchOS).

Secondly, that competitor product is at a financial advantage because of the 30% fee.

It's not the fee itself that's the issue. It's that Apple is (arguably) using it's control of the platform to compete unfairly against Spotify.

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