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Comment by Spivak | Hacker News Reader

Can I get an MBA here to explain why this is a big deal? If Spotify can't make money on the Apple store why not just charge whatever they need to, pretend it doesn't exist, and go for customers through different channels?

Like does Spotify really need their iOS app to be an advertising channel for them? Is being able to sell premium on Apple devices really so valuable?

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When they advertise through other channels, a significant fraction of the users they get will turn out to be iOS users, who, regardless of what the CTA is, will respond by installing it on their phone through the Apple Store. They start out as free users. Apple then disallows any attempt to convert them into paid users via the app, and also via email, and also via pretty much any targeted channel. So Spotify would have to not only give up on the channel, but also mostly give up on that customer segment.

From the sound of it, the cost to acquire customers outside the app store ecosystem is significantly more expensive. Let's say it costs them x dollars. And gross profit per month is y dollars. The average customer stays for z months before churning. profit is thereby reduced by (y*z) - x. In the app store, x is somewhat reduced, but y is greatly reduced due to Apple's cut. At the same time, Apple has its own competing offering which it makes a first class citizen in the app store, violating policies it enforces on others. This further increases x, presumable to the point it doesn't make economic sense anymore. So they must then compete without the app store on an even more unlevel playing field where their x is much higher than Apple's x.

>If Spotify can't make money on the Apple store why not just charge whatever they need to, pretend it doesn't exist, and go for customers through different channels?

Because Apple's App Store and Google's Play Store are where everyone is.

I mean it's where users download apps but it's not the only place people sign up for subscriptions.

If customer acquisition is so expensive outside of the App Store then that's an argument that Apple's "we get 30% of all revenue made through us when you use our platform as a funnel" might actually be too low.

Except apple then released their own competing service that doesn't have to play by the same rules. In effect this raises the cost of customer acquisition both within and outside of the app store. Spotify's take on things basically says as much. They were willing to work in the app store and pass the apple tax on to consumers until apple created their offering and made that too untenable.

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