I’m a little late to the party here, but I also don’t really feel like we ever got any closure on the entire App Store policy and Spotify’s complaint against.

How The App Store Works

When Apple opened up the App Store to developers back with the iPhone 3G, Apple allowed the developers to charge whatever they wanted for apps. Apple of course, would get to keep 30% of the money that customers paid for apps and would pay the rest to the developer.

So if a game charged $1, Apple would get $.30 while the developer would get $.70.

Apple uses that 30% to maintain the App Store, pay people to review apps, store the apps, and even market them. While Apple has become the largest company in the world (at one point) and it just seemed like money would be flowing into their pocket, they do have cost associated with the apps store.

In 2011, Apple brought subscriptions in. Subscriptions followed the same model as the App Store. Users could purchase subscription inside apps and Apple would process them all and keep 30% of each payment. This kept money flowing in fro both the App developer and Apple.

After years though, Apple wasn’t having to do things for those customers that had been subscribing in an app for years now. Developers were starting to balk at the amount of money that Apple was taking.

In response, in 201 Apple changed the rules again. Apple would still take a 30% cut of the cost of an app for 1 year and after that Apple would only take 15%. The developers began to get more money and Apple still gets a share to help support the development and support of the app store.

The Rules

So before I really get to the Spotify issue, there’s another rule that comes into play. In the App Store guidelines, Apple forbids any app from providing a link to a website to sign up for an account that requires a payment.

Apple does allow companies to allow users to sign up on their own sites, but they don’t allow the app to link to it.

For example, if you want to sign up for Hulu you’d have a few options.

• Sign up in the App using Apple’s In-App-Purchase system (this is a subscription so you will be charged monthly). This is the only way to sign up within the app. There aren’t any links to the website.
• Go to Hulu’s website and sign up. If you go this route, you’ll still be able to log in to Hulu in the app and Apple doesn’t get a cut.

Netflix offered In-App-Subscriptions for years. Recently though, Netflix has removed the ability to do that in the app. There is nowhere that it can say to go to the website to sign up either. Netflix is banking on people knowing the website to sign up.

Spotify

Spotify was one of the first streaming music services to really go big. I would argue that Spotify wouldn’t be nearly as large as it is now without Apple’s App store.

But the problem is that Spotify isn’t really making as much money as they like. To get on the Apple system, Spotify will either have to give up 30% of their In-App-Subscription to Apple who has become a competitor or it will hope that people will sign up on their website.

Spotify even tried to raise the prices inside the app from the standard $9.99 to $12.99 to offset the price. This was also breaking the App Store rules as you can’t offer a better deal outside of the app.

Spotify was rightfully troubled by the cut they are giving to Apple, but things got to a head when Apple unveiled Apple Music, a service that rivals Spotify.

Spotify even went so far as to create a website that claims that Apple has a monopoly and lists their complaints against the App Store and Apple. I don’t agree with many of the things they complain about, but they do have some points.

Breakup The Machine?

While it doesn’t seem fair to Spotify that Apple doesn’t have to pay the 15-30% subscription fee to anyone. With Apple’s rules, Spotify is facing an uphill battle.

It all makes sense in the grand scheme of things. It has become such an issue that many of the politicians that will be running for a chance at running for President are bringing up the idea to break up the larger tech companies. This way companies that compete can’t use things like App stores to their advantage.

This way, Apple wouldn’t control the App store and would have to pay a company if they wanted to compete.

But here’s the thing, last time I checked, Target still sells its own brand in its stores. Every grocery store seems to have their own brand that they sell.

I don’t think it would be right for Apple to break off the App Store to someone else or break the company up so that they couldn’t reap all the advantages of the App Store like they do now.

I don’t think that’s the right move. Apple has every right to compete in its own store and I don’t think that they should break the store up though.

Suggestions

I’m not sure that any of these would really work, but here’s how I would fix the App Store:

Lower the share that Apple gets to 20% for purchases or the first year, and then lower that share to 10%.

This would still allow Apple to bring in money. They are starting more services and that would help make up the loss of revenue from the App Store. It would also promote more developers to get into the App Store.

Allow developers to place links to their sites to sign up.

One of the reasons that I sign up in Apps is because it is so much easier to manage. If I want to cancel a subscription I just cancel it on the app. Some subscriptions make it near impossible to cancel.

Plus, I trust Apple with my information more than I trust some of these other companies out there. Apple has my information so I don’t have to enter it every time.

If given the choice, I would most likely pick the Apple route over going to websites to sign up, but I would like to be given the choice.

Wrap Up

I get Spotify’s point. It is hard to compete against Apple when they enter a market. Is it bad enough where they need to rip the store away from Apple? No.

It also doesn’t help that Spotify is trying to lower the amount that it pays artist themselves. They don’t want to spend the money on the people that create the thing that they sell. Apple recently raised what they paid to the artist, so I think that’s also a hard sell.

I do wish that Apple would loosen up the App Store guidelines though. I think that if they do allow links inside Apps, they will still make money because they make the better product to purchase things inside an app.

What do you think? Do you see Apple as a monopoly? Should they be broken up?