Spotify Wants to Avoid Paying Apple Its 30 Percent Cut of In-App Transactions

spotify apple music

Spotify's paid subscription (without Taylor Swift) costs $9.99 per month. Unless you sign up through the Spotify app, in which case it is $12.99 per month. This is because Apple charges developers 30 percent of any in-app transactions. While Apple dropped this to 15 percent for Apple TV subscriptions like HBO NOW, service providers like Spotify are still paying the full percentage. The launch of Apple Music with Beats 1, at $9.99 doesn't help. Unlike Apple, Spotify offers a free ad-based tier, while Apple only offers a three-month free trial. But Apple has used its leverage, and pocketbook, to bring on Taylor Swift, who pulled her songs from Spotify, increasing the pressure on Spotify, Rdio, Pandora, and other streaming services.

Spotify

So, in an effort to fight back, or out of genuine goodwill to its customers, Spotify sent out an email campaign letting them know they can save $3 per month by subscribing directly on Spotify's website for $9.99 per month instead of within the app for a$12.99. Either way, Spotify gets the same revenue, but its end users can get an extra cup of coffee each month if they use the website. Spotify's efforts might attract the wrath of Apple, as it's taking money off the table, but those two are already at odds, and Apple has already drawn the unwanted attention (and lawsuits) from the government over e-book price fixing. It probably doesn't want or need to get accused of manipulating the music industry as well.

Incidentally, HBO, Netflix, and Amazon have similar subscription services, but they do not charge a premium when users subscribe via the app. The companies just make less profit when using In-App purchases, or they do not offer In-App purchases at all, and direct the user to subscribe or make purchases via the website, and direct links are not allowed. But there is the convenience of having Apple do the billing and directly depositing a large check every month. Apple makes purchases so easy, with Touch ID and iTunes gift cards, that many vendors just accept the 30 percent as the cost of doing business. Apple takes care of credit card fees. Plus, users can often buy iTunes gift cards at a discount thanks to Staples, BestBuy, and Costco while Apple pays the full value to developers. For example, I can usually buy a $100 iTunes gift card for $85, using my credit card in a store.  The credit card company gets a cut, as does the storefront. Apple might end up with $80 of that money. If I use that $100 iTunes gift card to buy a $100 app, Apple "gets" $80 and still pays the developer $70. That's a bargain.

Spotify Edu

Spotify might want to drop its $12.99 in-app subscription price to $9.99, and just be happy to make less profit, while remaining competitive with Apple Music. In fact, $8.99 might help create some differentiation. To Spotify's credit, it offers a three-month trial of its premium subscription at $0.99 per month and a student rate of $4.99 per month. But if Spotify thinks competing in the streaming market is tough now, it's only going to get tougher.

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Todd Bernhard's picture

Author Details

Todd Bernhard

Todd Bernhard is a bestselling (6+ million downloads) award-winning (AARP, About.com, BestAppEver.com, Digital Hollywood, and Verizon) developer and founder of NoTie.NET, an app developer specializing in Talking Ringtone apps including AutoRingtone. And his profile photo is of the last known sighting of Mr. Bernhard wearing a tie, circa 2007!

An iPhone is almost always attached to his hip or in his pocket, but over the years, Mr. Bernhard has owned an Apple Newton, a Motorola Marco, an HP 95LX, a Compaq iPaq, a Palm Treo, and a Nokia e62. In addition to writing for iPhone Life, Mr. Bernhard has written for its sister publications, PocketPC Magazine and The HP Palmtop Paper.