My response to Apple's response to Spotify

Apple responds to Spotify. Daniel Jalkut and I predicted most of this response on Core Intuition a couple days ago. I’m going to quote a few parts of Apple’s response and comment.

Eleven years ago, the App Store brought that same passion for creativity to mobile apps. In the decade since, the App Store has helped create many millions of jobs, generated more than $120 billion for developers and created new industries through businesses started and grown entirely in the App Store ecosystem.

Apple likes to brag about how much money they’ve paid to developers, but they leave out how much they’ve kept for themselves: about $50 billion. To Apple, they are doing us a big favor by letting us ship iOS apps.

We’ve approved and distributed nearly 200 app updates on Spotify’s behalf, resulting in over 300 million downloaded copies of the Spotify app. The only time we have requested adjustments is when Spotify has tried to sidestep the same rules that every other app follows.

It’s very important to remember that Apple’s rules are not laws. Apple’s rules have changed over the years, and especially around in-app purchase it often feels that they are applied inconsistently. Because Apple runs the platform, they can make any guidelines they wish, but there isn’t necessarily any inherent legal or moral justification in specific rules. We shouldn’t accept that all of Apple’s rules are fixed and cannot be improved.

When you get to the scale of the App Store, there are also new monopoly and anti-trust questions. For more about this, see Ben Thompson’s article on Stratechery.

Back to Apple:

A full 84 percent of the apps in the App Store pay nothing to Apple when you download or use the app. That’s not discrimination, as Spotify claims; it’s by design.

In 2011 I wrote a blog post with the premise that Apple made a mistake with how they handle free apps in the App Store, and what followed was years trying to make up for that mistake because of the burden of running the App Store. I think there was some truth to that, but now the business is very different. The App Store is a huge money-maker.

And we built a secure payment system — no small undertaking — which allows users to have faith in in-app transactions. Spotify is asking to keep all those benefits while also retaining 100 percent of the revenue.

And yet in the previous quote, Apple says that 84% of apps pay nothing and they are fine with that. Uber pays nothing to Apple. Games with ads pay nothing to Apple. Why is it wrong for Spotify to also want to limit how much they pay to Apple? The line Apple has drawn around in-app purchase is arbitrary. They could just have easily restricted Uber accepting payments, or banned third-party ads.

Just this week, Spotify sued music creators after a decision by the US Copyright Royalty Board required Spotify to increase its royalty payments. This isn’t just wrong, it represents a real, meaningful and damaging step backwards for the music industry.

This is irrelevant to Spotify’s complaints about the App Store. While I think Spotify’s argument would have been stronger if they had focused on a couple of their core complaints instead of mixing in issues such as Apple Watch development, Spotify didn’t bring up other concerns about Apple’s business that do not relate to the App Store. Apple trying to interject Spotify’s relationship with musicians is whataboutism.

Overall, Apple’s response isn’t very convincing to me. There are still 2 fundamental problems with the App Store: exclusive distribution and exclusive payment. In that post from 8 years ago, I concluded with:

Apple, want to charge 30%? Go for it. Want to make the submission rules more strict? Fine. Want to adjust how you run the App Store to reflect what’s happening in the market? No problem. Just give developers an out. We are going to be back here year after year with the latest controversy until exclusive app distribution is fixed.

I think I’ve been proven right about this. This issue will never go away until Apple allows side-loading or makes it easier to let customers pay outside the App Store. In the meantime, I’ve been arguing for a 15% cut instead of 30% for all paid downloads and in-app purchase, which would go a long way to making this easier for developers.

Manton Reece @manton
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