Business News Digital

Spotify and Netflix both make moves to reduce payments to Apple

By | Published on Thursday 23 August 2018


Spotify is no longer allowing new subscribers to sign up through its Apple iOS app, which means it won’t end up with new subscribers where subscription monies have to be shared with the tech giant, aka its main competitor in the streaming music space.

The move was spotted by MusicAlly and TechCrunch while reporting on a pilot by Netflix to also remove the option to pay subscription fees via its iOS app in some countries. They both point to a page on Spotify’s website, updated earlier this month, that says: “It was possible to pay for Spotify Premium using Apple’s in-app payment system (iAP). However, this has been discontinued for new subscribers”.

Apple’s policies regarding in-app payments on its iOS system have proven controversial over the years. The tech giant takes a cut of any transactions made through its app platform, including on regular subscriptions. Apple’s standard cut is 30%, although it did reduce that down to 15% on regular subscription payments after a time.

For streaming music companies whose best-case scenario profit margin is 30%, having to hand over that sum (or even 15%) on any subscriptions taken through Apple’s platform is unviable. Therefore most streaming music platforms pass on Apple’s cut to the customer. But that then makes a Spotify subscription seem more expensive than an Apple Music subscription when viewed within the iOS ecosystem.

Of course the Spotifys and Neflixes of the world can sell subscriptions through their own platforms without paying any cut to Apple and those subscribers can then access said services via their iOS devices. But Apple bans services from pointing this out to customers within their iOS apps, which is the policy that has proven most controversial (and why Apple’s in-app purchase cut has proven more controversial that Google’s equivalent on Android).

App makers that have tried to circumvent this rule – usually by providing customers with an in-app link to their website for payment – have generally seen their apps blocked by the tech giant. Spotify isn’t doing this. Instead it has just made it impossible to sign up via its iOS app, presumably hoping that any potential subscribers will know to visit its website and hand over payment details there. It’s not entirely clear how Netflix is playing things and whether it is planning to flout any Apple rules.

Various content-on-demand platforms have expressed concerns about how three of their big competitors – Apple, Amazon and Google – all also control devices, operating systems, stores and/or other channels that they rely on to sell their services. Indeed the big three have also been involved in spats with each other on this issue.

There has been much debate on whether the policies of the big three in this domain, and especially Apple, actually violate competition law. And when various European streaming music services, including Spotify, set up a new trade body in Brussels last year, it seemed that lobbying on this issue was a priority.

All of which means, even if recent moves by Spotify and Netflix do reduce the two companies’ monthly payments to Apple without negatively impacting on their new subscriber sign-up rates, we can probably expect plenty more griping still to come on this issue.