The likes of Spotify, TIDAL and Pandora will be breathing a sigh of relief today.
Apple has just announced that it is cutting the revenue share it demands from recurrent third-party subscriptions secured through its AppStore.
Disparagingly referred to as the ‘app tax’ by third-party developers, this rule has traditionally seen Apple take 30% of any subscription arrangement agreed through an app on its devices.
That’s why Spotify and TIDAL, for example, have traditionally charged consumers one third more to gain access to their standard premium tiers via their iOS apps than via their desktop sites – ie. $12.99 instead of $9.99 a month.
Apple enforces this ‘app tax’ is paid by refusing to allow iOS apps to redirect people to a browser-based sign up.
When you consider that Apple Music‘s post-free trial cost is $9.99 a month, you can see why its rivals feel the odds on iOS are stacked against them in the competitive world of music streaming – and why there have been rumbles of anti-competitive action being taken.
Spotify has even encouraged its user-base to sign up via desktop and save $3 a month in an email campaign (see inset).
Now, though, Apple has cut this ‘app tax’ from 30% to 15% for users who have been paying for more than 12 months. (New subscribers will still be expected to pay the 30% surcharge for a year.)
In a new note to developers, it said: “Effective June 13, 2016, the revenue structure for auto-renewable subscriptions will change. Within a subscriber’s first year of an auto-renewable subscription, you receive the traditional 70% of the subscription price at each billing cycle, minus applicable taxes.
“After a subscriber accumulates one year of paid service, your revenue increases to 85% of the subscription price, minus applicable taxes. All current subscriptions are eligible.”
In other words, Spotify and TIDAL now have a bit of a decision to make:
- Do they keep charging existing iOS-signed up customers $12.99 a month but grab an extra 15% of the revenue – ie. a boost of $1.50 per person per month. Or do they come clean and reduce the total these people are paying each month?
MBW noted last week that, across its 28m paying customers, Spotify would have only needed to raise its average per-user monthly subscription income by $0.58 in 2015 to be a profitable company.
Interestingly, Google has matched Apple’s move, bringing its Android app subscription revenue to 15%.
This is less big news for the likes of Spotify as, unlike Apple’s App Store, Android apps are permitted to re-direct users to direct (ie. $9.99) sign-ups through a browser.
In addition, Apple is for the first time allowing app developers to charge different prices in different territories.
It explained in its latest dev update: “territory-specific prices and will have access to 200 price points across all currencies”.Music Business Worldwide