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App Store and content taxation

Posted by Thomas Wittenburg on 25/07/16 15:52

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30%. The price to sell your items on the App Store. Whether it's an app or products you sell through the app. This is neither new nor surprising. And it comes as no surprise that Apple enforce strict regulations and tries to prevent developers and content providers from circumventing them. Still, it caused quite a stir earlier this summer when Apple refused to approve a new version of the Spotify app. Does Spotify have a case and how does it affect other paid content as news platforms?

Are Spotify evading App Store rules?

Spotify continuously attempts to convert listeners from their free platform to paying customers. On iOS the conversion is made easy by offering an unlock module in the app. To avoid losing money on the conversion, compared to signups on Spotify's website, they add Apple's fee of 30% to the price. Thus, customers who convert on their iPhone or iPad pay more for a subscription.

Like any supplier competing for customers in an unforgiving market, Spotify knows that price is an important parameter. If they can save its customers 30%, more customers are likely to convert. In recent months the music streaming service have launched aggressive campaigns and deals on their Premium subscription. For all who sign up via the website. Outside the app. Apple rightfully sees this as an attack on the term and conditions for the App Store.

Equality for all?

Other industries are in a similar situation. Apple demands an in app purchase fee on all transactions related to the App Store. Whether it is music, video streaming or newspaper content. The conventional approach is to put the fee on top of the product price. A digital newspaper that costs 2 Euro on a website will cost 2.6 Euro in the iOS app. But that's not the whole story.

Apple recently launched differential pricing for subscription services. In short, the supplier gets up to 85% of earnings with a subscription renewal. Developers and vendors could therefore afford to lower the price of subscription renewal. A Spotify subscription purchased through the iOS app for 12.99 Euro will be 1.5 Euro cheaper on renewal. A strong argument for customers deciding whether to continue a subscription. At least in theory.

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Payment becomes more complicated

The 15% might still seem like much to both suppliers and customers. But future content providers will not fail to include payment fee for different platforms in their pricing.

For many media companies, it is no problem. Their users are often existing subscribers who convert to apps and e-newspapers. However, with an increasing focus on mobile first and only mobile it becomes increasingly difficult to ignore the App Store as a payment platform.

Spotify attempted to make users bypass the App Store payment module and lure them directly onto the website. This practice is in direct conflict with the App Store terms. How aggressively Apple enforces these regulations may obviously vary, but there is only one way for suppliers to get around the so-called Apple tax: Get customers to subscribe before they download the app.

Topics: Knowledge

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