Hey y'all, it's Austin. Last year, my wife made a frustrating discovery: Since late 2015, she had been paying $13 a month for Spotify, instead of the typical $10 subscription cost for access to the music-streaming service. The reason for the price hike? She'd originally signed up through Apple Inc., which takes a 30% slice of App Store sales, a revenue cut Spotify Technology SA has said is unfair and that forced it to raise subscription costs for those customers. For my wife, that essentially meant paying Apple a premium each month, for 55 months, simply because she didn't subscribe directly through Spotify's website. Apple established the 30% tech tax starting nearly two decades ago, with the iTunes Store. It took about 30 cents of a 99-cent song and used the same model when it introduced the App Store in 2008. The fixed 30% fee has since sparked a global war between software makers and technology giants, leading to antitrust scrutiny in Washington and Europe and fierce corporate lawsuits, such as the Epic Games Inc. trial against Apple over developer fees, which kicks off Monday. At stake are tens of billions of dollars annually and future control of the app economy currently dominated by Apple and Alphabet Inc.'s Google. But there are already signs the 30% rate, long standard across the tech industry, is dying, regardless of courtroom verdicts or government intervention. Last week, Microsoft Corp. said it'll soon reduce its take from PC games sold through the Windows store to 12%, from 30%. In March, Google's Play store halved its 30% developer fee to 15% for the first $1 million in revenue each year. Even Apple chopped its 30% cut in half for developers generating $1 million or less a year. But for larger developers on Apple's platforms, such as Spotify and Epic, which are still subject to the 30% fee, the fight goes on. They've claimed these fees are too high and anti-competitive and that the major app stores often have convoluted, if not arbitrary, rules, including Apple forcing them to use its proprietary billing system. Apple, meanwhile, has argued that the tremendous success of their mobile products has birthed a massive business for developers and that it has every right to share in the spoils, citing its investments in platform development and oversight. Apple has also noted that it takes a 30% cut of subscriptions only for the first year and then just 15% afterward. While this drama plays out, it's inevitable the economics of the app ecosystem will continue to evolve. This is partly due to ongoing public pressure. On Friday, European Union regulators said in an antitrust complaint that Apple is abusing its power as a "gatekeeper" for app makers. Apple responded that the EU's "argument on Spotify's behalf is the opposite of fair competition." Charging less can be a competitive advantage. Microsoft's move last week gives game makers an enticing reason to prioritize the Windows store over Valve Corp.'s Steam, which still charges a 30% fee. Likewise, Spotify, in building out its paid podcast network, said last week that participating in its subscription platform will be free for the next two years and then require a mere 5% cut of revenue starting in 2023. That's significantly less than the 30% of sales Apple will take from podcast subscriptions in their first year. What might eventually kill the 30% fee for good is customers realizing they're the ones often footing the bill. When my wife found out she had needlessly paid an extra $130 to Apple for her Spotify subscription, she immediately cancelled and set up a new account directly with Spotify. Apple's cut of those sales? 0%. —Austin Carr |
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