Last.fm Co-Founder Blasts Apple’s 30 Percent Cut

24 Comments

Rhapsody has probably garnered the most attention for speaking out against Apple’s new subscription plans, but Last.fm co-founder Richard Jones probably takes the cake for most direct denunciation. Speaking in an IRC chat, Jones said “[A]pple just f****** over online music subs for the iPhone.”

Jones suggested that Apple (s aapl) was preparing to launch its own streaming music subscription service later in the year, which would account for the new policy. He argued that “many services can’t survive a 30 percent loss of revenue,” specifically referring to Spotify by name, saying he didn’t imagine its “margins are anywhere near 30 percent.” Jones’ comments echo statements made by streaming music company We7 CEO Steve Purdham, who told paidContent.org that a 30 percent cut to Apple “makes music subscriptions economically unviable.”

Apple still has yet to comment beyond Steve Jobs’ initial statement that “[o]ur philosophy is simple – when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing.” On the surface, it seems fair, but Jones points out that, “basically, people on the iPhone will *always* subscribe using iTunes, because it’s easier.”

If there’s enough evidence to support the accusation that Apple is squeezing out competitors in the music subscription business to make room for its own streaming service to be launched at a later date, then it’s possible that the company could be setting itself up for an anti-trust investigation. Similar problems could arise with books and video, where content providers operating on the iPhone — like Netflix (s nflx) and Amazon (s amzn) — would compete with Apple’s own products while having to pay licensing fees, which could be too much to swallow.

Ironically, Last.fm itself actually only recently became subject to Apple’s new policy. Until Feb. 7, Last.fm’s streaming radio features were free to registered users, on the web and in the company’s mobile apps. Now, streaming radio requires a paid subscription, meaning Apple will expect a cut as of Jun. 30.

While large-scale distributors and publishers might have a hard time swallowing Apple’s new rules, I’ve argued that the new system might actually be a boon to other developers and the App Store economy at large. Jon Crowley also has a good counterpoint at his blog to those quick to dismiss Apple’s move as nothing more than the product of unbridled greed. What’s your take?

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24 Comments

Adrian

Apple is perfectly entitled to do this. It’s their ‘closed ecosystem’ after all.

Don’t like having Darth Jobs’ ‘I’m altering the deal – pray I don’t alter it further’ tactics? Sop doing business with the Empire.

JakeJones

as a iphone app developer, i wish Apple would change their flat 30% structure to better appear to those us trying out ideas (vs. the Electronic Arts of the world).

i have both paid and unpaid apps on the store. my paid ones have been doing okay $$ wise. but I would be much more active in promoting and improving them if Apple had an approach that nurtured improvements.

For example, how about we align incentives so that for the first $5k, Apple charges 0%. That way Apple has an incentive to help all great apps get more visibility and above the $5k mark. At $5k some of us would recoup our time/$$, but we wouldn’t be rich.

Then shift to 15% between $5 – $10k, and then above $10k, go to 30%.

I don’t think Apple should get 30% if they aren’t really helping me with any marketing (eg, no one can find me since there are so many, so i need to do all the marketing work) and just for a transaction fee.

Eric

Its like Apple only has one field to store a %, its 30% on everything…

imo 30% is way too much, but it dont see how this relate to anti-trust regulations…

Pete Austin

I work for a b2b SaaS vendor. If we provide an iPhone app in the future, to access our system, do we have to offer subscriptions+renewals through App Store, with a 30% cut to Apple?

Only a restricted version of the UI would run on the iPhone, not the expensive cloud services. Particularly for renewals, which sell themselves, this seems grossly unfair.

Sridhar

Isnt it like AMZN’s move (actually forced by publishers) to hike ebook prices from a fixed 9.99$ ?
Wouldnt the cost now be ‘passed’ onto the user?

Jeffyg3

I love the ipad and iPhone, and moving from my Evo Android phone to the iPhone was the best decision I made with phoes as the iPhone makes Android look like a piece of crap with its better OS and content in the AppStore, but some of the restrictions Apple puts on the Store is horrible. If Apple is trying to push developers away from the iOS ecosystem to Android, then they’re doing a damn fine job with this subscription move. If I were a developer like the ones for last fm, they I woud just give the middle finger to Apple and go Andoid. I hope Apple wises up and realizes the stupidity of this subscription service.

Darren

As Android is all over Apple’s market and likely to squeeze Apple more in 2011, they may need some of these services on board. I can use Spotify on my iPhone, Squeezebox, PC and others. Is an Apple streaming service going to work on everything I use? I doubt it. I’m already ready to jump, ruin my music experience and I’m off and I’m guessing thousands of others do the same.

SteveW

and so i switched away from apple tv’s monopoly style… bye
Google TV with Android marketplace yessssssssssssss

Don

Best buy is charging a huge tsx on my software purchases, more than least 30%, those weasels. Best buy CEO stand up and speak and acknowledge your evil ways! Oh, goodness, that is capitalism.

Brian S Hall

I’m glad you brought up the “boon” aspect to all this. It appears Apple has developed an online marketplace for subscriptions — where they get 30%, publisher gets 70% — in a market which previously did not exist! Except for those who had little choice but to give it away and live off Google ad scraps.

For those interested, link ahead. A debate between a rumored Android hater and Apple hater re this new policy:

http://bit.ly/g47ivp

WRT the anti-trust investigation? Not gonna happen.

millhill

I think everyone is misinterpreting the at the same price rule. I don’t think it prevents from offering a more expensive subscription plan for iOS users just that you can’t circumvent the 30% by offering that plan for cheaper anywhere else.

ChalkOutline

Don’t forget, Last.fm, Rhapsody and all the others can promote subscriptions outside of the Apple eco-system (for example, on their own websites). If an existing subscribers downloads their apps and logs into the service, there is no money going to Apple. So I suggest they invest the 30% in marketing and promotion ;-)

Gaby

Wierdninja, $3 not worth it for an excellent source of unlimited use of a varied and huge music selection? Don’t care for scrobbling stats, new music recommendations, and a better-than-Pandora service? Then, yeah, maybe save those few pennies and buy yourself some over-priced coffee, instead.

Alex555

“Its like Apple wants money or something. If you don’t want to go through Apple’s channels, make and market a web app. Nobody’s forcing you to use Apple.”

You can’t: the only store that works on iOS is apple app store, unless you jailbreak your phone.

If you don’t abide by Apple rules, they can put you out of the iphone buisness. Therefore, once apple start a product on the iphone, competitors have a hard time competing.

His Shadow

Go to another platform is what means. Go see how many customers you get on Meego, Symbian, Android, WebOS…

Wierdninja

Apple 30% is kind of high, but, it is their product after all. I think eventually with the competition from Android, Apple will relax the 30%. But, until then, to be in the app store, you gotta pay the price. For the record, I don’t think last.fm is worth $3.00 a month. I already deleted the last.fm app from my iPad and iPhone. There are other free alternatives, and I do have my own music library. Last.fm is overvaluing their own worth.

saumilzx

The iPad or an iOS device is a terminal node in Apple’s Distribution Channel, unlike a desktop or another mobile device, which may be just a device.

So Apple can either charge a fee to host/download/promote apps, OR host it for free and share profits with app makers.

They have chosen to share profits- and I personally like it, as it gives an opportunity to all developers to enter and offer their products, and be as accessible as the big guys.

In fact, in the ’90s when the web took off, this was the promise, but it went unfulfilled, as it was tough to subscribe from an unknown site, and be assured of security of credit cards/user info/downloads/what if they shut down and not return remaining amount…

By encouraging an in-app purchase, apart from many benefits to consumers of ease and assurance (that the small guys content will *always* be there), the consumer’s decision about buying/viewing content is purely based on the value of the content- and not on how/if/where you get it from.

Cold Water

As I understand it, you can’t charge a premium for in-app purchases, and that’s going to end badly if iOS customers are worth 27 cents on the dollar less than everyone else.

Apple is unwilling to change course from a bad decision until the ship has already hit the rocks. They will only change this policy when iOS tablet sales go flat, just like they changed App Store policy after iPhone market share hit its plateau.

Tim Riggs

Its sounds like sour grapes to me…. Its a free market guys.. Wise up ad move on.. If you don’t like Apples way of doing things make it web based.. as its already been said…Nobody is forcing you to use them

Dayne

Its like Apple wants money or something. If you don’t want to go through Apple’s channels, make and market a web app. Nobody’s forcing you to use Apple.

Tom Reestman

Not that I’m saying Apple’s doing this, but squeezing people out of your own store is *not* anti-trust. Squeezing them out of other stores is.

Comments are closed.