Apple’s new subscription service – an anticompetitive problem?

Apple’s new subscription system is a really dangerous move by Apple. It has the potential to be anticompetitive, and to allow Apple to compete unfairly on pricing against direct competitors in the markets of hardware, software and content. Here’s an example of how:

Spotify is installable on a range of devices, and comes pre-installed on HTC devices.
Currently you can subscribe to Spotify in the UK and access it on your smartphone via their website by signing up for £9.99 on their website.
If they want to continue being able to do this for iPhone users, they now have to offer the ability to subscribe directly from the iPhone app, and when someone does this give 30% of that to Apple.

So now, instead of taking £9.99, Spotify now take £6.99 and Apple take £3.00.
In order for Spotify to maintain their take at £9.99 for a subscriber via the iPhone, they have to increase their price by 43% to £14.29. This means Spotify gets £9.99 and Apple now get £4.30

But maybe you don’t use an iPhone. You use an HTC handset with Spotify pre-installed on it and you’ve been really happy with your experience at £9.99

Spotify can’t sell you access for £9.99 though, because Apple insist that prices have to be the same or less as access via other platforms. So now, as an HTC user you now HAVE to pay £14.29 in order to get exactly the same access that you used to have for £9.99 directly because of Apple’s pricing clause.

HTC and Spotify, or Spotify or any hardware manufacturer for that matter… In fact, Spotify or any mobile phone provider cannot put together a pricing deal for free access for a few months to its service. 3 in the UK offer 3 months free Spotify access for contract holders with some of their devices. This offer could be interpreted to clash with Apple’s same price or less clause for iOS apps. Spotify could by Apple’s terms, have to offer the same deal for iOS users.

Then of course, Apple could finally launch their cloud access to your music on iOS devices after they purchased Lala. They could price it at £9.99 themselves, and negotiate better margins than Spotify have for access to content due to their sheer size and power in music sales. They take 100% of that £9.99 charge, but they’re forcing Spotify to charge more to get the same take, or forcing them to earn less money per transaction than Apple to compete on price, and Apple gets a cut of that too!

I can’t see Apple getting out of this one without someone, somewhere getting involved. I’m looking at you, European Union…


Evolution Made Us All

Evolution Made Us All from Ben Hillman on Vimeo.

%d bloggers like this: