Oh, what a sad day to be Spotify, or any other music start up that has hopes of making money through the iPhone.
You see there is no doubt that iTunes is going to use a cloud based model for digital music distribution in the near future. That will make iTunes compete with other streaming services such as Spotify.
Prior to Apple’s recent announcement, a streaming music service could charge an in-app subscription fee and keep 100% of the profits. With Apple’s recent announcement, now Apple will take 30% of that subscription.
As an artist, I’m sure you already know that for any iTunes sales that you make Apple takes 30% of you 99 cent track. So really, is asking subscription services to fork up 30% that far fetched?
Apple has built an amazing product that is desired by many because it works so well. Music services such as Spotify were using that service free of charge until now. Apple realized how much money they were leaving on the table and set down this law before things got really messy in the digital distribution world (music, movies, print).
…This in-app subscription system will undoubtedly be one of the most user-friendly systems that subscription billing has ever seen.
…No need to enter billing addresses. No need to enter credit card numbers. If you want to unsubscribe, it’s one-click. Change you subscription terms? One-click. What was once a nightmare of dozens, or hundreds, or thousands of different backend systems (or worse, phone calls) is now all taken care of thanks to the iTunes ecosystem…
…This new system sucks for companies that provider subscription services, as they’ll now be forced into Apple’s way of doing things and must pay them 30 percent for it. But if it leads to a massive amount of new customers, it could actually be a very good thing…
But wait, although this could be a “very good thing” for gaining new customers, Kyle over at Hypebot accurately pointed out that any growth in the digital music industry is good for Apple. Legal or illegal.
- If music piracy continues to thrive, Apple wins; it sells the iPod.
- If fans buy music legally, Apple wins; it controls 66% of the market.
- If cloud music takes off, Apple wins; it takes 30% of their rival’s profits.
- If Apple starts a subscription service, it wins; the company can position its mobile app as being cheapest and most integrated one in the market (more @Hypebot)
So is this new 30% Apple’s way of capitalizing on the business created because of their sweet phone? Or is Apple getting ready to launch the iTunes Cloud and wants to knee-cap their competitors? Probably a little of both.