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Last.Fm Founder Criticizes Apple Over Music Subscription Fees 218

An anonymous reader writes "Apparently not one to mince words, founder Richard Jones lambasted Apple for their recently announced App Store subscription rules. 'Apple just ****ed over online music subs for the iPhone,' Jones wrote in IRC earlier this week. Taking things further, Jones angrily theorized that by effectively preventing subscription services like Rhapsody and Spotify from thriving on iTunes, Apple is paving the way for its own music subscription service where it will, surprise surprise, face little to no competition." Jones argues that music service subscriptions don't operate at margins "anywhere near 30%," and that the dramatic loss in revenue will be tough to survive. Another article suggests that Apple's fee structure will highlight the publishing industry's broken business model. Some analysts expect it to raise antitrust concerns, though the wave of Android tablets hitting the market may stifle that sentiment.
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Last.Fm Founder Criticizes Apple Over Music Subscription Fees

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  • Re:Oh Jonesy (Score:5, Informative)

    by VGPowerlord ( 621254 ) on Friday February 18, 2011 @03:04PM (#35246722)

    Jones argues that music service subscriptions don't operate at margins "anywhere near 30%," and that the dramatic loss in revenue will be tough to survive.

    Then price your products accordingly. People are willing to pay for iPads because of the convenience - they will pay for iSubscriptions for exactly the same reason.

    According to new stories I've read from other sites on the same subject, Apple forbids them from charging more to iOS users than they do through their own web storefront.

  • Re:Oh Jonesy (Score:5, Informative)

    by DdJ ( 10790 ) on Friday February 18, 2011 @03:24PM (#35247050) Homepage Journal

    People were doing that. The thing is, if you've already got development and distribution and promotion and all that stuff handled otherwise, factoring in 30% for essentially nothing but payment processing is pretty much unprecedented.

    Something like 2% or 3% is closer to normal. Given the tie-in to an existing and popular gift card ecosystem (iTunes cards) and the near universal participation in the system by iOS users, maybe even 5% would have been reasonable. But 30%, for just payment processing? Even as an avid iPhone/iPad/MacOS user myself... too much, too much.

    (Unless you're allowed to charge more to make up for it. That'd be better.)

  • Re:Easy Fix (Score:4, Informative)

    by jpmorgan ( 517966 ) on Friday February 18, 2011 @03:54PM (#35247474) Homepage

    No, just no. If your profit margin is less than 30%, a 30% cut to per subscriber revenue means you're losing money on every customer, before any fixed costs. You can't just "make that up in volume".

    If you loose $0.50 on every customer, and you have 1 million customers, you just lost $500,000. If you try to make that up in volume and sign up another 9 million customers, you're now losing $5 million.

  • The problems are.... (Score:5, Informative)

    by gstrickler ( 920733 ) on Friday February 18, 2011 @04:00PM (#35247550)
    There are several flaws with Apple's new subscription model. According to Apple's =press release:

    “Our 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,”

    In theory, I agree, and so would most publishers. However, Apple's model doesn't operate that way:

    1. Not all purchases made through an application are new subscribers, it may be an existing subscriber who is renewing. As the policy is written, Apple would still take 30%
    2. Apple handles renewals, including automatic renewals for all subscriptions purchased via Apple. This means that Apple actually making the subscriber a customer of Apple, not a subscriber of the content provider. That's true even if it's an existing subscriber who renews via Apple. That is not how existing subscription models work, if you sell a new subscription, you get an one time commission, and all the renewals are handled by the publisher with no additional commission paid.
    3. The publisher is prohibited from providing a link to their own online subscription signup/renewal from within an application they wrote, and the MUST provide a link with all the same subscription options within the app. All those must go through Apple, even if it's for an existing subscriber.
    4. Even though the customer owns the iOS device, the publisher wrote the application, creates the subscriptions, and delivers the content, they are prohibited from making it convenient for customers to deal (or continue to deal) directly with the publisher from within the publisher's own application. In most cases, Apple isn't even hosting the content or providing the bandwidth for delivery. In short, the only way Apple might be involved is that they made (and sold) the iOS device, and is in accepting a payment (and only because of a policy that prohibits the publisher from making it easy for the customer and publisher to do business directly with the publisher). That's not worth 30% by any measure.

    The policy as written is completely inconsistent with nearly all existing subscription business models, makes it easy for Apple to "steal" existing subscribers and take 30% of the subscription fees, and makes it more difficult for existing subscribers to subscribe or renew with directly with the publisher. It's completely inconsistent with the stated intent and philosophy. If not corrected, it will dramatically reduce the available of non-iOS specific content services such as Netflix, Pandora, Last.FM, and Rhapsody on the iOS platform. Fix it now Apple.

  • Re:Funny... (Score:4, Informative)

    by gnasher719 ( 869701 ) on Friday February 18, 2011 @04:45PM (#35248174)

    At half a cent per stream (and 1.5m plays a month) they would make 75k a month A MONTH. That would be 900k a year. There really arn't that many artists that I think should receive 900k a year. The ones who do deserve that, will have no issues getting the 1.5 million plays a month.

    Go straight to your school and ask for your money back.

    1 play = half a cent
    2 plays = one cent
    200 plays = 1 dollar
    1000 plays = 5 dollar
    10,000 plays = 50 dollar
    100,000 plays = 500 dollar
    1 million plays = 5,000 dollar
    1.5 million plays = 7,500 dollar

  • Re:Easy Fix (Score:4, Informative)

    by Anubis IV ( 1279820 ) on Friday February 18, 2011 @04:56PM (#35248330)

    Actually, they've both been gaining market share. Android has outgrown iOS in the smartphone market (but not in general), but most of that growth for both of them is at the cost of Nokia and others.

"You must have an IQ of at least half a million." -- Popeye