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Businesses Music The Almighty Buck Apple

Last.Fm Founder Criticizes Apple Over Music Subscription Fees 218

Posted by Soulskill from the blood-from-a-stone dept.
An anonymous reader writes "Apparently not one to mince words, Last.fm 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 More

Last.Fm Founder Criticizes Apple Over Music Subscription Fees

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  • Funny... (Score:5, Insightful)

    by dwightk ( 415372 ) on Friday February 18, 2011 @02:52PM (#35246542) Homepage Journal

    that's what artists say subscription services are doing to the music industry

    http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/ [informatio...utiful.net]

    • Re: (Score:2)

      by sakti ( 16411 )

      How much did the artist get for each radio play? Nothing you say. Subscription services are arguably more comparable to radio than purchasing an mp3 or CD. At least they make something off the subscription service. It's a gain as far as I can tell.

    • Re: (Score:3)

      by Graff ( 532189 )

      that's what artists say subscription services are doing to the music industry

      http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/ [informatio...utiful.net]

      That link really misrepresents the state of the industry.

      First of all, most artists who create their own CDs don't make anywhere near $8 per CD. Having a CD produced varies greatly but the less you produce the more it costs per CD. Many artists go for short runs when they are starting out but they still have to shell out a couple of hundred bucks for 100 CDs. There are also the studio, production, and marketing costs which may or may not be present depending on the individual artist and the desired quality

  • 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.

    • 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:4, Interesting)

        by node 3 ( 115640 ) on Friday February 18, 2011 @04:15PM (#35247764)

        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.

        All they have to do is have a separate iOS streaming subscription.

        $X for streaming to PCs and Android
        $X*1.3 for streaming to PCs, Android and iOS

        What they *can't* do is offer the same purchase as an in app purchase outside of the app for less than inside. So they can't offer the iOS streaming package for less on their website than they do within their app.

        In other words, this is a non-issue.

    • Re: (Score:2)

      by geekoid ( 135745 )

      And that's the problem.

      Apple demands there price be equal to or cheaper then any other platform you sell on.

      This reeks of Tim Cooks doing.

  • Easy Fix (Score:3, Interesting)

    by alvinrod ( 889928 ) on Friday February 18, 2011 @03:18PM (#35246938)
    Here's the easy fix. Ditch your app and make a web-based app. Apple has no control over that and it will port more easily to other platforms such as Android, Web OS, WP7, MeeGo, etc. If you're doing it right, you can even make it easy for your users to make a shortcut to your web-app that shows up as though it were an app.

    If that's too much work, don't offer subscriptions through the iOS app. Make a free version that throws in commercials every so often. 30% of $0.00 is $0.00.

    I think these companies want to complain because 30% cuts into their profits, but I don't know how many will leave because the iOS user base is still worthwhile even at 70%.

    As for the anti-competitiveness of it all, is it really a problem? After all, Apple has been losing market share to Android so who really cares if they want to make themselves a much less attractive platform. On the other hand, I can't buy e-books from Apple and have them work on my Kindle so as far as I'm concerned it's not a good argument for Amazon. If nothing else, hopefully these spats will help drive DRM-free ebooks.

    • Here's the easy fix. Ditch your app and make a web-based app.

      Yeah, do what Apple said you should do when they introduced the iPhone, which was said to be really dumb at the time.

    • Which, BTW, is how Apple wanted people to do things in the first place. People screamed and wanted apps and a store, so they got that too.

    • 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.

    • 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.

    • Re: (Score:2)

      by vux984 ( 928602 )

      I think these companies want to complain because 30% cuts into their profits, but I don't know how many will leave because the iOS user base is still worthwhile even at 70%.

      No. Its not. That's the issue.

      If I write a small app with a subscrption and generate 2,000,000 in sales, and have 1,600,000 in expenses, I'm making a modest but respectable 400k; enough to live comfortably, and even have an employee or two.

      Things are sailing just fine. Apple now decides they want 30% of subscription revenue... that's 60

      • Re: (Score:2)

        by tlhIngan ( 30335 )

        If I write a small app with a subscrption and generate 2,000,000 in sales, and have 1,600,000 in expenses, I'm making a modest but respectable 400k; enough to live comfortably, and even have an employee or two.

        Things are sailing just fine. Apple now decides they want 30% of subscription revenue... that's 600k for processing processing a VISA card through their app store. Directly through VISA I was paying 2.5% or $50,000 annually. So I'm now operating at a 150k annual loss from a 400k annual profit.

        That's o

        • Re: (Score:2)

          by vux984 ( 928602 )

          Apple's demands of 30% only take effect if the iOS user subscribes through the app. If the user is an existing subscriber, nothing changes.

          Yes I know all that, but then you are faced with a conundrum... you can't charge more on the app store to cover the users who go that route.

          And you can't afford to take a loss on the customers who go that route... so you effectively have to raise your prices to cover your losses on the app-store buyers... the more people that use the app store the higher prices go.

          Meanwh

    • Re: (Score:3)

      by Qwavel ( 733416 )

      "Here's the easy fix. Ditch your app and make a web-based app. "

      Doesn't work. These services require DRM. Apple happens to have blocked the only good way of doing DRM in the browser. I believe that Google is attempting to do Javascript pseudo-DRM to get around this, but I doubt it will be very effective.

      Lots of people are saying this is a non-issue and demonstrating it with their easy way to get around Apple's restrictions, but I suspect that Apple already thought of all these easy work-arounds. Apple i

  • What Apple is Doing is Terrible (Score:4, Insightful)

    by MogNuts ( 97512 ) on Friday February 18, 2011 @03:20PM (#35246986)

    I hate that people are already saying "well don't buy it" or "don't use it." Here is the reality of what happens in the REAL world:

    a) Company pulls out of the market
    b) Company raises their prices, in some form or another, to cover the cost. Consumer loses. Consumer pays more.

    The winner? Ding ding! Answer B. That's what happens. So thanks to Apple, instead of paying, what $3 that Last.fm charges, they'll charge more. It could be $5. Or they could raise it to the competitors like Zune which is $10. I wouldn't bat an eye to pay for $3 for music a month. For $10, I might shop around first and potentially they might lose a sale.

    And here is an even bigger problem. That cost will be raised for everyone else too. So you got an Android phone because you don't support Apple being an evil company? Too bad. It's $10/mo for Last.fm no matter what.

    And wait, it gets worse! It raises the traditional pricing level for that product. It seems everyone is either in the $3/mo tier, $10. But at least you have a choice. But when Last.fm charges $10 because they can't make it at 3 with Apple's blatantly rip-off policies, now the norm will be $10. Thanks Apple! Now you have no choice--everyone pays $120 per year instead of being able to choose one that's $36 per year.

    But alas, I'll get flamed and modded down to hell for this. I really think they enjoy the useful things at reasonable prices being ruined and they like to say "thank you sire, may I have another?"

    • In defense of Zune's $10 vs LastFM's $3 Zune gives you 10 free DRM free MP3s per month and you can listen to the music offline.

      • Re: (Score:2)

        by MogNuts ( 97512 )

        That's a pretty good deal. Didn't know about that.

        As a side note, I do think Zune Pass is a very good service. I was just throwing it out for illustrative purposes. Though $3/mo for unlimited music streaming is pretty incredible though. I wouldn't want that gone, you know?

    • Re: (Score:3)

      by dwightk ( 415372 )

      if last.fm is making it on $3, they can raise their price to $4 and more than cover the 30%.

      I missed the part where you showed why they would jump to $10

      they'll charge more. It could be $5. Or they could raise it to the competitors like Zune which is $10 ... It seems everyone is either in the $3/mo tier, $10

      It seems to be somewhere in there, but I don't think you fully explored that thought.

      • if last.fm is making it on $3, they can raise their price to $4 and more than cover the 30%.

        To restate what you said:
        Conjecture: Last.FM is making it on $3.
        Assumption: Last.FM needs to make $3 to break even.
        Hypothesis: Raising the price to $4 will more than cover the 30% Apple fee.

        So, here's the math:
        $4.00 * 30% (or 0.3) = $1.20

        $4.00 - $1.20 = $2.80
        $2.80 $3.00

        So, it looks like your hypothesis was wrong.

        This is intentionally ignoring that not all Last.FM customers will be using iOS devices... but unless you

      • Re: (Score:2)

        by geekoid ( 135745 )

        no, you can't necessarily just raise the price. If you break the price point you loose too many subscribers.

        Apple also demands that there price be equal or cheaper then then any price you offer elsewhere. So you need to raise the price to all your customers, not just iPhone users.

      • Re: (Score:2)

        by lgw ( 121541 )

        if last.fm is making it on $3, they can raise their price to $4 and more than cover the 30%.

        Math fail: They'd need to charge about $4.30 to make the same profit (a 43% price increase). The GPP was worried that there doesn't seem to be a price tier between $3 and $10, so they might just jump to $10 (and possibly add other features to justify that). If you like the $3 products over the $10 products, that would be annoying, but I'm not sure how true that is.

      • Re: (Score:2)

        by 517714 ( 762276 )

        I don't have an iPhone, iPod, or iPad, and I do not like the idea of being charged $4.00 instead of $3.00 because they raised the price for all their customers so Apple could skim 30% from iPhools. How would you like it if your cable bill went up 30% because the manufacturer of your TV wanted a cut? You use your car to get to work, how about paying 30% of your wages to the auto maker?

        I don't want to pay Apple 30%! Is there an app for that?

    • [quote]And here is an even bigger problem. That cost will be raised for everyone else too. So you got an Android phone because you don't support Apple being an evil company? Too bad. It's $10/mo for Last.fm no matter what.[/quote]

      Who says? AFAICT the terms only say they have to charge the same price for subscriptions on the iOS regardless of source. Where does it say in the terms that a service has to charge the same price for apps operating on non-Apple devices?

    • Re: (Score:2)

      by geekoid ( 135745 )

      That assumes consumer follow along. Maybe they will, and maybe they wont.

      Of course, I can go without last.fm

  • Predatory Business Practice? (Score:4, Insightful)

    by l0ungeb0y ( 442022 ) on Friday February 18, 2011 @03:34PM (#35247214) Homepage Journal

    Charging 30% of the price of the app you developed with XCode and Objective-C both of which were developed by Next then Apple and which is then sold and promoted by the iTunes Music Store is one thing.

    Charging 30% of all the money you make offering subscriber content seems exorbitant and could be argued as being a predatory business practice. Personally, I believe many others will see it this way and we will see this matter in court before too long.

    In the end however, I think Apple's alienation of low-margin subscriber services such as Last.fm, Rhapsody and others will only make the Android platform stronger.

  • In other news: Users Criticise LastFM Over Featureslack (TM).

    They have been dropping feature after feature. I payed to use those features thus i unsubscribed.

  • 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.

    • Somehow the link to Apple's press release [apple.com] didn't make it into my post.

  • Apparently not one to mince words, Last.fm founder Richard Jones lambasted Apple for their recently announced App Store subscription rules. 'Apple just ****ed over online music subs for the iPhone,'

    Really? Because di.fm sure doesn't seem to have any problem getting my subscription fees. Oh and look...I can even use my subscription service on my phone via the di.fm iPhone app.

    • The new rules take effect for old apps in June, not now. Old apps that don't follow the rules will likely be pulled.

  • charges a fee to music services that it doesn't pay for it's own music service, they will face Anti-Trust.

  • I imagine the goal of what's left of the music industry is to retain some semblance of control of distribution. That's how they over-charge consumers for their content.

    The entertainment oligopoly wants this deal. It marries content playback to hardware. This is a way to regain control of digital distribution and extract way more money out of consumers than a LastFM.

  • I don't think Musicians should be able to make a living performing music. It should be a hobby--something to do that's more productive than watching TV or writing thousands of posts on Slashdot. It takes a lot of time and effort to release a single album--but not so much that you can't supplement your income with other jobs. Or doing concerts/tours/charity events/something-other-than-selling-digital-copies-of-your-music. Which most artists do anyway.
    This is coming from the son of a musician father and

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