July 13, 2015:FTC looking into Apple’s 30% cut of App Store subscriptions

FTC looking into Apple’s 30% cut of App Store subscriptions

iphone-4-logo-pro_090245024500649901The issue of Apple taking a 30% cut of purchases made through its App Store – including subscriptions to rivals of its Apple Music streaming service – has been bubbling for months now.

On Friday, speculation stepped up a notch with a report from Reuters claiming that the US Federal Trade Commission (FTC) is looking into the issue.

We’ve chosen our words carefully there: the FTC has not begun a formal investigation according to Reuters’ “three industry sources” that confirmed the news.

“The agency has had meetings with multiple concerned parties,” claimed one of those sources, with Reuters noting that such meetings do not necessarily lead to an antitrust investigation.

The arguments on either side of this debate are now familiar. Apple established iOS as a platform with hundreds of millions of users, registered their credit cards and built the App Store ecosystem – with its 30% cut of spending hardly hindering fast-growing industries like mobile gaming.

Yet the streaming music services argue that the 30% cut is a big problem for their businesses: they’ll have to choose between matching Apple Music’s $9.99-a-month price and see their margin swallowed by Apple, or charge $12.99-a-month to preserve their margin but be $3 more expensive than Apple Music.

“It will be an issue for the industry going forward. You can either raise your prices and not be competitive with Apple’s price, or you can have no margin,” Deezer’s North America boss Tyler Goldman told Reuters.

There is a third choice, of course: persuade people to subscribe directly through streaming services’ own websites to get the standard $9.99 rate, with Spotify kicking off an email marketing campaign to encourage exactly this.

If the FTC does formally investigate Apple, the company’s rules barring companies from promoting external subscriptions within their iOS apps is likely to come under the spotlight.

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Stuart Dredge
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