Big news for music-streaming services that charge subscriptions using the billing systems of Apple and Google’s app stores. And, indeed, for any music-related app that does that.
Both Apple and Google are halving the revenue share they take from in-app subscriptions from 30% to 15%. There are caveats in Apple’s case, but the impact on Spotify, Deezer, Smule and other subscription-based music apps will be significant.
Apple broke the news in a series of briefings ahead of its WWDC event later this month. For the first year of any user’s subscription, Apple will get 30% of the revenues as before. “After a subscriber accumulates one year of paid service, your revenue increases to 85% of the subscription price, minus applicable taxes. All current subscriptions are eligible.”
Within hours, Google had revealed that it too is moving from 30% to 15% on subscription rev-share, but without the requirement for a year’s subscription first.
For streaming services like Spotify, this is a bigger deal on iOS, because on Apple’s platform they are barred from promoting direct subscriptions – sending users to their website to start the billing relationship there – whereas they are not on Google Play. That’s why Spotify is a top-three ‘top grossing’ app on iOS, but absent from the upper reaches of the same chart on Google Play.
The changes could see the cost of a music-subscription reduce on iOS: currently most services charge $12.99 a month for iOS in-app purchases to cover Apple’s 30% cut. They could now reward users sticking with them for more than a year by reducing the price from, say, $12.99 to $11.99.
Which is still two dollars more than Apple Music – a disparity that rivals have regularly complained about – but an improvement. Also new: territory-specific subscriptions pricing, with apps not tied to a single price worldwide.
The new subscriptions model isn’t the only change coming to Apple’s App Store, however. The company is planning to introduce paid search ads to the store from next Monday, with developers buying the ads via an auction system based on specific search keywords.
A Spotify, Deezer, Rhapsody or Google Play could bid on ‘music’ for example, and have an ad for their app shown at the top of the search results. We’d be surprised if Apple allowed them to bid on one another’s names however.
It’s too early to tell how those ads will compare in effectiveness and return-on-investment to, say, Facebook ads or advertising within other apps. If they work well, it could be a powerful new marketing channel for music apps of all kinds. Google was a year ahead of Apple on this front, introducing search ads on its Google Play store in July 2015.