5 ms·

So then if Apple Music internally pays 30% to App Store, we're all good by this definition.

by slver 5y ago

Cthulhu_ 5y ago
In theory and superficially that makes sense, but they are the same company so it wouldn't make a difference in the end. It's not like Spotify can pay itself that 30%.
- villasv 5y ago
  > it wouldn't make a difference in the end Yes it would.
konschubert 5y ago
I am sure they are doing that already. And I don't think that's the law works.
- slver 5y ago
  It's often how law works. For example companies often create subsidiaries in order to limit liability of the parent company.
  - konschubert 5y ago
    You have a point.
falcor84 5y ago
I think the problem is with 'internally'. As I understand it, the antitrust regulations could force Apple to spin Apple Music out.
- slver 5y ago
  Let's take a step and ponder wouldn't you find it bizarre to have this sequence of events: 1. Apple creates iPod, and iTunes serves as its music store. 2. Apple creates iPhone, which has an iPod app. 3. Apple introduces App Store so other apps can be used on the iPhone. 4. iPod (Apple Music) competitors emerge. 5. EU says "that's it, Apple can't have iPod anymore on the phone unless iPod (Apple Music) becomes a separate company". No one (successfully) sued Apple for anti-competitive practices on iPod. Ergo if the iPhone never had an App Store, they'd be allowed to have 100% of the revenue of iTunes, and ban competitors out completely. By opening the iPhone platform to third parties, EU sees them as another type of entity completely. In effect the EU penalizes the creation of market places, because once you're market place, you lose control over your own products to the government.
  - realusername 5y ago
    > No one (successfully) sued Apple for anti-competitive practices on iPod Because they never had the market share and power in the music market that they have now on the mobile market that's why. You kind of answered why they are getting sued now yourself.
    - slver 5y ago
      You're in effect saying "no, EU didn't sue iPhone because it added an App Store to iPhone, it sued iPhone because it was successful". Is that better? Become successful, get sued? Android has 87% market share, iOS has 13%. That's not even a monopoly. Of course we can define arbitrary categories like "Apple has monopoly on the iOS market". Which makes the concept of monopoly absolutely nonsensical, because then everyone has a monopoly. I have a monopoly on the slver username on HN, so I guess EU might sue me any moment now. Also, let's recall EU suing Microsoft and forcing them to offer Windows without a media player. So what did this result in? It resulted in lots of nephews children and grandchildren having to visit their relatives and help them install Windows Media Player. I'm from EU and I want to like all their decisions, I'm team EU. But they're complete idiots sometimes when dealing with tech.
      - 5y ago
mrep 5y ago
With that accounting methodology, between the 30% apple store cut and the 70% music publishers cut, Apple music is left with no revenue whatsoever to fund their service, therefore running it at a 100% loss and thus price dumping which is also illegal.
- laurent92 5y ago
  But this is an excellent accounting methodology then: Each sub-business should run as a separate business. It picks my interest: Companies internally run as communist economies, all resources are merged and shared, employees are not individually associated with a revenue because the group is worth more than its sum, on the outer, liberal economy. At what size / on which criteria should a group inside a company be considered an independent product-and-loss entity, in order to avoid supercorporations to make use of monopolistic behaviors? Should a 100-billion-dollars marketing operation inside Apple be allowed to function at a loss if it pumps interest in all of Apple’s other products? Can Apple Music be disguised as a marketing operation instead of as an independent entity?
  - kypro 5y ago
    Whenever a company of significant size branches into another market where it has some unfair advantage thanks to it's dominance other industry it should come under scrutiny. The reason products like Alexa and the Fire tablet have been so successful for Amazon is basically because they have been able to promote them for free on the worlds largest marketplace and then sell them at a loss offset by the profits generate from other segments of their business like ecommerce and AWS. I've been so underwhelmed by every Amazon product I've ever brought I'm 100% convinced their success in hardware has been almost entirely due to their cannibalistic business practises than their ability to make solid hardware that people want to buy. This means in basically any market Amazon enters they don't need to make the best product, they just need to undercut and promote their products enough to kill off the competition. Google and Apple can also run this strategy very effectively with Google Search promoting Google products and Apple's hardware/appstore ecosystem promoting then locking users into their own hardware and software.
  - 5y ago
dopidopHN 5y ago
Oh I’m sure they bill their branch in Ireland for this. In order to make sure to avoid any tax they own us.
onetimemanytime 5y ago
That's the same as "The cocaine was in my left pocket your honor. See I have nothing in my right pocket :)"
MichaelApproved 5y ago
That’s good for internal bookkeeping but it’s not enough to prevent the unfair advantage. Take this example: Apple Music “pays” 30% to parent Apple Corp. That 30% payment cuts into Music’s revenue and now they’re operating at a 25% loss. However, that rough calculation still allows parent Apple Corp to consider Music to be profitable, since it’s a net profit for Apple Corp. It’s happy to take the 25% “loss” in the music division because it’s just a paper loss. In cash terms, the Music division increases Apple Corps profit. The only real way for this division to be fair is to spin Apple Music off into its own company that is not owned by Apple Corp.
- moffatman 5y ago
  I don't think you considered the loss of the 30% from each apple music customer's previous subscription to a competitor. There's no unfair advantage, the maximum profit apple can make by switching a customer away from spotify is spotify's profit.
  - codys 5y ago
    This assertion ignores that apple makes a profit off the 30% cut. In other words: it doesn't correspond to a real cost to Apple.
    - moffatman 5y ago
      It's known that music licensing costs are about 50% of gross subscription prices. So a subscription to spotify is about 50% to rightsholders, 30% to apple, and 20% to spotify as their profit. A subscription to Apple music is 50% to rightsholders, and 50% to apple. The additional profit Apple makes from converting a Spotify customer is only 20% (50%-30%), the same profit that any other competitor to Spotify (such as Tidal) would make on a conversion. Now, Apple could afford to lower their subscription costs to below Spotify's, selling below "cost" at say 75% rate. So they are still "making money" per subscription, but at a price which is unsustainable to Spotify, which seems at first glance unfair and is what I think the comment chain is picturing. But what's happening here is that Apple as a whole is actually making less money on an Apple Music customer (25% margin) than a Spotify customer (30% margin), so it's not profitable or a good business decision versus the alternative. And we don't see apple doing that, at least where I live both subscriptions are the same price. It only works if you are able to drive Spotify out of business, then jack up the prices, but that anticompetitive opportunity to "dump" is possible for Apple in essentially any market due to their vast vast cash reserves. In my view the potentially anti-trust advantages Apple has over Spotify mainly come from the fact Apple Music is preinstalled and is promoted to iOS users through push notifications.
ClumsyPilot 5y ago
That like how startbucks UK pays it's company in a different country a fee for using it's brand, and therefore has no profits in Uk and pays no tax here Totally legit
- ectopod 5y ago
  The law says that the fees paid for IP in this way have to be plausible. Franchising is a long-established business model and nobody would run a franchise if the franchise fee ate all the profit. So Starbucks' franchise fees are not plausible. Why doesn't HMRC challenge this? I've no idea.

So then if Apple Music internally pays 30% to App Store, we're all good by this definition.

by slver 5y ago

So then if Apple Music internally pays 30% to App Store, we're all good by this definition.

In theory and superficially that makes sense, but they are the same company so it wouldn't make a difference in the end. It's not like Spotify can pay itself that 30%.

villasv 5y ago
> it wouldn't make a difference in the end Yes it would.

konschubert 5y ago

I am sure they are doing that already. And I don't think that's the law works.

slver 5y ago
It's often how law works. For example companies often create subsidiaries in order to limit liability of the parent company.
- konschubert 5y ago
  You have a point.

falcor84 5y ago

I think the problem is with 'internally'. As I understand it, the antitrust regulations could force Apple to spin Apple Music out.

slver 5y ago
Let's take a step and ponder wouldn't you find it bizarre to have this sequence of events: 1. Apple creates iPod, and iTunes serves as its music store. 2. Apple creates iPhone, which has an iPod app. 3. Apple introduces App Store so other apps can be used on the iPhone. 4. iPod (Apple Music) competitors emerge. 5. EU says "that's it, Apple can't have iPod anymore on the phone unless iPod (Apple Music) becomes a separate company". No one (successfully) sued Apple for anti-competitive practices on iPod. Ergo if the iPhone never had an App Store, they'd be allowed to have 100% of the revenue of iTunes, and ban competitors out completely. By opening the iPhone platform to third parties, EU sees them as another type of entity completely. In effect the EU penalizes the creation of market places, because once you're market place, you lose control over your own products to the government.
- realusername 5y ago
  > No one (successfully) sued Apple for anti-competitive practices on iPod Because they never had the market share and power in the music market that they have now on the mobile market that's why. You kind of answered why they are getting sued now yourself.
  - slver 5y ago
    You're in effect saying "no, EU didn't sue iPhone because it added an App Store to iPhone, it sued iPhone because it was successful". Is that better? Become successful, get sued? Android has 87% market share, iOS has 13%. That's not even a monopoly. Of course we can define arbitrary categories like "Apple has monopoly on the iOS market". Which makes the concept of monopoly absolutely nonsensical, because then everyone has a monopoly. I have a monopoly on the slver username on HN, so I guess EU might sue me any moment now. Also, let's recall EU suing Microsoft and forcing them to offer Windows without a media player. So what did this result in? It resulted in lots of nephews children and grandchildren having to visit their relatives and help them install Windows Media Player. I'm from EU and I want to like all their decisions, I'm team EU. But they're complete idiots sometimes when dealing with tech.
    - 5y ago

mrep 5y ago

With that accounting methodology, between the 30% apple store cut and the 70% music publishers cut, Apple music is left with no revenue whatsoever to fund their service, therefore running it at a 100% loss and thus price dumping which is also illegal.

laurent92 5y ago
But this is an excellent accounting methodology then: Each sub-business should run as a separate business. It picks my interest: Companies internally run as communist economies, all resources are merged and shared, employees are not individually associated with a revenue because the group is worth more than its sum, on the outer, liberal economy. At what size / on which criteria should a group inside a company be considered an independent product-and-loss entity, in order to avoid supercorporations to make use of monopolistic behaviors? Should a 100-billion-dollars marketing operation inside Apple be allowed to function at a loss if it pumps interest in all of Apple’s other products? Can Apple Music be disguised as a marketing operation instead of as an independent entity?
- kypro 5y ago
  Whenever a company of significant size branches into another market where it has some unfair advantage thanks to it's dominance other industry it should come under scrutiny. The reason products like Alexa and the Fire tablet have been so successful for Amazon is basically because they have been able to promote them for free on the worlds largest marketplace and then sell them at a loss offset by the profits generate from other segments of their business like ecommerce and AWS. I've been so underwhelmed by every Amazon product I've ever brought I'm 100% convinced their success in hardware has been almost entirely due to their cannibalistic business practises than their ability to make solid hardware that people want to buy. This means in basically any market Amazon enters they don't need to make the best product, they just need to undercut and promote their products enough to kill off the competition. Google and Apple can also run this strategy very effectively with Google Search promoting Google products and Apple's hardware/appstore ecosystem promoting then locking users into their own hardware and software.
- 5y ago

dopidopHN 5y ago

Oh I’m sure they bill their branch in Ireland for this. In order to make sure to avoid any tax they own us.

onetimemanytime 5y ago

That's the same as "The cocaine was in my left pocket your honor. See I have nothing in my right pocket :)"

MichaelApproved 5y ago

That’s good for internal bookkeeping but it’s not enough to prevent the unfair advantage. Take this example: Apple Music “pays” 30% to parent Apple Corp. That 30% payment cuts into Music’s revenue and now they’re operating at a 25% loss. However, that rough calculation still allows parent Apple Corp to consider Music to be profitable, since it’s a net profit for Apple Corp. It’s happy to take the 25% “loss” in the music division because it’s just a paper loss. In cash terms, the Music division increases Apple Corps profit. The only real way for this division to be fair is to spin Apple Music off into its own company that is not owned by Apple Corp.

moffatman 5y ago
I don't think you considered the loss of the 30% from each apple music customer's previous subscription to a competitor. There's no unfair advantage, the maximum profit apple can make by switching a customer away from spotify is spotify's profit.
- codys 5y ago
  This assertion ignores that apple makes a profit off the 30% cut. In other words: it doesn't correspond to a real cost to Apple.
  - moffatman 5y ago
    It's known that music licensing costs are about 50% of gross subscription prices. So a subscription to spotify is about 50% to rightsholders, 30% to apple, and 20% to spotify as their profit. A subscription to Apple music is 50% to rightsholders, and 50% to apple. The additional profit Apple makes from converting a Spotify customer is only 20% (50%-30%), the same profit that any other competitor to Spotify (such as Tidal) would make on a conversion. Now, Apple could afford to lower their subscription costs to below Spotify's, selling below "cost" at say 75% rate. So they are still "making money" per subscription, but at a price which is unsustainable to Spotify, which seems at first glance unfair and is what I think the comment chain is picturing. But what's happening here is that Apple as a whole is actually making less money on an Apple Music customer (25% margin) than a Spotify customer (30% margin), so it's not profitable or a good business decision versus the alternative. And we don't see apple doing that, at least where I live both subscriptions are the same price. It only works if you are able to drive Spotify out of business, then jack up the prices, but that anticompetitive opportunity to "dump" is possible for Apple in essentially any market due to their vast vast cash reserves. In my view the potentially anti-trust advantages Apple has over Spotify mainly come from the fact Apple Music is preinstalled and is promoted to iOS users through push notifications.

ClumsyPilot 5y ago

That like how startbucks UK pays it's company in a different country a fee for using it's brand, and therefore has no profits in Uk and pays no tax here Totally legit

ectopod 5y ago
The law says that the fees paid for IP in this way have to be plausible. Franchising is a long-established business model and nobody would run a franchise if the franchise fee ate all the profit. So Starbucks' franchise fees are not plausible. Why doesn't HMRC challenge this? I've no idea.