4 ms·

Spotify's problem is it has to pay out ~80% of revenue to rightsholders, so Apple's 15% take doesn't leave you with a viable business. For a time, Spotify handl

Spotify's problem is it has to pay out ~80% of revenue to rightsholders, so Apple's 15% take doesn't leave you with a viable business. For a time, Spotify handled this by charging more for subscriptions from the App Store. I'm guessing Google wanted to get a big name off what would become the Epic suit. They knew Spotify pays ~2% when processing credit card fees, there's a higher conversion rate with in-app payments, but Spotify has a hard fee limit because of rightsholder payouts, so they found a deal that makes everyone happy. Oh, and GCP. The marginal cost for Fortnite is lower, so Google kept squeezing. It's standard price discrimination. The problem for Google is it also controls the marketplace.

thetrb 3y ago
Wouldn't they be able to say that the actual revenue is just the 85% they get after Apple's take?
- hellisothers 3y ago
  No because Apple gets 15% of the IAP price right off the top, Spotify doesn’t cut them a check after the fact with an explanation about rights holders etc.
josefresco 3y ago
> Spotify's problem is it has to pay out ~80% of revenue to rightsholders, so Apple's 15% take doesn't leave you with a viable business. It's the 80% of revenue to rightsholders that makes it a non-viable business.
- bryanlarsen 3y ago
  20% of a very large number is still a large number. There are lots of very profitable businesses that have a ~1% profit margin.
  - xboxnolifes 3y ago
    80% of a very large number is an even larger number.
  - andrewmcwatters 3y ago
    Costco is famously about 2% or so, which is basically the entirety of their membership fee revenue, iirc.
  - dessimus 3y ago
    That doesn't mean 20% is their profit. It means all the rest of their overhead has fit into that 20%, such as hosting infrastructure, office space, labor, marketing, etc.
    - bryanlarsen 3y ago
      Oh no, how will they cover overhead with 20% of tens of billions of dollars!?
- pjerem 3y ago
  It’s not like they have any control over this. What should they do ? Yeah they could say fuck-off to Universal & Co but it would be their instant death. Right holders made them sign extremely strict contracts which disallow Spotify to diversify themselves. Notoriously, their contracts with majors states that they are forbidden to develop their own in-house label.
paldepind2 3y ago
Surely the revenue is calculated from how much money Spotify actually gets right? If they sell a $10 subscription and get $7 after Apple takes their cut then that is $7 dollars of revenue, no?
- jychang 3y ago
  Profit = revenue - costs
phpisthebest 3y ago
>>Spotify's problem is it has to pay out ~80% of revenue to rightsholders, so Apple's 15% take doesn't leave you with a viable business. Any payment fees would be subtracted before the payout to the rights holders, they pay based on NET revenue not gross revenue [1] [1]https://support.spotify.com/us/artists/article/royalties/ https://support.spotify.com/us/artists/article/royalties/
- raincole 3y ago
  Interestingly the GP's theory sounds 100% plausible if you don't know the difference between net revenue and gross revenue. Humans are really very similar to LLMs...
  - jkaplowitz 3y ago
    > Humans are really very similar to LLMs... So true. I was actually once accused on Reddit of using ChatGPT to write a comment that I genuinely wrote myself, by a person who (if I recall correctly) didn’t like the substance of what I was saying. It was a long detailed response with multiple paragraphs and proper usage of words like “However”. Yes, a LLM may write similarly to people who have lots of experience reading and writing formal written English, including academic and legal writing. At least my example was purely a harmless Reddit accusation. I really feel bad for the people who write essays in school that the teacher incorrectly rejects and reports as AI-written because the teacher misunderstands the limitations of AI detectors and the meaning of their output. (Of course, this is a separate question from students who genuinely try to pass off AI-written work as their own.)
  - deleted 3y ago
    [deleted]
araes 3y ago
The part I don't get with the Epic / Fortnite deal, is the last sentence. "it was one of the highest-profile early members of the Coalition for App Fairness, a group that included Epic and supported the Fortnite publisher’s antitrust suit" If they support the suit, why not "psst, btw, we got a great deal from Google. You know, have somebody subpoena contract records ..." Instead they're "We got our 4%, we Support you..."
scarface_74 3y ago
> Google is it also controls the marketplace. And? Retailers cut deals and do kickbacks with certain merchants all of the time for different reasons.
- eli 3y ago
  Some of which are illegal
maxlamb 3y ago
Wouldn’t it be 30% for Spotify? 15% is only for businesses where iOS revenue is less than $1m.

thetrb 3y ago

Wouldn't they be able to say that the actual revenue is just the 85% they get after Apple's take?

hellisothers 3y ago
No because Apple gets 15% of the IAP price right off the top, Spotify doesn’t cut them a check after the fact with an explanation about rights holders etc.

josefresco 3y ago

> Spotify's problem is it has to pay out ~80% of revenue to rightsholders, so Apple's 15% take doesn't leave you with a viable business. It's the 80% of revenue to rightsholders that makes it a non-viable business.

bryanlarsen 3y ago
20% of a very large number is still a large number. There are lots of very profitable businesses that have a ~1% profit margin.
- xboxnolifes 3y ago
  80% of a very large number is an even larger number.
- andrewmcwatters 3y ago
  Costco is famously about 2% or so, which is basically the entirety of their membership fee revenue, iirc.
- dessimus 3y ago
  That doesn't mean 20% is their profit. It means all the rest of their overhead has fit into that 20%, such as hosting infrastructure, office space, labor, marketing, etc.
  - bryanlarsen 3y ago
    Oh no, how will they cover overhead with 20% of tens of billions of dollars!?
pjerem 3y ago
It’s not like they have any control over this. What should they do ? Yeah they could say fuck-off to Universal & Co but it would be their instant death. Right holders made them sign extremely strict contracts which disallow Spotify to diversify themselves. Notoriously, their contracts with majors states that they are forbidden to develop their own in-house label.

paldepind2 3y ago

Surely the revenue is calculated from how much money Spotify actually gets right? If they sell a $10 subscription and get $7 after Apple takes their cut then that is $7 dollars of revenue, no?

jychang 3y ago
Profit = revenue - costs

phpisthebest 3y ago

>>Spotify's problem is it has to pay out ~80% of revenue to rightsholders, so Apple's 15% take doesn't leave you with a viable business. Any payment fees would be subtracted before the payout to the rights holders, they pay based on NET revenue not gross revenue [1] [1]https://support.spotify.com/us/artists/article/royalties/ https://support.spotify.com/us/artists/article/royalties/

raincole 3y ago
Interestingly the GP's theory sounds 100% plausible if you don't know the difference between net revenue and gross revenue. Humans are really very similar to LLMs...
- jkaplowitz 3y ago
  > Humans are really very similar to LLMs... So true. I was actually once accused on Reddit of using ChatGPT to write a comment that I genuinely wrote myself, by a person who (if I recall correctly) didn’t like the substance of what I was saying. It was a long detailed response with multiple paragraphs and proper usage of words like “However”. Yes, a LLM may write similarly to people who have lots of experience reading and writing formal written English, including academic and legal writing. At least my example was purely a harmless Reddit accusation. I really feel bad for the people who write essays in school that the teacher incorrectly rejects and reports as AI-written because the teacher misunderstands the limitations of AI detectors and the meaning of their output. (Of course, this is a separate question from students who genuinely try to pass off AI-written work as their own.)
- deleted 3y ago
  [deleted]

araes 3y ago

The part I don't get with the Epic / Fortnite deal, is the last sentence. "it was one of the highest-profile early members of the Coalition for App Fairness, a group that included Epic and supported the Fortnite publisher’s antitrust suit" If they support the suit, why not "psst, btw, we got a great deal from Google. You know, have somebody subpoena contract records ..." Instead they're "We got our 4%, we Support you..."

scarface_74 3y ago

> Google is it also controls the marketplace. And? Retailers cut deals and do kickbacks with certain merchants all of the time for different reasons.

eli 3y ago
Some of which are illegal

maxlamb 3y ago

Wouldn’t it be 30% for Spotify? 15% is only for businesses where iOS revenue is less than $1m.