Rdio CEO Says New Apple Tax Makes It “Untenable” For Them to Exist On iOS Devices
CEO Steve Jobs has made it clear that when Apple brings new subscribers to apps he expects them to let Apple handle the billing process and for providing that service, he believes his company is entitled to a 30% cut of the profits.
This has not yet been rolled out to music apps but the move is likely.
If Jobs requests that services like Rhapsody and Rdio pay Apple a cut for providing the platform and store for their services, this makes it, according to Rhapsody CEO John Erwin, "economically untenable" for them to exist on iOS devices. To paidContent, Rdio CEO Drew Larner echoed Erwin's concern:
"I would echo what the heads of some of my competing companies have said. From a financial standpoint, that fee is certainly untenable for us, that's obvious. If it creates a situation where it's not financially possible for us to be in the environment, that's a loss for consumers and I don't think that's a good thing. We're still evaluating what the policy looks like and the ins and outs."
Last.fm co-founder Richard Jones also told paidContent:
"Apple just fucked over online music subs for the iPhone."
Conversely, We7 CEO Steve Purdham voiced optimism:
"I suspect that we will fall into the 30 percent net – especially when we update the app for consideration; it is likely to 'fail' at that time. Thirty percent share makes music subscriptions economically unviable in their current form.
But, if we take some time, let the dust settle, I think we will start to see new and novel approaches to this new 'Apple Tax'."
Forester analyst Mark Mulligan had an interesting take:
"if subscription services opt to take their transactions out of Apple's ecosystem, the net result will be less "internal" competition for Apple's music offerings… the 30% levy won't kill off music subscriptions, but it will be a major speed bump with the added benefit for Apple of moving some pesky competitor tenants off its front lawn."
It's nice to see calm in the storm. Here's what readers said:
Lynn S. said…
"I bought an iPod Touch because of apps like Pandora, Sirius XM, and Napster plus non-music ones like the Kindle and Netflix. Without those options, what would have been the point of buying the device in the first place? With the possibility that those apps will no longer be offered, I will be considering the alternatives to Apple when it is time to buy a new device."
"Streaming services and labels should get together, call Apple's bluff, jump ship, and setup/get behind an alternative ecosystem… Apple's devices are nothing without the content and I'm sure competitors will bend over backwards to eat into Apple's market share. But such a move would bite the hand that feeds…"
"Hold your horses doom and gloom. This isn't the end. If services such MOG, Spotify, or Rdio want to sell their subscription service Apple isn't stopping them. It's given them the ability to either play in their sandbox or spend the marketing money to have people opt to sign up on their website to start their sub service through them. You're slapping the 30% on this like it's a tax, but if your service, app, whatever is a good enough to stand on its own, you shouldn't be worried."