Apple vs. Everyone: Why Rivals Sharpen Knives

Apple vs. Everyone: Why Rivals Sharpen Knives

iPhone users: Did you buy an audiobook from Spotify’s iOS app? If you’ve used the app recently, the answer is probably no, but not due to any lack of effort on Spotify’s part. Audio giant admits painstakingly developing workarounds for its fledgling audiobook business, led by Nir Zicherman, to circumvent Apple’s in-app purchase system, which requires developers to give Apple a cut 30% of digital goods purchases made in an iOS app.

The solution, initially approved by Apple, emailed users directing them to an external link to purchase the book. While inelegant, the workaround worked well when Spotify launched Audiobooks in September – until Apple backtracked and rolled back three versions of Spotify’s app updates, sending the Spotify developers chasing the wild goose to find a solution the company would approve of.

The result is that now iOS users who try to purchase an audiobook from the app are effectively faced with a brick wall. The first message they receive: “Do you want to listen? You cannot purchase audiobooks in the app. We know that’s not ideal. Click the “I got it” button and the journey ends there, with no message or further instructions on how – or where – else – to buy a book to listen to on Spotify.

Harry Clarke, associate general counsel at Spotify, says Apple’s repeated rejections of the audio giant’s audiobook workarounds are the latest example of the tech giant being “arbitrary” and “completely inconsistent” with its IAP application.

“I don’t understand how they apply their rules. I don’t understand how a reasonable developer is supposed to interpret these rules,” Clarke said. The Hollywood Reporter. “It reflects that Apple is expanding its interpretation of its rules over time, and more arbitrarily, and deliberately enforcing those rules against developers like Spotify.”

(In response, an Apple spokesperson said, “The Spotify app was rejected for not following guidelines regarding the inclusion of explicit communications within the app to direct users away from the app. to make digital purchases. We gave them clear guidance on how to fix the problem, and approved their app after making changes that brought it into compliance.”)

Spotify has been one of the most vocal critics of Apple’s App Store policies. In 2019, the Stockholm-based company filed an antitrust complaint against Apple with the European Commission, which triggered an ongoing investigation. But last year the commission issued a “statement of objections” and noted that its preliminary view was that Apple was “distorting competition in the music streaming market by abusing its dominant position in the distribution of music streaming apps via its App Store”.

Spotify’s back and forth audiobook activity on iOS, according to Spotify, continues the trend. “I just think it’s absurd, frankly, that they’re allowed to continue doing this,” Spotify CEO Daniel Ek said during the company’s Oct. 25 earnings call on the rules. from the Apple App Store. “It’s holding back developers, it’s holding back creators, and it’s bad for consumers.”

Now, thanks to an update to Apple’s App Store rules, Spotify may soon find a powerful ally in another US company whose own economic downturn has been exacerbated by Apple’s policy changes: Meta. On October 24, Apple, led by Tim Cook, has updated its rules, announcing that for boosted posts sold on iOS apps, developers are required to use Apple’s payment system, which requires a 30% discount from Apple. “Boosting, which allows an individual or organization to pay to increase the reach of a post or profile, is a digital service – so of course an in-app purchase is required,” a rep said. ‘Apple.

The move impacts social platforms like Facebook, Instagram, Twitter and TikTok, which sell sponsored or promoted posts to user bases. But of the bunch, Meta – the parent company of Facebook and Instagram – is the most directly affected by the change, given that it hasn’t used Apple’s in-app purchase (IAP) system for its boosted posts in the past. Losing additional advertising revenue, at a time when Meta shares have fallen more than 70% over the past year, wouldn’t exactly help the company out of its hole.

Apple countered that requiring in-app purchases for boosted posts, and therefore requiring the 30% discount, is an integral part of making purchases within an iOS app. “For many years, App Store guidelines have made it clear that the sale of digital goods and services within an app must use in-app purchases,” an Apple spokesperson said. “Boosting, which allows an individual or organization to pay to increase the reach of a post or profile, is a digital service – so of course in-app purchase is necessary. It has always been the cases and there are many examples of applications that do this successfully.

The latest changes to the App Store come at the end of a long and painful year for most businesses that rely on digital advertising. Apple’s changes to “app tracking transparency” have wreaked havoc on the digital advertising industry, with most consumers choosing not to share their data with app developers. Meta estimated that it would lose $10 billion in revenue due to privacy changes. Snap, Snapchat’s parent company, continued to underperform this year and lost around 85% of its market share, largely due to a slowdown in its advertising business. As a result, affected companies have been forced to develop workarounds to continue providing data-driven advertising services, which have had varying degrees of success.

“Anyone who owns an app and an ad business is feeling the changes, although very large platforms are more affected than publishers who directly sell their brands or shows,” said a senior digital content source. “You always want to know more about your audience than less.”

It remains to be seen what kind of longer-term financial impact the IAP rules will have on Spotify’s audiobook business and Meta’s revenue stream for boosted posts. But the immediate impact, at least in Spotify’s case, is obvious: Without a clear path for iOS users to buy audiobooks, the company saw a “strong divergence” in conversion rates (read: drop in sales) on iOS compared to Android, where Google allowed Spotify to email users a link to purchase the book, according to Zicherman, Spotify’s head of audiobooks and secure content.

The easiest solution, of course, would be to accept Apple’s in-app purchase system. Spotify would be able to make in-app sales and provide a streamlined experience for its users. But economically, says Zicherman, this solution is a “failure”.

“There are only two ways to economically justify paying a 30% cut of every transaction, either eating away at our own margins on Spotify in a way that makes the business completely unsustainable, or increasing the prices to consumers, which just hurts. consumers. And it also hurts publishers and authors because it means they’re not able to sell their content either,” Zicherman said. THR.

“There is a lot of untapped growth potential, both in terms of supply and demand for audiobooks. We’ve seen it in the podcasting world, we know it’s happening in the audiobook world,” the Spotify executive adds. “It’s harder to achieve that growth if you can’t give users a great experience.”

Alex Weprin contributed reporting.

A version of this story first appeared in the Nov. 2 issue of The Hollywood Reporter magazine. Click here to subscribe.

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