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FTC now properly investigating Apple tax on music apps

By | Published on Wednesday 22 July 2015


The Federal Trade Commission in the US has now reportedly launched a proper investigation into the Apple tax, having previously been looking into the cut the tech giant takes from app-based subscriptions on a more informal basis.

As previously reported, with mobile-based subscription services, if a user signs up to a premium package through said platform’s iOS app, Apple takes a 30% cut of the money, as it would for paid-for apps sold through its store. Which is a problem for streaming music services already operating on very tight profit margins, because they can’t afford to swallow Apple’s 30% commission.

Users can always pay to subscribe via the streaming set-up’s own website, where Apple has no right to a commission, and then use their logins to use the service via the iPhone app. But Apple’s rules firstly say that in-app purchase has to be offered, and then also restrict the app maker’s ability to communicate the benefits of paying via its website instead.

Because of the tight profit margins, services like Spotify have had to add Apple’s 30% commission onto its subscription rates, so it is more expensive to subscribe through the app. Which was always irritating, but has become more of an issue for streaming music firms since Apple Music went live, because it means that consumers signing up to stream tunes via their iPhone will see Apple’s own service is three dollars a month cheaper than most of its competitors, but won’t necessarily realise that is only the case when you sign up via the phone.

Apple’s rivals argue that this is unfair competition, ie the tech firm exploits its control of the iPhone ecosystem to give it an unfair advantage over its streaming music competitors. According to The Verge, FTC inquiries into this issue, likely encouraged by Spotify et al, have started to gain momentum, so that a proper investigation is now underway. The tech site says that the FTC has already issued subpoenas to various services in a bid to gather more information.

The investigation will likely focus less on the basic 30% commission Apple charges and more on the various rules that surround in-app purchases, and also other limitations the tech giant applies that restrict the offers app makers can offer.

None of these rules are specific to music, applying across the board to all apps, but Apple’s dominance in the digital music space, and its much hyped move into streaming, makes the anti-competitive allegations particularly strong in this space. It remains to be seen if the FTC moves to force a change in some of Apple’s app regulations.

Meanwhile Apple overlord Tim Cook has told investors “millions and millions of customers are already experiencing” the Apple Music streaming service, though of course they are all currently doing so on the three month free trial.

In an earnings call he added that 15,000 artists are now connected to Connect within the Apple Music platform, and that the Beats1 radio station has millions of listeners worldwide. So, that all good to know, isn’t it? But will Apple convert tens – and preferably hundreds – of millions of customers into paying streamers come October? Oh, now there’s a question.