There was a bit of a brouhaha a couple of weeks ago when Senators Amy Klobuchar and Mike Lee sent a letter to Apple accusing the company of failing to provide a witness for the App Store-focused antitrust committee hearing that is happening later today; Apple responded that it was all a misunderstanding due to a scheduling conflict. From Bloomberg:
“We have deep respect for your role and process on these matters and, as we told your staff, we are willing to participate in a hearing in the subcommittee,” Apple said. “We simply sought alternative dates in light of upcoming matters that have been scheduled for some time and that touch on similar issues.”
It seems likely that Apple was referring to Epic’s lawsuit against Apple and its App Store policies, which goes to trial on May 3rd; the Senators’ letter said as much. The fact this hearing is the day after an Apple event, though, is notable in its own right, given how Apple itself just highlighted where the App Store goes wrong.
Apple Podcasts received 75 seconds of attention in Apple’s one hour and one minute presentation; it seems appropriate that 20 of those seconds were spent recounting Apple’s role in popularizing the format:
The 2005 release of iTunes 4.9 and the iTunes podcast directory was indeed a critical step in popularizing podcasts. I explained in 2017’s Podcasts, Analytics, and Centralization:
Centralization occurs in industry after industry for a reason: everyone benefits, at least in the short term. Start with the users: before iTunes 4.9 subscribing and listening to a podcast was a multi-step process, and most of those steps were so obscure as to be effective barriers for all but the most committed of listeners.
- Find a podcast
- Get a podcatcher
- Copy the URL of the podcast feed into the podcatcher
- Copy over the audio file from the podcatcher into iTunes
- Sync the audio file to an iPod
- Listen to the podcast
- Delete the podcast from the iPod the next time you synced
iTunes 4.9 made this far simpler:
- Find a podcast in the iTunes Store and click ‘Subscribe’
- Sync your iPod
Recounting this simplification may seem pedantic, but there is a point: this was the most important improvement for podcast creators as well. Yes, the iTunes Music Store offered an important new discovery mechanism, but it was the dramatic improvement to the user experience that, for the vast majority of would-be listeners, made podcasts even worth discovering in the first place. Centralized platforms win because they make things easier for the user; producers willingly follow.
And then Apple stopped. Yes, the iPhone happened, and podcast management and listening was further centralized into a single app, but given that Apple’s goal was only ever to sell more iPods (and then more iPhones) the company never pursued centralization to its logical conclusion:
Remember, the web was thought to be a wasteland for advertising until Google provided a centralized point that aggregated users and could be sold to advertisers. Similarly, mobile was thought to monetize even worse than the (desktop) web until Facebook provided a centralized point that aggregated users and could be sold to advertisers. I expect a similar dynamic in podcasts: the industry will remain the province of ads for web hosting and underwear absent centralization and aggregation, and the only entity that can accomplish that is Apple.
In fact, it was Spotify that identified the vacuum that Apple had created, aggressively expanding its podcasting business in an attempt to displace Apple’s Aggregator position; eMarketer predicts the streaming service will surpass Apple later this year in podcast listeners. Spotify is pursuing a multi-pronged strategy ranging from exclusive content to open podcast hosting to targeted advertising, and the company’s actions not only promise to dramatically increase podcast monetization but have also stirred Apple to action.
The company’s initial response came in the remaining 55 seconds:
Paid podcasts are not a new concept; Stratechery launched a paid version of the Daily Update last February, and Dithering (where we covered Apple’s other product announcements this morning) last May. Both podcasts are predicated on the fundamentally open nature of RSS: every subscriber has a unique feed, which they can add to the podcast player of their choice, including Apple Podcasts (but not Spotify). It’s a little clumsy, but it works:
Apple’s solution looks far easier to use:
The company didn’t actually show the subscription flow in action, but it seems like a safe bet that it will operate similarly to an app subscription flow: hit a button, scan your face, and you’re good to go. Apple’s pricing is the same as apps as well: 30% for the first year of a subscription, and 15% after that.
As a longstanding | critic | of | the App Store, you might expect me to be scandalized by Apple’s podcast subscription offering…and you would be wrong! In fact, Apple’s podcast offering is an excellent example of how the App Store should operate (with one big exception).
What Podcast Subscriptions Gets Right
Apple’s podcast subscription offering gets four big things right, three of which are the complete opposite of the App Store.
A Great Customer Experience with Competitive Creator Economics
This is the part that podcast subscriptions share with the App Store: it really is a great customer experience, from purchase to subscription tracking to cancellations. This accrues to creators as well: increased customer trust means an increased conversion rate.
Second, because Apple controls the entire experience, they can offer things like trials, early access, or the wholesale substitution of ad-supported episodes with ad-free ones. Integration has value!
Third, while 30% is really high, 15% is extremely competitive; a $5/month podcast like Dithering loses 9% of that amount in credit card fees (2.9% + $0.30/charge), plus whatever amount is paid to the subscription management service. Add on the fact that the number one cause of churn is expired or lost credit cards and Apple’s offering — which is far more likely to have an up-to-date credit card attached — is more attractive than it seems.
Unfortunately everything else that I like about Apple’s offering is in stark contrast to the App Store.
Multiple Ways to Subscribe
Some creators may find 30% to be too much (along with the big problem detailed below), but that’s fine: you can still add arbitrary RSS feeds to Apple Podcasts, either via a deep-link like I demonstrated above, or from this screen:
This means that creators have a choice, and that Apple has to win on the merits, and again, there is good reason to believe that Apple can do just that. And if they can’t win on the merits, perhaps they will have to lower their price, or increase the attractiveness of their offering. Competition is a good thing!
The App Store, unfortunately, has no alternative. All apps must be installed via the App Store, which Apple says is for security, but is in fact security theater; the primary reason why bad apps don’t mess up your phone is due to the way that iOS is designed. Theoretically the App Store could also protect you from scams, but that appears to be not much of a priority. And why should it be? There is no competition.
Easy Access to Alternative Payment Methods
Podcasts can contain show notes, and show notes can contain links; these links open in a podcast player’s webview (or in Safari). This is great for subscription-based podcasts: you can load a webview to manage your account, or add on a subscription to your members-only feed:
Once again, this is a fair bit clumsier than simply using Apple’s built-in purchase flows (although Apple Pay helps). That’s ok, though: Apple built the iPhone, and it’s reasonable to argue that they can leverage that advantage to have a superior purchasing experience.
Apps, though, can’t load a webview if there is even a hint of a payment option — apps can’t even include words that tell you to visit a website to subscribe. That means that Spotify or Kindle or any number of apps with digital content can do little more than provide users with a login screen, and keep their fingers crossed that users figure out how to sign up on the web on their own. This works for big names, to an extent, but it is much more difficult for smaller players.
Availability of Alternative Podcast Players
It is possible that Apple shuts all of these avenues down. The company could end the possibility of adding arbitrary RSS feeds, and it could disable links in show notes. This would, to be clear, be an exceptionally crappy thing to do, but then again:
- I think that trying to tax small businesses moving on-line during a lockdown is a pretty crappy thing to do, and that didn’t stop Apple.
- I think that demanding 30% of digital goods that are merely consumed on an iPhone is a pretty crappy thing to do.
- I think that barring developers from even disclosing that Apple is taking 30% is a pretty crappy thing to do.
The good thing about podcasting is that even if Apple locks the Podcast app down, there are plenty of other podcast apps in the App Store, and most of them are free. Make no mistake, it would be bad for my business if I were shut out from Apple’s podcast app, but at least I would have a chance.
That chance doesn’t exist for developers. There are no alternatives to the App Store on the iPhone, and hoping that a customer spends hundreds of dollars and tens of hours switching to Android is completely unrealistic.
Two Big Problems
There does remain two big problems with Apple’s podcast subscription service:
Who Owns the Customer
As I noted above, I’m actually very open to allowing Apple to be my payment processor; in my experience, though, a critical part of the creator business model is having a direct connection with your customers. That is something Apple simply doesn’t allow. From the Podcasters Program Agreement:
Personal Data. In connection with any Podcaster Content hosted by Apple and made available in Apple Podcasts under this Agreement, You represent and warrant that You and Your personnel, agents, and contractors will not access or otherwise process any information that can be used to uniquely identify or contact an individual (“Personal Data”).
This makes it crystal clear that every subscriber that signs up is Apple‘s customer, not mine, and while the revenue may be nice in the short run, it is fundamentally constraining in the long run. I believe that creators will increasingly monetize across apps and experiences; Apple, though, won’t even let me email folks to let them know about what is happening beyond the podcast.
There is an even more problematic angle to this as well: I noted above that Apple might start locking down its podcast app, which might mean that I want to change to a different platform or monetization method. However, the fact I don’t know who my customers are will make that impossible to communicate.
I’m not, in the context of podcasts anyway, saying that what Apple is doing is illegal, and I acknowledge that many customers may prefer this arrangement. As a creator, though, this is a major red flag (developers, meanwhile, also get no contact, but they have no alternatives).
The Anticompetitive Angle
Apple’s podcast offering, as I laid out above, rightfully competes on the merits with alternative ways of paying for subscription podcasts in the Apple Podcast app. Unfortunately there is a meta competition problem, which is that no one else can offer a podcast subscription service like Apple’s.
Spotify is, of course, the other obvious candidate, and the streaming service is currently testing subscription podcasts via Anchor. However, when that product launches Spotify will not be able to upsell customers from within the Spotify app, like Apple is from within the Podcast app. Not because it is technically impossible, but because Apple is leveraging its control of the operating system into control of the App Store into control of apps and now podcast monetization.
Apple’s Flipped Motivations
To go back to yesterday’s presentation, the obvious reason why Podcasts only warranted a minute of Apple’s time is that the company had so many other cool things to announce:
- AirTags and the anonymous iPhone network they tap into are something that only Apple could create, thanks to their integrated model.
- The new iMac is gorgeous, and, as Apple was careful to point out, uniquely enabled by their industry-leading chips.
- The latest iPads are full-blown computers in their own right, and even more capable in ways that creators are still figuring out.
Apple even released a great-looking new iPhone color, and finally fixed (?) the Apple Remote.
Then again, perhaps Apple spent so little time on podcasts for a rather less attractive reason: while iTunes 4.9 was created to make iPods better, the end game of all of these beautiful devices seems ever more focused on locking in services that make Apple richer; that’s a conversation better saved for Congress.