Disney+ to launch in November as streaming segment starts to look crowded

Disney has announced it will launch its video streaming service in Australia, New Zealand, Canada and the Netherlands alongside the US in November, but how much appetite is there in the market?

This is the big question which the streaming world is facing; how many streaming services can be introduced before saturation point is reached in the profitable segment?

Alongside the likes of Netflix, Prime Video, Hulu, Now TV, YouTube, Fubo, Sling TV and several other niche services such as Nickelodeon and Fox News, Disney+, HBO Max and Apple TV will be fighting for the consumers attention. With so much fragmentation, you have to wonder whether the first-golden age for the streaming segment is coming to a close.

Today, Disney+ has given concrete plans for its launch, while Apple has been the subject of rumours. At Disney, the streaming service will debut in the US at the beginning of November, in Canada and the Netherlands on 12th November and in Australia and New Zealand on the 19th November.

Looking at the launch, Disney does seem to be ticking the right boxes in terms of content, it already owns an impressive library and has got some promising commitments to original titles, but you have to wonder about everything else.

Let start with experience. The likes of Hulu, Netflix and Prime Video have been honing their platforms for some time, and this could be one of the defining feature when it comes to winning the scrap for long-term subscribers. One of the attractive elements of OTT streaming services are the month-by-month commitment; customers can up and leave very quickly should they find issue with the service and getting them back will be tough.

Disney does not have any experience when it comes to creating or managing these platforms, whereas rivals have got years behind them. This could be a very important factor, especially when it comes to mobile.

Another challenge Disney will face, and we are surprised it hasn’t done more to address it on launch, is the brand awareness of the service. Fighting for eyeballs is a very expensive and tricky game to play, and while Disney has one of the most prominent brands on the planet, it has zero credibility when it comes to the delivery of digital content. Some might also question the breadth and depth of content which the library will contain.

This is why we are surprised Disney isn’t launching the service through local partnerships. Netflix and Amazon have already shown how powerful partnerships can be, embedding services in existing content aggregator platforms is an excellent way to win eyeballs and tempt subscriptions. This would have been an obvious route to take, leaning on the credibility and billing experience of a local partner, a telco for example.

That said, it is not too late. The service will be expanded to every major market by the end of the year, Disney claims, and there certainly are some multi-national telcos who could help generate exposure and credibility in some major markets. Vodafone or Deutsche Telekom could offer excellent exposure across Europe, as would Telefonica, as well as the LATAM markets. These partnerships could offer a direct, trusted and validated link to local consumers.

Another element to consider for the telco partnerships is the delivery of content over mobile. This is a different dynamic than the traditional means of viewing content, and few can offer the same expertise as the telcos. Mobile could be a significant tool for the armoury moving forward, and it will be interesting to see how the experience is received by consumers.

However, this does not address the wider issue which is lurking on the horizon; customer fragmentation.

When there were only two or three major services available, consumer wallets might have been able to tolerate numerous subscriptions. However, it is quickly getting to a point where choices will have to be made, as these services are not priced that cheaply anymore.

£6.99 or £10.99 isn’t realistically that much, however the quality of the services might decline. In years gone, these services were aggregators, but with the content owners clawing back titles off rival platforms, the libraries will get smaller. With Disney for example, all the Marvel content will be taken back, and with HBO’s service, titles like Friends will be removing from wider distribution.

What is worth noting is that original content could replace some of these titles, however, the pursuit of the next Breaking Bad or Game of Thrones is a perilous pursuit; not everything will be a winner, or appeal to a wide enough audience. There is a risk the quality of content could degrade as the streaming segment becomes more fragmented.

This is of course a negative view on the quality of content, the increased competition might welcome in a new era of quality programming. However, there are a lot of duds which are launched onto the unsuspecting world.

It is also worth noting that there is plenty of room for growth across the world. Markets like the US, UK or Germany might not present much greenfield growth for new subscribers, but there are still a few more hundred million in developed and developing markets to capture profits from.

Since Netflix changed the entertainment world with its streaming offering, hoovering up revenues, many have tried to replicate the success. You have to wonder how many services the segment can tolerate and remain the bountiful bonanza which many investors have been promised.

Third-parties are next battleground in video streaming war

Securing a partnership with the likes of Netflix and Amazon might be the golden-ticket for the telcos, but no-one should forget they have as much negotiating power as the OTTs.

For the telcos, convergence is an oasis of profit in the barren desert of the connectivity industry. As traditional means of generating cash are either destroyed (SMS and voice tariffs) or increasingly squeezed (CAPEX investments for 5G), many telcos are searching for differentiation to charge more and prove they can add value beyond the utilitised connectivity column. Content is a very popular route for many to take.

Aside from attempting to create content platforms, more telcos are seeking third-party relationships to move into the aggregator business model. This is a very sensible approach to business, the telcos can add a lot of value to the OTTs and securing a partnership with one of the more prominent streaming players is a key cog to their own ambitions. However, despite the desperation of the telcos, they should consider themselves on equal terms to the OTTs.

“Every telco is fighting to become an aggregator, but there is also a battle between the streaming OTTs to gain visibility,” said Paolo Pescatore of PP Foresight.

As Pescatore notes, outside of the two major players in the streaming world (Amazon Prime and Netflix), achieving visibility and scale can be very difficult. This is and will continue to be an incredibly congested field, therefore the relationship between telcos and OTTs could add an edge for any challenger.

Looking at the growth opportunities for the OTTs, there is plenty of cheddar left on the table, though in the developed markets, there are only crumbs left. Take the US for example, here Netflix subscriber growth has slowed, suggesting the glass ceiling for direct customer acquisition has been reached, or will be in the near future. The question is how these final customers can be engaged? Third-party relationships are key here.

At IBC last year, Maria Ferreras, VP of EMEA Business Development at Netflix highlighted that partnerships with telcos were an important cog as the streaming giant continues to evolve. At the time, the discussion was primarily from a billing relationship, though there are plenty of other opportunities.

Partners with their own content platform offer Netflix and Amazon something incredibly important; real-estate. Whoever can secure the most prominent position on the content platform will gain additional visibility and engagement with customers. It is evidence the OTTs are buying into the convergence strategies employed by the telcos, but also the value of the telco relationship with the customer.

Looking around the world, these partnerships are becoming much more common. Netflix has been embedded in the Sky platform in the UK, while Amazon Prime has been integrated into the Virgin Media platform. Mexico’s Totalplay has become the first operator in LATAM to add Amazon Prime to its TV service, while Vodafone Spain has secured partnerships with Netflix, HBO Spain and Amazon Prime.

There are of course numerous ways in which these partnerships can develop. Some are simply billing relationships, allowing the streaming service to be added onto the monthly bill, while some can have the OTT experience embedded into the content platform offered by the partner. What is clear, however, is this is an arms race from the OTTs.

The more partnerships which are in place, the more opportunity there is to engage potential customers and increase subscriptions. These partnerships are not only about securing visibility or accessing billing systems, but also leaning on another brands credibility to engage customers who wouldn’t have been previously accessible.

Interestingly enough, there aren’t many telcos or content providers who have relationships with more than one of the streaming giants. This might be a coincidence, or there might well be a desire from the OTTs to secure exclusivity through the platform of choice, even if it is not made official or public.

The challenge which many will face is going toe-to-toe with Amazon and Netflix. If these partners are securing the best relationships with the telcos, they will gain the most eyeballs on their services. Disney is company which will certainly want to lean on relationships with third-parties, but it will have to move sharpish to ensure it is not shut out.

Although Disney is one of the most prominent brands on the planet, it is almost unknown in the content world. This will present a challenge in two ways. Firstly, cutting through the background noise to educate the user on its offering, and secondly, the billing relationship.

For both of these challenges, third-party relationships with telcos and content platform owners can help. A direct line of communication is already in place, visibility can be offered through apps, billing relationships already exist, and third-parties are looking for partners to help build bundling options.

If Disney is going to be successful in its pursuit of streaming fortunes, it will need more than engaging content. It already has the content, and the ambitions for original content creation do look promising. The challenges will be in terms of securing visibility and credibility in the eyes of the consumer.

Telcos should realise sooner rather than later that they are an equal partner to the OTTs in this context, as they are just as desperate to secure favourable partnerships as the telcos. This is the next battleground in the streaming race; partners mean prizes.

Maine gets tough on telcos over data economy

Maine Governor Janet Mills has signed new privacy rules into law, demanding more proactive engagement from broadband providers in the data-sharing economy.

While the rules are tightening up an area of the digital world which is under-appreciated at the moment, it will have its critics. The law itself is targeting those companies who delivering connectivity solutions to customers, the telcos, not the biggest culprits of data protection and privacy rights, the OTTs and app developers.

The rules are applicable to broadband providers in the state, both mobile and fixed, and force a more proactive approach in seeking consent. Telcos will now be compelled to seek affirmative consent from customers before being allowed to use, disclose, sell or permit access to customer personal information, except in a few circumstances.

As is on-trend with privacy rules, the ‘opt-out’ route, used by many to ensure the lazy and negligent are caught into the data net, has been ruled out.

There are also two clauses included in the legislation which block off any potential coercing behaviour from the telcos also:

  • Providers will not be allowed to refuse service to a customer who does not provide consent
  • Customers cannot be penalised or offered a discount based on that customer’s decision to provide or not provide consent

This is quite an interesting inclusion in the legislation. Other states, California for example, are building rules which will offer freedoms to those participating in the data-sharing economy if the spoils are shared with those providing the data (i.e. the customer), though the second clause removes the opportunity to offer financial incentives or penalties based on consent.

This is not to say rewards will not be offered however. There is wiggle room here, zero-rating offers on in-house services or third-party products for example, which does undermine the rules somewhat.

It is also worth noting that these rules only pertain to what the State deems as personal data. Telcos can continue to monetize data which is not considered personal without seeking affirmative consent, unless the customer has written to the telco to deny it this luxury. Personal data is deemed as the following categories:

  • Web browsing history
  • Application usage history
  • Geolocation
  • Financial
  • Health
  • Device identifiers
  • IP Address
  • Origin and destination of internet access service
  • Content of customer’s communications

What is worth noting is this is a solution to a problem, but perhaps not the problem which many were hoping would be addressed.

Firstly, the telcos are already heavily regulated, with some suggesting already too much so. There are areas which need to be tightened up, but this is not necessarily the problem child of the digital era. The second point is the issue which we are finding hard to look past; what about the OTTs, social media giants and app community?

The communications providers do need to be addressed, though the biggest gulf in regulation is concerning the OTTs and app developers. These are companies which are operating in a relative light-touch regulatory environment and benefiting considerably from it. There are also numerous examples of incidents which indicate they are not able to operate in such a regulatory landscape.

Although it is certainly a lot more challenging to put more constraints on these slippery digital gurus, these companies are perhaps the biggest problem with the data-sharing economy. Maine might grab the headlines here with new privacy rules, which are suitably strict in fairness, but the rule-makers seem to have completely overlooked the biggest problem.

These rules do not add any legislative or regulator restraints on the OTTs or app developers, therefore anyone who believes Maine is taking a notable step in addressing the challenges of the data-sharing economy is fooling themselves. This is a solution, but not to the question which many are asking.

Vodafone Germany tries to placate regulators via wholesale cable deal with Telefónica

Telefónica Deutschland will be able to sell services that run on the combined Vodafone and Unitymedia cable network in Germany, as a remedy measure taken by Vodafone to satisfy EU’s competition concern over its proposed acquisition of Liberty Global.

The two companies announced that they have entered into a definite “cable wholesale agreement” in Germany, whereby Telefónica Deutschland will offer its customers broadband services that use both the Vodafone fixed network and that of Unitymedia. The combined networks cover 23.7 million households and represent a significant upgrade to whatever Telefónica Deutschland customers are currently getting.

“The cable agreement will enable us to connect millions of additional households in Germany with high-speed internet in the future,” said Markus Haas, CEO of Telefónica Deutschland. “By adding fast cable connections, we now have access to an extensive infrastructure portfolio and can offer to even more O2 customers attractive broadband products – including internet-based TV with O2 TV – for better value for money.”

Vodafone’s plan to acquire Liberty Global in Germany (where it trades under the brand Unitymedia), the Czech Republic, Hungary, and Romania, has run into difficulty at the European Union, which raised competition concerns at the end of last year. The Commission was particularly worried that the combined business would deprive the consumers in Germany of access to high speed internet access, and the OTT services carried over it. Vodafone expressed its confidence that it would be able to satisfy the Commission’s demand. Opening its fixed internet access to its competitor is clearly one of the remedies. Also included in the remedy package Vodafone submitted to the Commission was its commitment to ensure sufficient capacity is available for OTT TV distribution.

“Our deal with Liberty Global is transformational in many ways. It is a significant step towards a Gigabit society, which will enable consumers & businesses to access the world of content & digital services at high speeds. It also creates a converged national challenger in four important European countries, bringing innovation & greater choice,” said Nick Read, CEO of Vodafone Group. “We are very pleased to announce today our cable wholesale access agreement with Telefonica DE, enabling them to bring faster broadband speeds to their customers and further enhancing infrastructure competition across Germany.”

Vodafone believed the remedial measures it put in place should sufficiently reassure the Commission that competitions will not suffer after its acquisition of Liberty Global. The company now expects the Commission to undertake market testing of the remedy package it submitted, and to give the greenlight to the acquisition deal covering the four countries by July 2019. It plans to complete the transaction by the end of July. The merger between Vodafone’s and Liberty Global’s operation in The Netherlands was approved by the EU in 2016.

Skint AT&T flogs its 10% of Hulu for $1.43 billion

Having dropped $85 billion on Time Warner AT&T needs to raise some cash sharpish and getting out of OTT TV company Hulu us a start.

Hulu is a private company that is roughly 60% owned by Disney, 30% by Comcast and 10% AT&T. The latter stake (9.5% to be precise) is being bought back by Hulu itself for $1.43 billion, valuing the whole company at $15 billion. Hulu will presumably apportion the stake such at Disney owns two thirds of the company and Comcast one third.

“We thank AT&T for their support and investment over the past two years and look forward to collaboration in the future,” said Hulu CEO Randy Freer. “WarnerMedia will remain a valued partner to Hulu for years to come as we offer customers the best of TV, live and on demand, all in one place.”

AT&T says it will use the case to pay down its debt pile a bit, but the ongoing relationship of its expensively acquired media business with OTT players like Hulu will remain a source of intrigue. Disney recently announced its own streaming service, as did Comcast’s NBCUniversal at the start of this year.

On top of that Apple is getting funny ideas, Netflix and Amazon continue to throw money at original content and you’ve got all the various on-demand versions of traditional broadcasters. They can’t all go it alone. So the aggregation of this proliferation of video on-demand is a critical issue. How long WarnerMedia will remain a valued partner of Hulu now that AT%T doesn’t own a piece of it remains to be seen.

Verizon strengthens commercial messaging platform

After providing call filtering features for free, Verizon is going to update its commercial messaging platform to better protect customers.

Verizon announced that an updated commercial messaging platform will be launched within a month to improve the protection of users. “This new platform will improve spam protections while continuing to enable commercial providers of SMS text messages capacity at scale,” the carrier said in a statement.

The platform refers to Verizon’s “application to person” (A2P) messaging service that businesses can use to engage directly with consumers, e.g. for promotion, customer service, or consumer survey. Verizon did not disclose more details on how the improved security features will work other than that the “new platform uses a full 10-digit telephone number to help you recognize who is texting you”. However we can expect that this would be the first implementation of the RCS based messaging service that Verizon announced at the end of last year. So far, Verizon has been using its own proprietary A2P messaging technology.

Despite that OTT messaging services like WhtasApp and WeChat are gaining popularity whereas mobile operators are losing values through SMS, largely due to the rich features these OTT services can offer. However, the more features are integrated in these services the more they are open to abuse, e.g. spams and phishing attacks, which drives consumers to place more trust in SMS and RCS (coming in messaging format). RCS is a “clean channel”, not tarnished by the privacy scandals committed by Facebook and co, or the over monetisation by others, said the software company Mavenir at the recent Mobile World Congress. Research shared by Mavenir showed 97% of SMS / RCS are opened within 3 minutes.

Verizon’s new announcement on the improved security for messaging came shortly after the carrier made some features of its Call Filter app free to its postpaid users at the end of March. Used to cost $2.99 per month, now users can have Spam Detection, Spam Filter, and Report Numbers for free, while additional features will still come at a price. Verizon is playing catch-up to T-Mobile and others that have already provided free spam protection. It can also be read as responding to a call from Ajit Pai, the FCC Chairman, late year that demanded operators to “adopt a robust call authentication system to combat illegal caller ID spoofing and launch that system no later than next year [2019]”.

Verizon Call Filter free vs. paid

UK finally runs out of patience with internet players

The UK Government has unveiled a public consultation which may well see stricter rules placed on the digital giants as the era of the wild-west internet draws to a close.

To date the internet giants have largely been unregulated. This was fine when everyone admired the likes of Google, Facebook and Amazon, though numerous scandals have exposed the darker side of the internet economy. Many might have seen the likes of Mark Zuckerberg and Jeff Bezos as friendly folk, out to democratize technology, though the underlying business model has shocked many, forcing slumbering politicians into action.

Today, the Department of Digital, Culture, Media and Sport and the Home Office have jointly launched a new public consultation on proposals which will aim to introduce a new regulatory body to govern the internet economy and create a ‘duty of care’ mandate to ensure online safety and tackle illegal and harmful activity, as well as creating a rulebook suitable for the digital economy. The new body will have the power to hand out fines should any of the internet players fall short of expectations.

“The era of self-regulation for online companies is over,” said Digital Secretary Jeremy Wright. “Voluntary actions from industry to tackle online harms have not been applied consistently or gone far enough. Tech can be an incredible force for good and we want the sector to be part of the solution in protecting their users. However, those that fail to do this will face tough action.”

The new regulator, and the soon to be created rules, will apply to any company that allows users to share or discover user generated content or interact with each other online. Those platforms who do not meet expectations will either have sites blocked or face significant fines. One of the questions which the consultation will look to answer is whether the new regulatory body should be part of an existing department, or a newly formed body which would be funded through a levy placed on the sales of the internet companies in the UK.

While this is a necessary step forward, this is going to be a very complicated process. Creating a mechanism which protects users but also maintains the principles of free speech is a delicate equation to balance. We suspect there will never be a situation where all parties are satisfied, such are the complications when dealing with opinions; who should be the judge on what is offensive and what is acceptable?

Ultimately, this is a move which is long overdue. Social media companies, such as Facebook, have slipped between the regulatory red tape for years, fitting nicely into the grey area between ‘platform’ and ‘publisher’. While these services might have started as a platform, they have certainly evolved beyond that, however, it would not be just to designate them as publishers; they are not content creators as such. A new definition is needed and only then can rules fit for the digital era be created.

Change is on the horizon, and it is unavoidable for the internet economy. That said, the lobby machine will soon be taken up a gear to attempt to minimize the impact of any new rules. Numerous European nations are swiftly moving forward to create more accountability, and the internet players will have to change their game-plan from offensive to damage limitation.

That said, the internet players have been given enough chances to clear up their act over the last few years. These are companies which have operated without the severity of the red-tape restraints of other segments, partly because governments have not understood how these businesses operate, but this era of self-regulation is drawing to a close.

“Despite our repeated calls to action, harmful and illegal content – including child abuse and terrorism – is still too readily available online,” said Home Secretary Sajid Javid.

“That is why we are forcing these firms to clean up their act once and for all.”

If 52% don’t understand data-sharing economy, is opt-in redundant?

Nieman Lab has unveiled the results of research suggesting more than half of adults do not realise Google is collecting and storing personal data through usage of its platforms.

The research itself is quite shocking and outlines a serious issue as we stride deeper into the digital economy. If the general population does not understand the basic principles behind the data-sharing economy, how are they possibly going to protect themselves against the nefarious intentions from the darker corners of the virtual world?

You also have to question whether there is any point in the internet players seeking consent if the user does not understand what he/she is signing up for.

According to the research, 52% of the survey respondents do not expect Google to collect data about a person’s activities when using its platforms, such as search engines or YouTube, while 57% do not believe Google is tracking their web activity in order to create more tailored advertisements.

While most working in the TMT industry would assume the business models of the Google and the other internet are common knowledge, the data here suggests otherwise.

66% also do not realise Google will have access to personal data when using non-Google apps, while 64% are unaware third-party information will be used to enhance the accuracy of adverts served on the Google platforms. Surprisingly, only 57% of the survey respondents realise Google will merge the data collected on each of its own platforms to create profiles of users.

Although this survey has been focused on Google, it would be fair to assume the same respondents do not appreciate this is how many newly emerging companies are fuelling their spreadsheets. The data-sharing economy is the very reason many of the services we enjoy today are free, though if users are not aware of how this segment functions, you have to question whether Google and the other internet giants are doing their jobs.

The ideas of opt-in and consent are critically important nowadays. New rules in the European Union, GDPR, set about significant changes to dictate how companies collect, store and use personal information collected by the service providers. These rules were supposed to enforce transparency and encourage the user to be in control of their personal information, though this research does not offer much encouragement.

If the research suggests more than half of adults do not understand how Google collects personal information or uses it to enhance its own advertising capabilities, what is the point of the opt-in process in the first place?

Reports like this suggest the opt-in process is largely meaningless as users do not understand what they are giving the likes of Google permission to do. The blame for this lack of education is split between the internet giants, who have become experts at muddying the waters, and the users themselves.

Those who use the services for free but do not question the continued existence of ‘free’ platforms should forgo the right to be annoyed when scandals emerge. Not taking the time to understand, or at least attempt to, the intricacies of the data-sharing economy is the reason many of these scandals emerge in the first place; users have been blindly handing power to the internet giants.

The internet players need to do more to educate the world on their business models, however the user does have to take some of the responsibility. We’re not suggesting everyone becomes an internet economy expert, but gaining a basic understanding is not incredibly difficult. However, it does seem ignorance is bliss.

Queen Liz set to live-stream and monetize Prince Phillip

Tired of having to explain why Prince Philip keeps offending people and cultures, Queen Elizabeth is said to be setting up an OTT live-streaming service to monetize the gaffs.

In between impressions of Colin Macrae, Prince Philip, the Duke of Cambridge, is well-known for unintentionally insulting anyone who didn’t gain at least three O-Levels from Eton or Harrow. According to sources, Queen Elizabeth has decided to mount the latest Go-Pro on her husband, which will be then live-streamed through a currently unknown website, with subscribers only having to pay £2.99 a month.

“Her Majesty wants to demonstrate she is more than just the Head of State,” said Dennis, a Buckingham Palace insider. “After 92 years, Her Majesty wants to demonstrate to the people of the UK and the world that she has excellent business acumen. We expect thousands of people to sign up almost immediately, such is the prominence of Prince Philip’s comments.”

Although unconfirmed, the Palace is reportedly in discussions with several telcos around the world, many of whom are seeking exclusive rights for a zero-rating offer. The UK telcos are bidding particularly aggressively, with EE reportedly the keenest, sniffing out a bargain to continue building its content platform. Insiders at Three suggest it wants the right to be the focal point of a new campaign which will be know as ‘Go Groan’.

“Video is constantly being hyped nowadays, and the Royal Family members are constantly sending cat and rugby memes to each other,” said Dennis. “The Queen published her first post on Instagram in March, during a visit to London’s Science Museum, and now she’s hooked. She sees this platform as a great opportunity to make some extra money off her husband’s personality. Those corgi’s go through a lot of doggie biscuits.”

April fools day cartoon

Apple issues weak response to Spotify’s claims of discrimination

Apple has presented its side of the dispute with Spotify, claiming it is treating the latter the same as other apps and it is reasonable to charge 30% of premium payment to apps.

Shortly after Spotify filed a claim at the EU against Apple for being discriminated by the latter’s App Store rules and practices, Apple released a statement to deny these claims and throw the accusations back at Spotify.

Apple argued for the 30% charge of premium paid to apps on App Store platform with a few justifications. “Apple connects Spotify to our users. We provide the platform by which users download and update their app. We share critical software development tools to support Spotify’s app building. And we built a secure payment system — no small undertaking — which allows users to have faith in in-app transactions,” the statement said. Apple also hastened to add that Spotify has left out policy that the revenue share will drop to 15% from the second year on.

On Spotify’s argument that Apple has restricted payment methods to Apple’s own payment system only, Apple retorted that it demands all “digital goods and services that are purchased inside the app using our secure in-app purchase system”.

There are a few layers in the reading of the attrition when each side is only talking its own side’s truth, but there are also bigger questions related to the whole digital economy. There are minor inconsistencies in Apple’s statement, for example it claimed that Spotify has made “substantial revenue that they draw from the App Store’s customers”, only to contradict a few lines below by playing down the App Store’s significance by saying “only a tiny fraction of their subscriptions fall (sic.) under Apple’s revenue-sharing model.” And there is no need for Apple to use the dubious accusation that Spotify is suing music creators. They (Spotify, Google, Pandora, Amazon) are not. They are appealing to overturn a court decision to increase royalty payment by 44%.

There is as much left unsaid as said. For example, Apple failed to address Spotify’s concern that Apple is both operating a platform and distributing its own competing products, in this case Apple Music. This was a point brought up in a conversation The Verge had with Sen. Elizabeth Warren, who did not include in her first list of companies to “break up”. “It’s got to be one or the other,” Warren told The Verge referring to Apple. “Either they run the platform or they play in the store. They don’t get to do both at the same time.” This resonates with Spotify’s accusation that Apple is being both the referee and a player.

It also does not give out the reason why Spotify, or any apps, should not have the option to handle payments within the app with equally safe payment system (e.g. credit cards).

Then there is the broader question whether app stores should be allowed to collect a commission fee for apps distributed on its platform. Technically Apple, and other applications stores like Google’s Play Store, could argue that they are a distribution channel and a retail outlet. Like other channels and retailers, they must charge a fee to sell the products. This side of the business would not be so significant for Apple earlier, as it was mainly using the app ecosystem to sell, and lock consumers in, iPhones. It is getting more meaning for the company now that the iPhone sales are slowing down while “Services” has become a meaningful part of the business. That is also a key reason why both Apple and Google are actively encouraging apps to move to subscription model to generate recurring income for the platforms.

But there has never been any justification why the fee should be as high as 30%, and Apple and Google have been well synchronised with their charge level (as well as dropping the fee from second year onward to 15%). This has become a significant additional cost for the app developers. Some with deeper pockets could absorb the cost and keep the retail price similar to other platforms (e.g. The Economist magazine). Those businesses operating on low margin or on a loss have to move the additional cost to users who opt to pay for the premium inside the app (e.g. Spotify). Other businesses simply choose to disable the option to upgrade to premium inside their iOS app to avoid the fee (e.g. the Financial Times newspaper).

Apple used Spotify’s partnerships with carriers as a supporting argument for the charge, saying “a significant portion of Spotify’s customers come through partnerships with mobile carriers. (This) requires Spotify to pay a similar distribution fee to retailers and carriers.” This may or may not true as each carrier deal with OTT services is different. Even if this is accurate, mobile carriers most likely are following the Apple’s and Google’s benchmark rather than the other way round.