Spotify vs Apple, UMG vs TikTok, TikTok vs YouTube, Taylor vs AI
Can't we all just get along?
Spotify vs Apple
Understanding the Complexities of the EU's Digital Markets Act
Last week, Apple made changes to its ecosystem in the EU to comply with the new Digital Markets Act — and that angered Spotify.
While this might seem like a war between tech titans, its ripple effects could redefine how we, as users, interact with our favorite apps.
Let’s unpack this complex situation…
The new plan includes:
A €0.50 fee per download for apps that get more than 1m downloads
A 17% commission on external in-app purchases
Both of which Spotify claims is a complete and total farce, saying in a blog post "As Apple has just shown the world, they think the rules don’t apply to them.”
Spotify's CEO Daniel Ek also criticized Apple in a series of tweets. Apple responded by saying that the changes give developers a choice and that more than 99% of developers would pay the same or less to Apple.
Ek added that "under the new terms, we cannot afford these fees if we want to be a profitable company, so our only option is to stick with the status quo" and encouraged regulators in the EU to push back on Apple's plans.
Now let’s take a look at those changes Apple made.
John Gruber at Daring Fireball has put together a great summary of these changes. Feel free to scroll past, but I’m including them for reference:
Here’s my summary of the options available to developers in the EU, under Apple’s proposal:
Stay in App Store under the current (pre-DMA) rules, exclusively. Developers that take this option:
Are not permitted to use any of the new business terms available in the EU, but new iOS platform >options for the EU, such as alternate browser engines, are allowed. (Because they are required to be allowed.)
Because nothing business-related changes under this option, the existing worldwide rules apply for paid apps, subscriptions, and in-app purchases (IAP), including the 30/15 percent commission to Apple and a requirement that apps exclusively use Apple’s App Store payments system.
The Core Technology Fee (CTF) is not collected, because the business terms haven’t changed. (See below re: the CTF.)
Opt in to the new EU rules (all sub-options available under this choice require paying the Core Technology Fee for each app with over 1 million downloads in the EU):
After opting in to the new EU rules, developers can choose to
remain in the App Store, and:
Use Apple’s App Store payments system: 20/13 percent commission + CTF paid to Apple automatically.
Use a custom in-app payments system (e.g. Stripe): 17/10 percent commission + CTF paid to Apple.
Use external links from inside apps to the web for payments and subscriptions: 17/10 percent + CTF paid to Apple.
The latter two options — using custom payment processing and/or external links to the web — are similar to the announced-last-week External Payment Link entitlement policy, regarding the developer’s obligation to track these payments, report sales to Apple monthly, and submit to audits by Apple to ensure compliance.
Distribute apps in one or more third-party marketplaces:
No option to use Apple’s App Store payment processing, because the apps aren’t coming from the App Store.
The only money due to Apple is the Core Technology Fee — there is no commission percentage on in-app transactions or links to the web.
Under option (2) — the catch-all for opting in to the new rules available in the EU — the sub-options are not mutually exclusive. Developers that opt in to the new EU rules can have (or keep) apps in the App Store and distribute those same apps, or different apps, via third-party app marketplaces. Or they can stay in the App Store exclusively (under the new business terms, with lower commissions but also the CTF), or they can distribute exclusively via app marketplaces.
Only options (1) and (2) are exclusive. However, once a developer opts in to the new EU rules, that decision is irrevocable. Quoting from the Q&A section of Apple’s “Update on Apps Distributed in the European Union” document:
Developers who adopt the new business terms at any time will not
be able to switch back to Apple’s existing business terms for
their EU apps. Apple will continue to give developers advance
notice of changes to our terms, so they can make informed choices
about their businesses moving forward.
There are a few additional points to understand about the new paradigm:
There is no direct side-loading of apps, like from a developer’s website; rather, companies can set up alternative app marketplaces (by registering with Apple and having a €1 million line of credit).
Apps can only be installed from one marketplace at a time; if Spotify wanted to set up its own marketplace, it could not overwrite existing Spotify installs but would have to hope users delete the one they have and install a new one.
Apple will still review all apps on alternative app marketplaces, but not for content: they will scan for malware and the use of private APIs, enforce App Tracking Transparency, and other vagaries around security (this step will include human review).
While it’s clear that Apple is flexing its regulatory muscles, the question remains: is this move pro-competition or a clever workaround? From Spotify’s viewpoint, it's a daunting challenge that will stifle their business model. But it's not just about these two players; the outcome of this standoff could set a precedent impacting the entire digital ecosystem.
Apple and “Or”
The first thing to note is that no one — including Apple — knows if this plan abides by the DMA. This is, unfortunately, par for the course for the European Union. Regulations are passed that insist on certain outcomes, with various carve-outs and definitions, and it is up to the companies impacted to figure out how to meet them; only then do the powers-that-be decide whether or not said company is in compliance.
This is an insane way to write regulations, but when you consider the E.U.’s insistence on contradictory end goals — increasing competition while insisting on an absolutist approach to user privacy — you can understand how the burden ends up falling on companies to come up with their own solutions. This also opens up massive loopholes (like the fact that Apple believes it can still enforce App Tracking Transparency restrictions on apps not in the App Store).
My biggest disappointment with the DMA’s regulations around third-party app stores is the word “or”: gatekeepers must allow third-party software applications (i.e. side-loading) or third-party stores.
Apple’s approach clearly rests on that “or”, and here’s the rub:
The companies that would be able to get alternative app marketplaces off of the ground would likely have to be other large tech companies.
Those large companies, by and large offer free apps.
By accepting Apple’s new business terms (a pre-requisite for launching an alternative app marketplace), those companies would have to pay the CTF (€0.50 fee per download) every year, forever.
To put it in concrete terms:
Meta has 245 million monthly active users in the E.U.
If we assume that 1/3 of those users have an iPhone, then Meta has 81 million iPhone-using monthly active users.
Let’s further assume that each of those customers uses all four of the core Meta apps: Facebook, Instagram, WhatsApp, and Messenger; that is 324 million apps on which Meta needs to pay the CTF.
This rough calculation means that Meta would need to pay Apple €162 million per year forever, just to exist. That’s doable — Meta made $29.7 billion last year, and that includes the double-digit billions they are spending on Reality Labs — but it certainly isn’t ideal. What is much more questionable is how many other developers could afford that expense, which, again, is above and beyond all of the challenges of getting users to install an alternative app marketplace, uninstall the app they have from the App Store, and install another app…for what benefit exactly? Showing porn?
Everything else is still subject to review.
This, by extension, raises the question as to why Meta or anyone else would bother: they would face all of the same challenges, above and beyond the fee, and in the end, it is essential for any Aggregator to be as accessible to users — the source of their power — as possible.
So, Now What?
The smartphone is unequivocally the most important consumer computing platform in the world, and it should be the rightful foundation for whatever comes next, from AI to AR/VR. However, Apple's total control of the iOS software experience has severely limited the potential of software that could have been developed, particularly on the iPad, and has made it significantly harder for new entrants building new experiences in AI or AR/VR to get off the ground.
While developers helped sell the iPhone, it was Apple that created a new market for them and conditioned customers to love apps (There’s An App For That) and trust the purchase process in a way that undoubtedly benefited both parties. It’s absurd to expect all platform innovation to be halted at the level of Windows circa 1998, where users could install whatever software they wanted, for better and for worse.
Despite Apple's insistence on monetizing its property, it is important to acknowledge that the current App Store approach is the optimal way to monetize its intellectual property, not just from their perspective but from society’s as well. Any and all payments are taken out of zero marginal cost revenue, which minimizes the harm from any sort of "tax" and maximizes innovation while minimizing deadweight loss.
The E.U. needs to realize that Apple's iOS is their individual property, and if they wish to charge for it, they have every right to do so. The E.U. will have to decide whether or not Apple is abiding by their impossible-to-abide-by regulation, and developers will have to decide if they want Apple's old business model or the new one.
However, it’s imperative that we acknowledge the evidence of any consumer harm — at least once we dismiss theoretical apps that were never created — not only don't exist but actually run in the opposite direction.
Those Taylor Swift Deepfakes
Last week's viral spread of sexually explicit deepfake images of Taylor Swift on various platforms, including the one formerly known as Twitter, reignited discussions about digital privacy and freedom of expression.
Fans were outraged, and it dominated the news cycle — which as always — amplified the Streisand effect of the images. Prominent organizations, of course, felt the need to respond.
The Response from Prominent Organizations:
The White House: Press Secretary Karine Jean-Pierre called the situation 'alarming,' advocating for urgent legislative action to tackle such digital violations.
SAG-AFTRA: The union emphasized the deepfakes as 'upsetting and harmful,' pushing for laws to protect public figures from digital privacy invasions.
Microsoft: CEO Satya Nadella spoke about the responsibility of tech companies to implement 'guardrails' around technology, highlighting the societal need to establish norms for technology use.
The Platform’s Reaction: The platform formerly known as Twitter decided to block searches for Taylor Swift's name. While done in the name of safety, it’s a major disservice to users (as well as the artist) to restrict searching her name. This less-than-nuanced approach also shows what happens when you gut your content moderation team.
The Legal and Ethical Dilemma: The creation and spread of deepfakes pose a complex challenge: balancing the protection of individuals against digital harm with the preservation of freedom of expression. I get a queasy feeling when I see knee-jerk reactions to stifle speech, especially when it's from a government spokesperson AND an org created to protect artists. Two key considerations emerge:
The Nature of Deepfakes: Unlike genuine content, deepfakes are inherently false, suggesting their suppression might not equate to censoring authentic expression.
The Difficulty in Detection: The reliance on automated technology to identify deepfakes complicates the process, especially when political biases might influence interpretations of authenticity.
Potential Legislative Solutions Actions:
Overt vs. Covert Deepfakes: Distinguishing between overt (clearly fake) and covert (deceptively real) deepfakes can guide legal responses. Overt deepfakes, used in satire or education, might warrant protection under freedom of expression, while covert deepfakes could be targeted more aggressively. Nobody in their right mind believes Taylor Swift is actually having sex with the Muppets, or a stadium full of Chiefs fans.
Balanced Approach: A nuanced approach, considering context and intent, is essential in crafting laws that address the harms of deepfakes without infringing on artistic and political expression. I care far less about public figures in this context and much more about kids dealing with this in school.
I recall when a magazine publisher was at odds with Howard Stern, and he published a manipulated photo of his wife at the time, Alison Stern giving birth to a deformed baby. The headline said, “Stern Gives Birth To Mongoloid Baby.”
Freedom of speech prevented Stern from taking any action, which he later wrote about and agreed with, despite personal feelings that it was reprehensible. That freedom also protected Kathy Griffin when she posed with the bloody head of a dummy made to look like President Trump.
While deepfakes represent a new frontier in digital manipulation, the core principles of freedom of expression and the right to privacy remain central to our democratic values; I hope they can be balanced by the market and societal norms because government interference in speech rarely goes well.
TikTok Takes (greater) Aim at YouTube
TikTok takes another step into the realm of long-form content, directly challenging YouTube's supremacy.
Recently revealed by social media consultant Matt Navarra, TikTok is nudging creators sideways: posting landscape videos over one minute in length.
Labeled as the "Video View Booster," this feature promises to amplify the visibility of qualifying videos within 72 hours of posting.
But there's a catch: these boosted views won't translate into monetary rewards through TikTok's Creativity Program Beta, which otherwise compensates creators for longer videos.
This decision by TikTok creates a nuanced landscape for content creators. On one hand, the increased exposure without direct financial incentive might seem like a raw deal. However, many creators might view this as a fair exchange for the broader audience reach and potential brand-building opportunities. It’s like Heavy Mental; I’ve received thousands in pledges, but I won’t turn on premium subscriptions until I’m satisfied with the overall size of my subscriber base.
The underlying mechanics of this ‘boost’ feature, functioning on an opt-out basis, may lead to some initial confusion among creators expecting a revenue bump alongside their increased viewership.
The push towards horizontal videos also represents a strategic alignment with evolving content consumption patterns. Despite TikTok's vertical video format being a perfect fit for mobile viewing, the platform is adapting to the broader, more diverse content preferences of its audience. This shift aligns with the growing trend of longer videos on the platform, evident from its experiments with 30-minute formats and the recent extension to 15-minute videos. Such changes signal TikTok's ambition to house more comprehensive, in-depth content, akin to the popular "week in the life" vlogs on YouTube.
I wonder how much horizontal content will now be rehashed on both platforms. Not unlike lazy marketers who post the exact same content on IG, FB, etc.
TikTok is going after YouTube beyond format and length alterations. TikTok's Series program, which allows creators to offer exclusive content for a fee, further encroaches into YouTube's territory. With the ability to charge anywhere from $1 to $190, creators can leverage this feature to build a more sustainable income stream, diversifying beyond ad-based revenues.
I haven’t seen it mentioned anywhere, but horizontal videos are obviously well-suited for larger screens, hinting at TikTok's potential expansion into the TV and streaming console market. Such a move would position TikTok as a direct competitor to YouTube in living rooms worldwide.
UMG Takes Aim at TikTok
Universal Music Group removed all of its music from TikTok, and posted an open letter airing their grievances.
All existing content featuring Universal Music-owned songs will be muted.
Artists affected include all of that crap that’s popular with the kids:
Taylor Swift, Lady Gaga, Bad Bunny, SZA, Drake, Kendrick Lamar, Harry Styles, Justin Bieber, Adele, Billie Eilish, Ariana Grande etc.
While that may annoy said kids, it’s the other 99% of the roster who’ll be impacted by this. Like it or not, TikTok is the biggest music discovery platform around, and while every artist listed above will still be able to fuel up the G5 without TikTok, smaller artists will feel it.
I’m not the first to point it out, but after reading that open letter, I found it amusing that UMG was accusing someone —anyone— of not compensating artists fairly.
Their new “artist-centric” model is just a means to cut royalties to small artists to increase them for their established ones. As Ari Herstand recently opined: “UMG is on a warpath right now to reclaim their market share by stealing from smaller, indie artists.”
That said, I do believe UMG is owed more than their previous agreement from TikTok, but despite losing all of those chart-topping names, I haven’t seen or heard of any backlash on TikTok.
It will interesting to see who bends the knee first.
Talking Heads Turned Down $80 Million
Buried in this report about Coachella attempting to facilitate a Talking Heads reunion is that Live Nation offered the band $80 million for 6-8 festival gigs.
First, let’s first address that Talking Heads at Coachella makes no sense from a fan’s perspective.
Kids at that fashion show quasi-music festival won’t care. There are endless videos of legacy acts being ignored at Coachella, while some dude with a MacBook Pro outdraws them. Poor Lemmy…
Actual fans of Talking Heads have no interest in spending big bucks to stand in the desert all day to see a band known for their intimate performances on an enormous, soulless stage.
Second, how much turmoil and ego trips must exist within that band for them to turn down $80 million for a handful of festival appearances?
Great Reads
Miracle in the Jungle
Make time to read this excellent story about the race to find four children who survived a plane crash deep in the Amazon.
Selling Luxury to the 1%
There’s a case study at the link, but you won’t read it. The insight I found most interesting is that the top 2 percent of luxury customers drive 40 percent of all luxury sales.
The 1990s Bay Area beach rave that collectively hallucinated a UFO
With a headline like that, do you really need additional enticement to read the story?
Starter Pack: The emerging tech guide for independent artists
In the face of growing challenges in the indie music sector, this comprehensive guide helps make sense of emerging technologies like AI, VR, and blockchain in revolutionizing music creation, distribution, and monetization. It offers a detailed Starter Pack for independent artists and their teams, providing practical guidance, strategic checklists, and case studies to effectively integrate these technologies into their creative and business strategies, enabling them to stand out in a saturated market and achieve their career goals. I’ve supported W&M since its inception and love to see them iterate each year.
