Beats Music Gives Apple 30% Of The Pie For New iPhone Subscribers

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Streaming media services that want to sell subscriptions to users of their apps on the iPhone or iPad have to make a deal with the proverbial devil: if they want to sign up customers on an iOS device, they have to give Apple a 30% cut of the sale.

For music subscription services like Rdio and Spotify, where the margins are razor thin, giving up that 30% cut is enough to turn a subscription from a profit to a break-even proposition. So when a company goes this route, it’s easy to assume they are hurting.

By this logic, Beats Music — the new subscription music service launched in January — is hurting.

Yesterday, Beats updated its has updated its iPhone app to allow new customers to sign up for the $10 per month service through the app, giving Apple a $3 per subscription slice of the pie.

Recode reports that the move was made because most Beats users have iPhones, but it’s almost impossible to sign them up for a subscription out of the app.

Beats CEO Ian Rogers says the decision to sell within the Apple app was fairly straightforward: More than half of Beats users use iPhones, and it’s very hard to get an iOS user to subscribe if you don’t sell in-app.

In giving Apple a chunk of the pie, Beats is joining Rdio and Rhapsody as streaming music services who are selling subscriptions in-app at a 30% loss. Intriguingly, though, Spotify has managed to hold out, possibly because it has a free, ad-supported tier which makes them money even from non-subscribers.

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About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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