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.

Source: Recode