Apple has every right to take a 30% cut of subscriptions sold through the App Store, says the CEO of online music company Wolfgang's Vault, and music services who have a problem with that are pursuing the wrong business model.
Wolfgang's Vault owns the rights to more than 14,000 live concert recordings, including many from big-name rock and jazz artists. The company lets users listen to some of these concerts for free, but hardcore fans can sign up for a VIP level of membership for $48 per year and get benefits like unlimited streaming to their iPhone. The company also owns Daytrotter, which focuses on new music and has its own mobile apps, and sells concert memorabilia.
Other music subscription companies say that the new rules are unfair, and that Apple should charge something like 2.5%, the standard fee for a credit card.
But Wolfgang's Vault CEO Bill Sagan explains, "iTunes is much more than a transaction processor like a credit card company. It's a store -- a massive store. Stores, whether it's Nordstrom or Wal-mart, take 45% and 55% of the share as the revenue stream." Even pure online stores like Groupon takes 50%, he notes.
Plus, Apple does a great job making app downloads easy. "It's probably the easiest commerce I've ever done. The way they have that set up, they do it extraordinarily well."
The reason Spotify and other subscription services have such a problem with the new fees is that they don't own any of the music they're selling to consumers -- they're simply renting the music from record labels and publishers.
Wolfgang's Vault owns its music and is willing to pay a distribution fee to help sell it. "Our business model accommodates a cost for distribution. Apple's price of 30% fits within our business model," Sagan says.
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