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Insider October 27, 2022 — No wonder Spotify’s pissed at Apple

Spotify had to pull audiobook purchases from its iOS app to comply with Apple’s rules

I did think Spotify’s PR push against Apple’s audiobook rules on Tuesday seemed a little odd, but now I see what it was really all about. The old audiobook purchasing system was far from perfect, but there was at least a pathway from the app to the purchase page. Now you just… have to guess how you might be able to buy it.

More on that below, plus Pandora’s legal defeat and ByteDance’s podcast ambitions.

You can’t buy audiobooks from Spotify’s iOS app anymore

Earlier today, Jake and I broke the news of Spotify’s new audiobook purchasing flow on iOS (or lack thereof). The updated Spotify iOS app no longer indicates how you can buy any of the audiobooks in its store, posing a major roadblock for its new business.

Now when you go to make a purchase, the app displays a mostly empty screen saying, “Want to listen? You can’t buy audiobooks in the app. We know, it’s not ideal.” There’s no indication of where you might be able to buy the book.

The update follows a statement from Spotify on Tuesday in which the audio streamer accused Apple of “choking competition” with its app rules for audiobook purchasing. It is worth noting that Apple also sells individual audiobooks through its Books app, which can be purchased in-app.

When Spotify’s audiobooks feature launched a month ago, users could not buy titles directly in the app, but they could tap a button that would email them a link to purchase the book on the web. Once the purchase was made, the title would become available for listening in the app. Now, users have to go to Spotify’s audiobook hub in a web browser or through the desktop app in order to make a purchase.

At issue seems to be Apple’s rules around in-app purchases. Apple requires that basically all digital purchases, like audiobooks, run through its own checkout system and give the company a 30 percent cut. That means Spotify would either have to eat the fee or raise prices — either of which would make it challenging to compete with Apple’s own Apple Books store, which isn’t subject to the same cut.

It seems as though Spotify’s initial purchase flow — where the app told you a book was for sale and would email you a link to buy it on the web — wasn’t fully in line with Apple’s strict rules. Spotify said this week that Apple rejected two proposed fixes before it finally allowed this new interface for audiobooks. The Spotify app is usually updated weekly; this is its first update in over a month.

Apple has very gently loosened its rules, allowing select apps to link to the web in certain circumstances. Spotify, for instance, could use an external link to direct users to sign up for a premium account subscription. That exception, apparently, does not extend to buying audiobooks. The Verge has reached out to Apple for comment.

Spotify’s move into audiobooks is an extension of its goal to move beyond music. With royalties inching higher, the company is relying on spoken-word content like podcasts to turn larger profit margins over time. Earlier this year, CEO Daniel Ek told investors that he believes audiobooks will be an area of growth for the company. In June, Spotify bought audiobook company Findaway for $123 million.

Pandora’s countersuit against comedians is dismissed by judge

In the messy fight between comedians like Lewis Black, Andrew Dice Clay, and George Lopez and SiriusXM-owned streamer Pandora, the comedians just clocked a win. Their lawsuit against Pandora, in which they claim the streamer made money off their comedy albums without obtaining the proper performance licenses or paying out royalties, is still ongoing. In response, Pandora filed a countersuit against the comedians and the performance rights organizations that represent them, claiming that they are operating as a monopoly and are part of a price-fixing conspiracy. The countersuit has been dismissed.

Pandora’s countersuit may not yet be totally over. The judge gave the company two weeks to amend their complaint but wrote that “the Court doubts whether Pandora can allege the necessary facts at this stage.” 

The result is not a clear indication of which way the judge will rule on the comedians’ lawsuit, but it definitely puts Pandora in a more vulnerable position. Now completely on the defense, the company may be more inclined to settle than to spend another year in court. If that happens, there could be major ramifications across the audio industry — comedians, and maybe even podcasters, could claim to have the right to a whole new royalty stream.

ByteDance is hiring for its podcast division

In another sign that TikTok parent company ByteDance is coming for Spotify’s lunch, the company recently posted a job listing for its podcast business development team based in LA. “We are tasked with creating and implementing the ByteDance podcast strategy,” the listing says. “The team helps drive growth and awareness of ByteDance and the podcast and creators that thrive therein.”

It’s not clear what that strategy is (but if you know, shoot me an email). Is the focus on podcasters who use TikTok to promote their shows or on the forthcoming expansion of ByteDance’s audio streamer, Resso? Resso, which hosts podcasts in addition to music, is only in three countries right now (India, Indonesia, and Brazil), but it is reported that the company is planning a major expansion.

Spotify earnings: the good and the meh

There were no major surprises during Tuesday’s earnings. Spotify added 7 million new subscribers, bringing the total to 195 million. The company expects it will cross the 200 million mark before the end of the year. But all that new sub money is not yet helping its profit margins, which, at 24.7 percent, were lower than expected and two points lower than during the same quarter last year. The company blamed currency exchange shifts (strong dollar, weak euro) and an unexpectedly high licensing payout for the margins. It’s not a disaster, but Wall Street is not satisfied — the stock is trading about 15 percent lower than it did before the results were reported.

That’s all I got for today! You’ll be hearing from Jake tomorrow since I will be in a Hot Pod Summit prep bunker.