Spotify announced earlier this week that it has filed an antitrust complaint against Apple with the European Commission (EC), claiming that Apple’s rules on the App Store ‘limits choice’ and ‘ stifle innovation’ at the expense of user experience. Spotify states that Apple receives a 30% tax on purchases made through Apple’s payment system from Spotify and other similar digital services.
“If we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music. And to keep our price competitive for our customers, that isn’t something we can do”, states Daniel Ek, CEO, Spotify in a blog post.
Ek mentions that in case Spotify decides not to use Apple’s payment system, then a series of technical and experience limited restrictions are applied by Apple. For instance, Customer communication on the app is restricted including its outreach efforts beyond the app. Also, they are not able to send emails to Apple customers in certain cases. Apart from that, Apple also blocks the experience enhancing upgrades on the app on a routine basis.
Spotify is not the only one to have stood up against Apple tax. Many companies have chastised and spoken against Apple tax. For instance, companies like Netflix Inc. and video game makers Epic Games Inc. and Valve Corp also complained about the cost of Tax that Apple charges, last year. However, Spotify is the first company to file a complaint against Apple tax that is registered with the EU, a regulatory body that ensures fair competition across the market.
Ek states that Spotify is not looking for any special treatment and wants Apple to treat them like other apps on the App Store, including Uber or Deliveroo, who are neither imposed any Apple tax nor do these apps have the same restrictions as Spotify. Ek also mentioned a list of requests to bring about a change in rules laid out by Apple for the app store. These are as follows:
- Apps should compete fairly on the merits, and not based on who owns the App Store. All apps should be subject to the same fair set of restrictions (including Apple music).
- Consumers should be offered a real choice of payment systems. They should not be forced to use systems that have discriminatory tariffs associated with them like Apple’s.
- App stores should not dictate communications between different app services and users, by placing unfair restrictions on marketing.
Spotify has also launched a separate ‘Time to Play Fair microsite’ that is dedicated to making users aware of Apple’s ‘anti-competitive behavior’. The site illustrates the complaints by Spotify extensively.
Horacio Gutierrez, General Counsel, and VP, Business & Legal Affairs at Spotify, confirmed that Spotify has submitted an “economic analysis” to the European Commission, that demonstrates how Apple’s policies have impacted its business. “We are confident that the evidence will show that even though we’ve been successful as a company, and have grown our business, we could have been even more successful if it were not for the restrictions that Apple has placed on our business,” said Guiterrez.
Apple’s response to the complaint
Apple has responded back to Spotify, addressing the claims of the complaint on a Press release published, yesterday. Apple states that Spotify wants to leverage all the benefits of the App Store without making any Contributions to Marketplace, and it wouldn’t be the business that it is today without the App Store.
“We share Spotify’s love of music and their vision of sharing it with the world. Where we differ is how you achieve that goal. Underneath the rhetoric, Spotify’s aim is to make more money off others’ work”, states Apple.
It also states that the only contribution that it requires is for the digital goods and services that are purchased inside the app with their secure in-app purchase system. Apple agrees that the revenue share is 30 percent but it further states that this is only applicable for the first year of an annual subscription and then drops to 15 percent in the years after.
“The only time we have requested adjustments is when Spotify has tried to sidestep the same rules that every other app follows. Just this week, Spotify sued music creators after a decision.. required Spotify to increase its royalty payments. This isn’t just wrong, it represents a real, meaningful and damaging step backward for the music industry”, says Apple.
Public reaction the news is varied with some sympathizing with Spotify, while others tweeting against Spotify and in support of Apple:
Apple talk shit because they know Spotify is the King of Music Streaming
— 🌴K E R T🌴 (@cassiusdarrow) March 15, 2019
So that's how Apple makes money
— Nate Avram (@AvramNate) March 14, 2019
If you don't like the way Apple runs their app store, then don't publish your app there. In fact, I hope Apple saves you the trouble and removes it for you.
— Tony Smith (@TonyXLR2) March 13, 2019
I disagree, if Apple makes its own Appstore, it has the right to promote its own products. Don’t like it? Go to another or make your own
— Joseph Isle (@IsleJoseph) March 13, 2019
Rene Ritchie, a Canadian blogger, Youtuber, and editor in chief of iMore, also posted a video on his YouTube channel, where he took a deep dive into the Spotify action against Apple in the EU, and called Spotify’s move as “kinda victimy”.