On Monday, in a filing with the European Commission (EC), Apple refuted Spotifys claim that its cut of streaming music revenue is an across-the-board tax,reports Billboard. Apple said it only receives revenue from 0.5% of Spotify Premium subscribers (approximately 680,000 users) and Spotify only pays 15% of subscription revenue to Apple, not the 30% they claim in their complaint with the EC. Apple also said Spotify has not paid for any of its customers acquired during the last three years.
Apples standard agreement with subscription services purchased through the App Store is they pay Apple 30% of first year revenue and 15% of revenue for subsequent years.Billboard explainedthat, between 2014 and 2016, Spotify allowed listeners to subscribe from within the iOS app, so Apple isnt getting any revenue from those subscribers.
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While the companies have been at odds for years, Spotifys most recent dispute came from Daniel Elk, founder and CEO of Spotify, in aMarch 13 blog post. Elk said Spotify had tried to work out their issues directly with Apple, but were unable to resolve them. As a result, the company filed a complaint with the EC, asking the organization to take action to ensure fair competition. Spotify said they dont want special treatment, but they do want to be treated fairly. Specifically, they want the following:
- Apps should compete based on merit, not on who owns the App Store. Spotify says all apps – including Apple Music – should be subject to the same fair set of rules and restrictions.
- Consumers should be able to choose their payment systems.
- App stores should control communications
One of Spotifys key disputes with Apple is the 30% tax it charges subscription companies. Spotify said that this rule would force the streaming music service to artificially inflate its prices to compensate for Apples cut. If Spotify does not use Apples payment system,
In spite of the formal complaint, Spotify says this is not a Spotify vs. Apple issue. It is about fairly competing in the marketplace with the same rules applying to all.
Apple didnt take Spotifys allegations lying down though. They responded on their own blog:
After using the App Store for years to dramatically grow their business, Spotify seeks to keep all the benefits of the App Store ecosystem – including the substantial revenue that they draw from the App Stores customers – without making any contributions to that marketplace. At the same time, they distribute the music you love while making ever-smaller contributions to the artists, musicians and songwriters who create it – even going so far as to take these creators to court.
Spotify has every right to determine their own business model, but we feel an obligation to respond when Spotify wraps its financial motivations in misleading rhetoric about who we are, what weve built and what we do to support independent developers, musicians, songwriters and creators of all stripes, said Apple.
In May, media outlets including the Financial Times and the Guardian said EU may be launching aformal antitrust investigation. Around the same time, the U.S. Supreme Court ruled that an antitrust case against the App Store could move forward, according to TechCrunch.
We have covered this territory before, and this is a no win situation for Apple and Spotify. Both sides have valid points and have information that support their side of the argument. It boils down to he said, she said, and it will take courts in Europe and in the U.S. to figure it out. It is not only an antitrust issue, but it is also a business model issue. Each has developed a model that they believe is fair and works for them, but there are many players and partners involved – including subscribers and developers – who are affected. A prolonged legal battle benefits no one.