Streaming music service Spotify has filed an antitrust claim against Apple with the European Commission, reports CNBC. Spotify, which launched in 2006 and is based in Sweden, claims the so-called Apple tax of 30 percent is unfair and deprives consumers of choice. It also gives Apple an unfair competitive advantage, not just over Spotify but over other streaming and subscriptions services consumers access via the App Store. Services must either mark up their fees by 30 percent to recoup the loss or eat the 30 percent fee that Apple takes off the top.
In a March 13 blog post, Spotify founder and CEO Daniel Ek spoke out about the issue.
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“My goal for Spotify is and has always been to reimagine the audio experience by giving consumers the best creativity and innovation we have to offer. For that to be a reality, it is my firm belief that companies like ours must operate in an ecosystem in which fair competition is not only encouraged, but guaranteed,” Ek wrote.
“In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience-essentially acting as both a player and referee to deliberately disadvantage other app developers. After trying unsuccessfully to resolve the issues directly with Apple, we’re now requesting that the EC take action to ensure fair competition,” added Ek.
In his post, Ek explains that for companies who choose not to use Apple’s payment system, Apple restricts Spotify’s features and experience for the consumer. For example, Apple can stop Spotify from communicating with its subscribers, or it can block service upgrades.
“We aren’t seeking special treatment. We simply want the same treatment as numerous other apps on the App Store, like Uber or Deliveroo, who aren’t subject to the Apple tax and therefore don’t have the same restrictions,” Ek continued.
This includes allowing services to compete based on their own merits, not on who owns the App store; allowing customers to choose their payment methods and systems; and not allowing app stores to control communications between the service providers and their customers.
In a point-counterpoint style move, Apple addressed Spotify’s claims in a March 14 post in its newsroom.
“At its core, the App Store is a safe, secure platform where users can have faith in the apps they discover and the transactions they make. And developers, from first-time engineers to larger companies, can rest assured that everyone is playing by the same set of rules.
“That’s how it should be. We want more app businesses to thrive – including the ones that compete with some aspect of our business, because they drive us to be better.
“What Spotify is demanding is something very different. 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 Store’s 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,” Apple wrote.
Apple addressed several of Spotify’s specific claims, disagreeing with many of Spotify’s points outright. For example, Apple said it has approved and distributed close to 200 app updates for Spotify which resulted in 300 million downloaded copies of Spotify. Yes, there were some points on which they disagree, but Apple explains those as technicalities and more complex than meets the eye.
Apple also said Spotify wants the benefit of a free app but without being free. Apple states 84 percent of its apps pay the App Store no commission or fee of any kind. Apple also pointed out that Spotify joined other streaming services – not including Apple – in an appeal of the U.S. Copyright Royalty Board’s new ruling that dramatically increases royalty fees for services like Spotify, Pandora and Google. Apple basically says, “that’s not cool.” (See this Friday’s Five on Friday for more on this issue.)
There you have it. Two streaming music giants, each fighting for their piece of the pie, are now fighting each other directly for market share in a he-said-she-said fashion. Spotify insists they are right, just as Apple insists that they are right. It doesn’t look like they will come to an agreement on their own, so it will be up to the EC to decide for them, and that could take months, perhaps years. In the meantime, Spotify will continue to grow its audience, but it won’t get any help from Apple to do so, and Apple will continue to grow its audience without having to bow to anyone else’s rules or demands.