What Spotify said about Apple (video)

In a complaint to the European Commission, Spotify CEO Daniel Ek makes the case against Apple Elizabeth Warren would have made if she’d known:

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.

Apple operates a platform that, for over a billion people around the world, is the gateway to the internet. Apple is both the owner of the iOS platform and the App Store—and a competitor to services like Spotify. In theory, this is fine. But in Apple’s case, they continue to give themselves an unfair advantage at every turn.

To illustrate what I mean, let me share a few examples. Apple requires that Spotify and other digital services pay a 30% tax on purchases made through Apple’s payment system, including upgrading from our Free to our Premium service. 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.

As an alternative, if we choose not to use Apple’s payment system, forgoing the charge, Apple then applies a series of technical and experience-limiting restrictions on Spotify. For example, they limit our communication with our customers—including our outreach beyond the app. In some cases, we aren’t even allowed to send emails to our customers who use Apple. Apple also routinely blocks our experience-enhancing upgrades. Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch.

  • First, apps should be able to compete fairly on the merits, and not based on who owns the App Store. We should all be subject to the same fair set of rules and restrictions—including Apple Music.
  • Second, consumers should have a real choice of payment systems, and not be “locked in” or forced to use systems with discriminatory tariffs such as Apple’s.
  • Finally, app stores should not be allowed to control the communications between services and users, including placing unfair restrictions on marketing and promotions that benefit consumers.

My take: This issue, about which Ek has bellyaching for nearly a decade, may be coming to a head.

Below: Spotify’s 2-minute cartoon.

See also: Ben Thompson on Elizabeth Warren’s blind spot

4 Comments

  1. Jonathan Mackenzie said:

    Grocery stores charge stocking fees and also compete with brands they sell by providing their own in-house brand. Companies must pay the fee or be “locked out” of the store, unable to reach its customers. Of course they are welcome to sell their product in other stores or create even their own store if they want to.

    Spotify’s situation is no different. They do not have some natural right to use Apple’s platform for free. And consumers unhappy with Apple can choose to buy another phone and buy apps on another platform. There is no monopoly here.

    And the emails Spotify claims it can not send result from the security of 3rd party data that Elizabeth Warren was so concerned about, she wanted to ensure platforms did not share it with vendors, so that’s a logical dead end as well.

    I can’t say how EU regulators will view this issue, but to me it is clear that all these whiny companies simply want free access to the user base that Apple built and maintains with its own money and at its own risk. I say take a hike.

    3
    March 13, 2019
  2. Robert Paul Leitao said:

    Spotify didn’t invest billions developing the App Store nor does the company cover the costs of its operation. Yet Spotify wants a free ride and preferential terms just because it distributes a music streaming service similar to the service offered by Apple.

    How is that “fair” to other developers who play by the rules and pay the uniform fees? It’s not that Apple’s position is somehow unfair, it’s Spotify that wants to be treated differently just because Apple also offers a streaming music service.

    Apple doesn’t offer Apple Music at a lower monthly cost than Spotify nor does it bundle Apple Music with its devices at preferential prices or as “free” with the purchase of an Apple device. In other words, Apple isn’t exploiting its position as the developer and operator of the Apple Store to offer its music streaming service at preferential or lower prices.

    The issue is Spotify wants to cut costs at Apple’s expense. Looking at the available information on Spotify’s financial performance, the company has yet to turn a profit. That’s not Apple’s fault.

    Apple has been distributing music since the opening of the iTunes Music Store in 2003. The company is widely credited with saving the music industry from the ravages of piracy by offering music legally at attractive prices. Spotify launched its service over five years later. Music is not a new venture for Apple and the company’s Macintosh line of PCs are among the most popular PCs for music creation.

    Perhaps Spotify would be best served by focusing on how to develop a sustainable and profitable business model rather than attacking Apple for allowing Spotify access to the App Store on the same terms offered to other developers and content providers.

    3
    March 13, 2019
    • Dan Scropos said:

      RPL said “The issue is Spotify wants to cut costs at Apple’s expense.”

      Precisely. If this platform and trusted customer relationship that Apple provides is both simple and free, like Spotify alleges, simply do it yourself. But they understand that Apple’s platform provides enormous value, for numerous reasons. Apple has essentially provided the platform for Netflix to exist, and now Netflix wants Apple to eat the cost of their inability to migrate customers. In essence, Netflix thinks these are Netflix customers, when I would argue that they are Apple customers buying Netflix. Why they think Apple’s cut with its own customers should go away is truly beyond me.

      1
      March 13, 2019
  3. David Emery said:

    Looking at this from a purely selfish ‘consumer’ perspective: At the end of the day I want some ‘thing’ (service, actually, but bear with me.) There are multiple sources for this ‘thing’. If I buy a ‘thing’ from the Apple store, I get some benefits: convenience, security curation, it works on my devices. I might (or might not) understand Apple places a premium on the cost of the ‘thing’ for that.

    The core issue for Apple is not its ownership of consumers. Rather, it’s whether consumers continue to value what it’s getting from Apple when they buy ‘things’. So far, Apple has managed to keep customers in its ecosystem through that value proposition. But I assert that loyalty is fragile. If Apple cannot continue to reinforce its value-added, consumers will start making decisions solely on price. (And you can look at the airline industry to see what happens when they start competing solely on price. It is Not A Good Thing.)

    RANT
    I think Apple needs to tighten up its quality game. For many years, I’ve “run my own streaming service” with ripping all my CDs, a Mini runnning iTunes Album Shuffle, and a couple Airport Expresses connected to speakers or stereos. That setup has become increasingly fragile. I now have to go to the Mini and restart iTunes because the Expresses have lost the stream synchronization. I tried to connect my phone to one set of speakers when I exercise, but the Music app on the iPhone does NOT support ‘shuffle by album’ and in fact makes it damn difficult to work with album-oriented (vs track/”song” oriented) music.

    Add to this the fact that Apple is no longer doing networking hardware, and Apple itself is driving me away from its ecosystem for something I’ve become dependent on.
    /RANT

    0
    March 14, 2019

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