Spotify has announced that it’s filing a complaint against Apple with the European Commission (EC), citing anti-competition practices and a business model that gives Apple an “unfair advantage”.
“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,” noted Spotify cofounder and CEO Daniel Ek, in a statement. “After trying unsuccessfully to resolve the issues directly with Apple, we’re now requesting that the EC take action to ensure fair competition.”
Spotify’s complaint against Apple goes back many years, and the crux of its ire centers on how Apple controls the iOS platform on which Spotify relies on to operate on iPhones and iPads, as well as the App Store, and a competing music-streaming service. Indeed, Apple charges digital services such as Spotify 30 percent fees on all revenues garnered through the app, which means that Spotify has historically charged a higher fee for subscriptions on iOS — $13 per month vs. $10 through the web. Apple Music, meanwhile, costs $10 per month.
Apple first started charging its 30-percent commission on in-app transactions back in 2011, then five years later it tweaked its fee structure so that its 30 percent cut would drop to 15 percent in subsequent years. However, a growing number of subscription-based companies have taken umbrage at this model — last year Spotify stopped accepting payments from new subscribers through Apple’s in-app payment (iAP) system, and actively encouraged those already on a recurring App Store subscription to cancel their plan and renew it through Spotify directly for the normal $10 monthly fee.
Netflix recently joined Spotify in ditching its iTunes billing for new users for similar reasons.
“Apple requires that Spotify and other digital services pay a 30 percent tax on purchases made through Apple’s payment system, including upgrading from our Free to our Premium service,” Ek said. 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.”
Spotify’s complaint extends beyond that of mere fees. Indeed, Spotify has sought to communicate with its users on iOS to ensure they know that they can pay for a premium subscription outside of Apple’s ecosystem, something that Apple isn’t keen to encourage given that this would not only mean missing out on its cut of Spotify’s revenues, but it would also set a precedent that other companies would follow.
“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,” Ek said. “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.”
According to Ek, Apple has previously hindered Spotify from integrating fully with its Siri voice assistant, which has also meant that Spotify users haven’t been able to enjoy the full benefits of Apple’s HomePod. Spotify also recently launched a very limited version of its service for Apple Watch, something that Ek suggested was due to a deliberate attempt by Apple to lock “Spotify and other competitors” out of Apple services.
Apple isn’t a company that tolerates being challenged in public by any third-party app developer, however Spotify is a major player and thus it will be interesting to see how Apple responds to this. In terms of remedies, Spotify suggests that Apple’s insistence that companies taking payments through the App Store use the iTunes billing system needs to change — alternative options should be afforded.
Moreover, Ek notes that Spotify and Apple Music should be able to compete on equal terms, rather “based on who owns the App Store,” while Apple should “not be allowed to control the communications between services and users.” In short, Spotify wants the freedom to use alternative non-Apple payment systems to collect subscriptions through iOS, and it wants to be able to tell its users how they can subscribe to Spotify elsewhere.
“Competition pushes us to evolve and improve both the customer and creator experience,” Ek added. “It’s not something we ever have — or will — shy away from. So, let me be clear that this is not a Spotify-versus-Apple issue. We want the same fair rules for companies young and old, large and small. It is about supporting and nurturing the healthy ecosystem that made our two companies successful in the first place.”
Today’s news comes at an interesting time in the broader technology landscape, with repeated calls to break up the big monopolistic companies. Apple is actually facing a class-action lawsuit in the U.S. at the moment over similar issues to what it’s now up against in Europe — the complainants argue that Apple violates federal antitrust laws by requiring apps to be sold through the App Store and taking a commission from subscriptions and other in-app purchases.
Earlier this week, Senator Elizabeth Warren also outlined plans to separate online marketplaces from the businesses that sell on them — if she were to become President. Though such a plan would impact many of the big tech firms, including Amazon, she also singled out Apple, saying that the Cupertino company should not be allowed to operate the App Store while also selling its own apps on the platform