If you follow tech news at all you’ve probably seen recent headlines like these: “Spotify
Accuses Apple of Using App Store Approval Process as a 'Weapon to Harm Competitors’”
“Apple Says Spotify Seeks to Keep All Benefits of App Store Without Making Any Contributions
to Marketplace” “Spotify files antitrust complaint over ‘Apple tax’” and “Apple
to be formally investigated over Spotify’s antitrust complaint”
And if you’re wondering what the heck is going on between these two companies, you’re
not alone.
So in this video I’m going to break down the whole ordeal piece by piece and help you
understand how this situation began, where it’s at today, and what could happen in
the near future.
This is Greg with Apple Explained and I want to thank Squarespace for sponsoring this video.
If you want to help decide which video topics I cover, make sure you’re subscribed and
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Now this whole battle started last summer when Spotify sent out emails to their iPhone
subscribers informing them that they could save three dollars a month by paying their
subscription fee directly to Spotify, rather than through Apple’s App Store.
Because if you didn’t already know, there are a few different ways for Apple users to
sign up for Spotify Premium.
They can do it on Spotify’s website, through Spotify’s desktop application, and through
Spotify’s iPhone app.
But not all of these methods are created equal.
If you sign up on spotify.com or through the desktop application, the subscription costs
ten dollars a month.
But if you sign up through the iPhone app, Spotify Premium would cost thirteen dollars
a month.
And this due to Spotify trying to offset the 30% fee Apple collects on all payments made
through their App Store.
But if you do the math, you’ll realize that 30% of $12.99 is $3.89.
Which means Spotify is earning about $9.10 on payments made through the App Store, rather
than $9.99 on payments made directly to them.
So despite the three dollar App Store up-charge, Spotify is still losing money they could have
otherwise made if Apple didn’t charge any fees at all.
Now it’d be easy for Apple to argue that their 30% fee is fair in order to pay for
the costs and infrastructure of the App Store.
Especially considering Google charges developers the same rate through the Google Play Store,
but that would be an oversimplification of the issue.
Because the 30% fee was only one of five policies that Spotify claimed were anti-competitive.
The second was Apple not allowing developers like Spotify to put a link in their app to
their website where customers could purchase a premium subscription for just $10 and bypass
the 30% App Store fee.
The third was Apple not allowing developers to even acknowledge that any other payment
methods were available besides in-app purchases.
The fourth was Apple not allowing developers to use an alternate payment system to the
App Store’s.
And the fifth, was Apple not allowing Spotify to inform iPhone users of promotional campaigns
like the one last fall, that offered new subscribers three months of Spotify Premium for $1 if
they signed up through Spotify’s website.
So you can start to see how complex this situation is, Spotify isn’t just asking for a lower
payment processing fee, they’re claiming that Apple is abusing their power as owners
of the App Store by suppressing competition that could threaten the growth of their own
services like Apple Music.
And that’s exactly why Spotify filed an antitrust complaint with the European Union
back in March.
Claiming that Apple was suppressing consumer choice and stifling innovation due to the
App Store’s anti-competitive policies.
Spotify even launched a press campaign called Time To Play Fair which outlined the problems
they had with Apple’s behavior.
And with all of this pressure piling up, Apple decided to issue a response to Spotify’s
accusations in the form of a press release titled, “Addressing Spotify’s claims.”
In it, Apple made some interesting arguments.
For example, they explain how the App Store’s policies aren’t discriminatory toward Spotify
in particular since they apply all developers.
Saying, “The only contribution that Apple requires is for digital goods and services
that are purchased inside the app using our secure in-app purchase system.
As Spotify points out, that revenue share is 30 percent for the first year of an annual
subscription — but they left out that it drops to 15 percent in the years after.
That’s not the only information Spotify left out about how their business works: The
majority of customers use their free, ad-supported product, which makes no contribution to the
App Store.
A significant portion of Spotify’s customers come through partnerships with mobile carriers.
This generates no App Store contribution, but requires Spotify to pay a similar distribution
fee to retailers and carriers.
Even now, only a tiny fraction of their subscriptions fall under Apple’s revenue-sharing model.
Spotify is asking for that number to be zero.”
And while Apple made a fair point, they didn’t acknowledge the other arguments Spotify was
making.
Because while the Google Play Store does charge developers the same 30% fee, it doesn’t
impose some of the other restrictions that the App Store does.
For example, it allows app developers to link to a subscription page outside the store and
it’s important to point out that the Google Play Store isn’t the only way to download
apps to an Android device.
You can actually go into settings and allow Android devices to install unknown apps from
a variety of sources.
Which gives Spotify another way to deliver their app to users and avoid Google Play’s
payment fees.
But there’s no way to do this on iOS.
Apple has the entire ecosystem chained to their App Store.
And although there are benefits to this closed system, there are also problems.
One of which Spotify is eager to point out since it works in their favor, and that is
the anti-competition aspect.
Now this channel is called Apple Explained and I am an Apple fan, but I always try to
be unbiased and report the facts on whatever topic I’m covering.
And I have to admit that when it comes to Apple’s anti-competitive track record, it’s
pretty disappointing.
Back in 2015 Apple, Google, Intel, and Adobe paid out $415 million to settle an anti-poaching
class action lawsuit.
It turns out they secretly agreed not to hire each others employees, in addition to suppressing
their workers salaries.
Which is the very definition of anti-competition.
In 2013 Apple was found guilty of an ebook price fixing scheme in an effort to slow down
Amazon’s lead in the market and force them to raise their prices.
Eddy Cue met with book publishers and convinced them to adopt an agency pricing model, which
would allow publishers to set ebook prices instead of retailers like Amazon.
That way all retailers would be forced to charge the $15 ebook price tag Apple wanted,
without being undercut.
And it appears Apple is engaging in a similar practice today with their App Store.
Spotify is fighting against a 30% payment fee while Apple doesn’t pay any fees on
money from Apple Music subscribers.
They’re also able to limit what features Spotify adds to their iPhone app.
Allegedly Spotify tried adding Siri support to their app but Apple prevented that from
happening.
In their press release Apple responded by saying “When we reached out to Spotify about
Siri and AirPlay 2 support on several occasions, they’ve told us they’re working on it,
and we stand ready to help them where we can.”
But the point is, Apple has that power over Spotify whether they decide to use it today
or five years from now.
And if you’re thinking “well the App Store is Apple’s platform so they have the right
to make whatever rules they want.”
That actually isn’t necessarily true from a legal perspective.
Take Microsoft for example.
In 1998 the US justice department found the company guilty of violating antitrust laws
by forcing computer manufacturers to include their own web browser as part of the Windows
installation.
Even though Microsoft create Windows, it was illegal to make the installation of their
web browser a rule.
And I don’t think that case it too far off from what we’re seeing with Apple and their
the App Store today.
Is Apple abusing their market share in the mobile storefront and device markets to give
Apple Music an unfair advantage over Spotify?
I think it’s an important question worth considering and one we’ll likely get an
answer to soon as Spotify’s antitrust complaint is deliberated by the European Union.
But I don’t want to make it seem as if all Spotify’s claims are legitimate.
Because they have made some additional accusations in the past few months that are misleading
at very least.
When it comes to their claims that Apple blocks Spotify app updates intentionally, that can
easily be disproven.
The company has been known to push the boundaries of Apple’s App Store to see just how far
the approval rules can be bent.
So when Spotify turns around and uses that as evidence of Apple being anti-competitive,
it simply weakens their case.
The company has also complained about not having access to Apple’s HomePod, even though
no developer has that privilege, so I’d say it’s a moot point until Apple actually
opens up that platform.
The last thing I want to point out is how Spotify tried to make it appear as if they
were standing up for the whole music community by taking on Apple.
While at the same time Spotify sued music creators to prevent paying them higher royalties.
So I think it’d be best for Spotify to drop the altruistic facade and just admit they’re
rightfully fighting for a level playing field in the music streaming industry.
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Alright guys thanks for watching and I’ll see you next time.