In mid-March, it seemed like a feud had broken out between super loved brands Spotify and Apple.
Spotify’s Founder and CEO, Daniel Eck went on record to say he had filed a complaint with the European Commission stating ‘Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience.
You can read his full statement here:
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.
It’s why, after careful consideration, Spotify has filed a complaint against Apple with the European Commission (EC), the regulatory body responsible for keeping competition fair and nondiscriminatory.
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.
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. What we are asking for is the following:
- 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.
As I recently shared, competition pushes us to evolve and improve both the customer and creator experience. 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.
Consumers win and our industry thrives when we’re able to challenge each other on fair footing. That’s what competition on the merits is all about.
A number of days later, Apple released their response to the complaint. Which you can read here:
We believe that technology achieves its true potential when we infuse it with human creativity and ingenuity. From our earliest days, we’ve built our devices, software and services to help artists, musicians, creators and visionaries do what they do best.
Sixteen years ago, we launched the iTunes Store with the idea that there should be a trusted place where users discover and purchase great music and every creator is treated fairly. The result revolutionised the music industry, and our love of music and the people who make it are deeply engrained in Apple.
Eleven years ago, the App Store brought that same passion for creativity to mobile apps. In the decade since, the App Store has helped create many millions of jobs, generated more than $120 billion for developers and created new industries through businesses started and grown entirely in the App Store ecosystem.
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.
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 we’ve built and what we do to support independent developers, musicians, songwriters and creators of all stripes.
So, we want to address a few key points:
Spotify claims we’re blocking their access to products and updates to their app.
Let’s clear this one up right away. We’ve approved and distributed nearly 200 app updates on Spotify’s behalf, resulting in over 300 million downloaded copies of the Spotify app. The only time we have requested adjustments is when Spotify has tried to sidestep the same rules that every other app follows.
We’ve worked with Spotify frequently to help them bring their service to more devices and platforms:
- 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.
- Spotify is deeply integrated into platforms like CarPlay, and they have access to the same app development tools and resources that any other developer has.
- We found Spotify’s claims about Apple Watch especially surprising. When Spotify submitted their Apple Watch app in September 2018, we reviewed and approved it with the same process and speed with which we would any other app. In fact, the Spotify Watch app is currently the No. 1 app in the Watch Music category.
Spotify is free to build apps for — and compete on — our products and platforms, and we hope they do.
Spotify wants all the benefits of a free app without being free.
A full 84 percent of the apps in the App Store pay nothing to Apple when you download or use the app. That’s not discrimination, as Spotify claims; it’s by design:
- Apps that are free to you aren’t charged by Apple.
- Apps that earn revenue exclusively through advertising — like some of your favourite free games — aren’t charged by Apple.
- App business transactions where users sign up or purchase digital goods outside the app aren’t charged by Apple.
- Apps that sell physical goods — including ride-hailing and food delivery services, to name a few — aren’t charged by Apple.
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 falls under Apple’s revenue-sharing model. Spotify is asking for that number to be zero.
Let’s be clear about what that means. Apple connects Spotify to our users. We provide the platform by which users download and update their app. We share critical software development tools to support Spotify’s app building. And we built a secure payment system — no small undertaking — which allows users to have faith in in-app transactions. Spotify is asking to keep all those benefits while also retaining 100 percent of the revenue.
Spotify wouldn’t be the business they are today without the App Store ecosystem, but now they’re leveraging their scale to avoid contributing to maintaining that ecosystem for the next generation of app entrepreneurs. We think that’s wrong.
What does that have to do with music? A lot.
We share Spotify’s love of music and their vision of sharing it with the world. Where we differ is how you achieve that goal. Underneath the rhetoric, Spotify’s aim is to make more money off others’ work. And it’s not just the App Store that they’re trying to squeeze — it’s also artists, musicians and songwriters.
Just this week, Spotify sued music creators after a decision by the US Copyright Royalty Board required Spotify to increase its royalty payments. This isn’t just wrong, it represents a real, meaningful and damaging step backwards for the music industry.
Apple’s approach has always been to grow the pie. By creating new marketplaces, we can create more opportunities not just for our business, but for artists, creators, entrepreneurs and every “crazy one” with a big idea. That’s in our DNA, it’s the right model to grow the next big app ideas and, ultimately, it’s better for customers.
We’re proud of the work we’ve done to help Spotify build a successful business reaching hundreds of millions of music lovers, and we wish them continued success — after all, that was the whole point of creating the App Store in the first place.
What do you think of it? All we can say is we’ll be watching this closely as it’s fascinating to see two juggernauts going head to head like this.