The company has today (March 13) announced that it is filing an anti-trust complaint against Apple with the European Commission, regarding the latter company’s controversial ‘app tax’.
Apple currently charges any third-party app developer a 30% commission on all sales made through the App Store – including music streaming subscriptions.
As Spotify co-founder and CEO Daniel Ek argues in a new blog post: “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.”
He adds: “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.
“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.”
Spotify has launched a consumer-facing lobbying site, TimeToPlayFair.com, to assist with its complaint.
This has been a long-running bugbear of Spotify’s: in 2016, Spotify ran a promotional campaign directing its users to sign up for its Premium tier on Spotify’s site, rather than through the App Store.
At the time, Spotify’s then-Head of Global Head of Communications and Public Policy, Jonathan Prince, said: “You know there’s something wrong when Apple makes more off a Spotify subscription than it does off an Apple Music subscription and doesn’t share any of that with the music industry. They want to have their cake and eat everyone else’s too.”
The issue even crops up under ‘Risks Related To Our Business’ in Spotify’s most recent financial filings, which reads: “Apple and Google own application store platforms and are charging in-application purchase fees, which are not being levied on their own applications, thus creating a competitive advantage for themselves against us.”
Interestingly, this debate arguably plays into the other major Spotify talking point this week: the fact it’s challenging a ruling in the US which would see it increase its payments to songwriters by at least 44%.
In a blog post justifying its appeal against the Copyright Royalty Board ruling, Spotify hinted that paying more to songwriters and publishers – while still paying the majority of its revenues to labels and artists – may threaten its current economic model and ability to grow.
“Music services, artists, songwriters and all other rightsholders share the same revenue stream, and it’s natural for everyone to want a bigger piece of that pie,” it said. “But that cannot come at the expense of continuing to grow the industry via streaming.”
Read Daniel Ek’s latest blog post, entitled ‘Consumers and Innovators Win on a Level Playing Field’ in full below.
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.
“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.Music Business Worldwide
