Spotify has become very vocal in recent weeks about Apple’s business practices for its App Store. Apple recently revamped its subscription policy for iOS developers, offering a 85/15 split if developers keep customers for more than a year, but Spotify is still not happy with proceedings.
In a letter to Washington seen by Recode, the company now says Apple is being anti-competitive by rejecting its latest update to the Spotify app in order to encourage sales of its own $9.99 Apple Music subscriptions. Spotify is making a lot of noise to suggest Apple is using illicit business practices to elevate the success of Apple Music, by crippling Spotify and other third-party services.
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The letter surfacing follows comments by Senator Elizabeth Warren that attacked Apple for acting inappropriately in the music markets, pushing out other players like Spotify. It seems Spotify wants Apple to allow it to sell In-App Purchases outside of Apple’s sanctioned system, where the company takes a typical 30% revenue cut. The politician’s comments seem to have been inspired by the circulation of Spotify’s complaint.
“This latest episode raises serious concerns under both US and EU competition law,” Gutierrez wrote. “It continues a troubling pattern of behavior by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple’s previous anticompetitive conduct aimed at Spotify…we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors.”
Although Apple will now lower its share to 15% after a year of subscriptions, Spotify believes it is still prohibitively anticompetitive to its business. This means Apple is effectively pricing other music services out of business whilst selling its own subscription service at whatever price it pleases. Whether such an argument would hold in court under scrutiny of EU and US law is unclear.
Apple allows services like Spotify to use its own billing system but it does not allow companies to promote alternate billing options in the app. If Apple deems a sale takes place through the app, it must go through Apple’s 30% system. It sounds like Spotify is now causing a stink about this formally. Apple also gets another advantage by shipping Apple Music to all iOS and Mac customers from the outright with prominent placement in iTunes and its native iPhone and iPad Music apps.
Outside of controversial App Store policy, Apple Music is simply becoming a major competitor to Spotify, catching quickly in paid subscriber counts, spurred by additions like a discounted student plan. It makes business sense for Spotify to explore ways to curtail Apple Music’s growth, including lobbying and injunction lawsuits (although none have yet been filed). Amazon has also said it will not bring Prime Video to Apple TV unless Apple changes its tune.
Both Spotify and Apple Music cost $9.99 per month to subscribe for individuals, although Spotify charges 30% more if you buy inside the app to offset Apple’s revenue cut.