Apple says Spotify 'wants all the benefits of a free app without being free'
Apple late Thursday issued a statement responding to, and refuting, anti-competition claims leveled by Spotify this week, a rare move for the tech giant who typically refuses to publicly engage competitors lobbing legal accusations.
Graphic from Spotify's blog post announcing its European Commission complaint against Apple.
In a press release published to Apple's website, the company says it feels obligated to respond to claims made as part of an anti-competition complaint Spotify lodged with the European Commission on Wednesday.
While Spotify has yet to release a public version of the complaint, founder and CEO Daniel Ek outlined the grievance in a blog post. Apple's statement is in response to what it deems to be financially motivated "misleading rhetoric."
"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," Apple says. "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's complaint focuses on Apple's facilitation and stewardship of the App Store, alleging the iPhone maker constructs artificial barriers to limit third-party services that compete with products like Apple Music. Apple's statutory 30 percent cut of all App Store purchases is central to Spotify's argument, as are supposed restrictions to customer data and technology. Together, the policies constrain user choice, Spotify says.
Apple counters claims of discrimination by noting 84 percent of App Store developers do not pay Apple when users download or run their apps. Apps that are free to download or earn revenue through advertising are not charged the 30 percent fee. Transactions made outside an app are likewise not "taxed," as Spotify puts it, and Apple does not charge apps that sell physical goods or real-world services.
The 30 percent fee applies only to "digital goods and services that are purchased inside the app using our secure in-app purchase system," Apple notes, adding that Spotify failed to mention the charge drops to 15 percent for subscription services that retain users for longer than one year.
As framed by Apple, Spotify is seeking a free ride on the App Store. A bulk of Spotify's users make no contribution to the Apple since they use a free, ad-supported tier of the music streaming service. Only "a tiny fraction" of subscriptions are billable under Apple's revenue sharing model, and Spotify wants that number to be zero, Apple says.
Apple goes on to frame its argument in no uncertain terms:
Further, Apple reportedly reached out to assist Spotify in the integration of Siri and AirPlay 2 "on several occasions" only to be told that the company is "working on it."
"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," Apple says. "In fact, the Spotify Watch app is currently the No. 1 app in the Watch Music category."
Ek in his blog post claimed Apple locked Spotify and other competitors out of certain Apple-run services, including Siri, HomePod and Apple Watch.
Apple ends by dinging Spotify over its reluctance to pay out increased royalties to musicians, while at the same time touting its own contributions to creatives.
Apple's relationship with Spotify was at one time relatively copacetic, but tensions mounted when Apple Music debuted as a market competitor in 2015. In the intervening years, Spotify and Ek have railed against alleged abuses of power, including so-called monopolistic practices relating to rejected app updates.
Spotify's Wednesday filing with the European Commission is just the latest in a series of complaints lodged with the antitrust body. In 2017, for example, the streaming market leader filed two similar protests, one in May and another in December.
Graphic from Spotify's blog post announcing its European Commission complaint against Apple.
In a press release published to Apple's website, the company says it feels obligated to respond to claims made as part of an anti-competition complaint Spotify lodged with the European Commission on Wednesday.
While Spotify has yet to release a public version of the complaint, founder and CEO Daniel Ek outlined the grievance in a blog post. Apple's statement is in response to what it deems to be financially motivated "misleading rhetoric."
"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," Apple says. "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's complaint focuses on Apple's facilitation and stewardship of the App Store, alleging the iPhone maker constructs artificial barriers to limit third-party services that compete with products like Apple Music. Apple's statutory 30 percent cut of all App Store purchases is central to Spotify's argument, as are supposed restrictions to customer data and technology. Together, the policies constrain user choice, Spotify says.
Apple counters claims of discrimination by noting 84 percent of App Store developers do not pay Apple when users download or run their apps. Apps that are free to download or earn revenue through advertising are not charged the 30 percent fee. Transactions made outside an app are likewise not "taxed," as Spotify puts it, and Apple does not charge apps that sell physical goods or real-world services.
The 30 percent fee applies only to "digital goods and services that are purchased inside the app using our secure in-app purchase system," Apple notes, adding that Spotify failed to mention the charge drops to 15 percent for subscription services that retain users for longer than one year.
As framed by Apple, Spotify is seeking a free ride on the App Store. A bulk of Spotify's users make no contribution to the Apple since they use a free, ad-supported tier of the music streaming service. Only "a tiny fraction" of subscriptions are billable under Apple's revenue sharing model, and Spotify wants that number to be zero, Apple says.
Apple goes on to frame its argument in no uncertain terms:
The remainder of the statement addresses Ek's assertions point by point, taking issue with claims that it blocks access to products and hinders the release of app updates. So far, Apple says it has approved nearly 200 updates that resulted in more than 300 million Spotify app downloads, and only requests "adjustments" to submitted software when the streaming service attempts to "sidestep" developer guidelines.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.
Further, Apple reportedly reached out to assist Spotify in the integration of Siri and AirPlay 2 "on several occasions" only to be told that the company is "working on it."
"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," Apple says. "In fact, the Spotify Watch app is currently the No. 1 app in the Watch Music category."
Ek in his blog post claimed Apple locked Spotify and other competitors out of certain Apple-run services, including Siri, HomePod and Apple Watch.
Apple ends by dinging Spotify over its reluctance to pay out increased royalties to musicians, while at the same time touting its own contributions to creatives.
Apple's relationship with Spotify was at one time relatively copacetic, but tensions mounted when Apple Music debuted as a market competitor in 2015. In the intervening years, Spotify and Ek have railed against alleged abuses of power, including so-called monopolistic practices relating to rejected app updates.
Spotify's Wednesday filing with the European Commission is just the latest in a series of complaints lodged with the antitrust body. In 2017, for example, the streaming market leader filed two similar protests, one in May and another in December.
Comments
Given the apps I've seen on the App Store, Spotify is in no way being forced to pay Apple's "tax" on their app. As pointed out, they could model it after YouTube, but of course, that would involve them spending their own money on an infrastructure instead of taking advantage of Apple's.
Apple.
The real headline should be: Apple wants to be both a player and the referee.
I’m not saying they are the bad guy in this context. However, given the ludicrous amounts of cash they are accumulating (with margins most other businesses can only dream of), I do wonder if 30% are necessary or greedy.
It would be interesting to see calculations of what it actually costs Apple to render these services to app makers - but of course we‘ll never ever get that...
Spotify's complaint is essentially that it doesn't like the App Store rules, and lacks a choice because it would lose money if it responded by pulling its app from the App Store. The problem with that argument (aside from the fact that there is no constitutional right to sell apps on the App Store) is that Spotify admits that it derives a huge financial benefit from selling on the App Store.
And what difference does it make "what it actually costs Apple to render these service"? It's a free market economy, and there is no law that limits a company's profit margin. Even if the developer fees were 99.9% profit it would be irrelevant to Spotify's argument. If anything, it undercuts Spotify's argument that the purpose of the App Store is to exclude competitors.
If Apple wanted to get an "unfair advantage" it could just as easily block music apps from the App Store and be done with it. There would be nothing illegal about that, and in fact Apple already bans apps that duplicate core iOS functionality.
1. If they allowed Spotify to let customers download their app directly from Spotify’s website and process their own payments then the cost to Apple would be virtually zero. There is only a cost here as Apple forced them to use the App Store. This goes to the heart of Warren’s desire to break up large tech companies.
2. Apple makes money from the sale of devices that have apps that people want. People apparently want Spotify on their iOS devices. Apps help Apple sell hardware so there is a symbiotic relationship, and it is not all one sided in favor of Apple. If there was no Netflix, Hulu, Amazon, YouTube etc on iOS there would be fewer iPhone sales.
3. Apple is trying to muddy the water with the claim about Spotify paying artists. This is a valid issue that needs to be addressed. But, considering that Apple apparently tries to pay creatives with goods instead of cash it is the pot calling the kettle black.