Spotify vs. Apple | Mobile Dev Memo

Spotify vs. Apple

Last week, Daniel Ek, the CEO of Spotify, published a blog post in which he revealed that the company has filed an antitrust complaint about Apple with the European Commission. In the blog post, Ek claims that, as an operator of both the distribution platform (the App Store) and a participant in the mobile app ecosystem as a publisher of apps like Apple Music, Apple enjoys an unfair advantage against companies that develop apps similar to those that come pre-installed on Apple hardware. From the post:

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.

Ek goes on to state that what Spotify finds problematic about the App Store dynamic isn’t the existence of the 30% platform fee (which is also applied on Google Play), per se, but rather the fact that alternative payment methods are not available on mobile (the App Store prevents developers from notifying users that they can register on the Spotify website) and that Apple’s own music app should also be subject to the payments rules of the App Store.

In all, the argument in the blog post comes off as disjointed and somewhat confused. At one point, Ek states that he doesn’t want or expect special treatment from Apple, only to be treated the same as Uber or Deliveroo, which don’t pay the 30% platform fee on transactions facilitated by their app. But Uber and Deliveroo don’t deliver digital products or services via in-app purchases; these companies fulfill their transactions in the real world. eBay similarly does not pay a 30% platform fee on items purchased in its app; nor does GOAT, the sneaker purchasing app; nor does Poshmark, the used fashion marketplace; nor does Fair, the car leasing app.

The distinction here is clear: Uber and Deliveroo don’t get special treatment on the 30% platform fee relative to Spotfiy because Spotify competes with Apple Music, but rather they are treated differently on a point of policy because they (and many other apps) facilitate the purchase of physical, real-world goods and services, not digital goods and services.

The second reason the blog post feels disoriented is that the issues taken with Apple aren’t harmonized around a single conversational thread. The original complaint is that Apple imposes a 30% platform fee on participants in the App Store but that the fee isn’t imposed on Apple’s own music app, Apple Music. That’s fine, and it is a reasonable grievance, but then the blog post continues to reveal that Spotify doesn’t actually pay the fee itself (it handles payments on its website; users aren’t even given the option of upgrading to premium via the iOS app anymore). So the objection evolves from having to pay the 30% platform fee to not being able to utilize the full range of communications functions for user messaging that a developer might desire because those aren’t permitted when a user isn’t seen as a customer by Apple.

This gripe is less reasonable. If Apple doesn’t facilitate an app payment, it has no idea that a user is a customer; imagine if every app that a user ever downloaded resulted in emails and other out-of-app messaging? My sense is that the emails that Ek is referring to here pertain to special promotions for users that have canceled subscriptions, which, again, makes sense from Apple’s standpoint: Apple should restrict app developers from sending unsolicited promotions to users via email. There is a word for such emails: spam.

The blog post ends with three suggestions for how Apple could change the App Store dynamic to be friendlier to developers and to reduce any anti-competitive advantage:

  1. Apply its App Store rules to its own apps;
  2. Allow developers the ability to offer multiple payment options to users, not just the iTunes payment mechanism;
  3. Remove any controls (which are essentially implemented via Apple’s iTunes Connect Terms & Conditions) over messaging between developers and users.

Points two and three sound like genuinely bad ideas: they are both ripe for abuse and, frankly, would deteriorate the customer experience. The second point creates the opportunity for users to be scammed and exploited, and the third would result in a flurry of communications.

The first point is prima facie reasonable until one considers the wider mobile ecosystem and the sheer amount of choice that Spotify has in distributing its product to customers. Is “Spotify” as a concept an iOS app, or is it a streaming music service that exists on multiple platforms? Spotify operates a desktop website that is functionally identical to its desktop app (which is partly why it can so easily collect payment information from its website), and it also operates a Google Play app. Spotify could almost certainly create an HTML5 web app that matches its iOS functionality and push users into that — it won’t do that because iOS users make that hardware choice in part because of the convenience, distribution benefits, and comfort of the iOS environment.

Apple is coming under increasing pressure over its 30% fee, and it seems likely that some sort of overhaul will be conducted in the medium-term future. But iOS is one ecosystem choice on mobile, and Apple is not a monopoly: the pressure that is being applied to the company comes in the form of a proliferation of optionality for developers on mobile.

Spotify benefits from the App Store — in terms of being able to easily connect with consumers in an environment that they deem safe and trustworthy — and it’s not unreasonable in the least that Apple should implement some conditions on the service it offers to developers. Spotify already isn’t paying Apple, either a share of its subscription revenue or the advertising revenue it generates from the free version of its app; in asking for further consideration, it comes off as slightly overindulgent.

Photo by Markus Spiske on Unsplash