The war of words between Apple and Spotify are quickly escalating. Two days ago, Spotify’s CEO Daniel Elk wrote a blog post announcing that Spotify has filed a complaint against Apple with the European Commission that alleges Apple’s App Store policies stifle competition. From the blog post:
“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.”
Elk went on to claim that Apple’s standard 30% take of in-app purchases amounted to an unfair tax that hurt its competitors and their users:
“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.”
In response, Apple took the rare step of launching a scathing rebuttal to Spotify’s allegations. The company issued a press release not just refuting Spotify’s claims, but alleging the company is a hypocrite by complaining about App Store fees when Spotify itself is distributing “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.” From Apple’s post:
“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.”
Apple then goes on to skewer Spotify’s claims, noting that “a full 84 percent of the apps in the App Store pay nothing to Apple when you download or use the app.” Apple continues:
“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.”
“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.”
Given that this spat between Spotify and Apple has blown up into a very public war of words, it will be interesting to see where this goes from here. After all, both companies need each other. If Spotify would yank its app from the App Store in protest, it would piss off tens of millions of its users who own iPhones. Alternately, Spotify’s iPhone users might blame Apple if Spotify is no longer available for the iPhone, forcing them to switch to an Android device if they want to continue using the service.