Spotify CEO Daniel Ek Speaks Out on Dispute With Apple Over App Store Policies

[Abazigal]

The difference in prices between Uber and Lyft are not only irrelevant to the discussion, it was not even my question to you. My question was, and still is this:

Why should a company like Uber not have to pay the revenue cut that Spotify does?

I think it comes down to the degree to which consuming the good in question involves your Apple device. For a service like Uber, you use the app on your phone to hail a ride, then the rest of experience comes from waiting for your driver to arrive and getting to your destination, all of which occur outside of your smartphone.

Conversely, every second you spend streaming music from Spotify is one second spent in the device itself, even if it is playing in the background. For a service which is consumed entirely from your device, Apple probably feels it is justified to its cut.

At the end of the day, I don’t think this lawsuit is about right or wrong, but ultimately about power. Total and utter control over all transactional activity and the experience Spotify desires for its users, for better and for worse.

Because for all its reach and subscriber base, Spotify is ultimately still another app on your phone, and still subject to the rules governing the App Store. That’s what Spotify is ultimately seeking to overturn.

And history has shown that there is no way to usher in a new world order without first doing away with the current one. And in such a world, Apple's platform would add more value to Spotify rather than the current dynamic in which Spotify seems to be adding more value to Apple's platform.

 

[Khedron]

They are providing a platform and the most lucrative base of customers that exists. You feel like Apple should just give that away for free?

People used to say that Apple users aren't the product. Seem they very much are the product for Apple Services Inc.

 

[raghu8912]

Spotify is "Spot On", but don't expect anything to happen about it.

The US DOJ Anti Trust division is NOT going to take any action against established US Monopolies. We have to put up with Apple/Google/Amazon et al. because if the US government enforces anti-trust laws we'll just end up having to put up with Huawei, or some other Chinese monopoly. The Chinese Communist Party will surely do everything in it's power to replace a US monopoly with a Chinese monopoly. 5G anyone?

If you think this hasn't happened before you are wrong. Lucent was a spin off of AT&T, the monopoly forced to split up by the US government in 1984. But Lucent could never compete with Alcatel because the French government allowed Alcatel to operate as a monopoly - this enabled Alcatel to overprice within the French market to undercut prices on the international market. This put Lucent at a disadvantage in the international market for their products. In the end, Alcatel bought Lucent. Now the US does not have a 5G equipment manufacturer. The Chinese Communist Party learned from this and now Huawei is the result.

Now do you understand why we are in a trade war with China?

Socialism at Corporate level ?

 

[omihek]

I'm completely with Spotify on this one. Apple should compete by just building better products - and they used to do exactly that. Let the customer decide.

Does the customer not have a choice in this matter?

 

[raghu8912]

And that’s exactly where you’re wrong: For all devs but Apple. It’s their playground, they make the rules. But if they are playing on their own playground, those rules should apply for them, too.

Wouldn't Apple loose money if a subscriber shifts from Spotify to Apple Music ? because Spotify is not paying a cut (15-30%) from subscription.

 

[omihek]

"It's like inviting you to a match on our ping-pong table and then forcing you to play blindfolded while we change the rules throughout the game."

At which point I leave and find a more fair ping-pong tournament or else just stop playing ping-pong all together. No one is forcing me to be there or play that particular sport. There are plenty of other sports. I could even start my own sport, but then of course I'd have to do all the legwork to make it popular and get a bunch of other people interested in playing it. I think you get the point.

Fact is, no one is forcing Spotify to be on iOS. If they want to be there, they gotta play by the rules just like everybody else. Apple doesn't play by the rules, you say? Well, you'd be wrong. They do in fact pay the 30% transaction fee to Apple just like all the other developers.
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What music streaming competitor did Apple buy? (Mentioned in the article). All I can find is Shazam recently, which certainly isn’t a competitor to Spotify.

Beats by Dre had a streaming service.
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People used to say that Apple users aren't the product. Seem they very much are the product for Apple Services Inc.

Then don't buy their services. No one is forcing you.

 

[raghu8912]

I realize that this comparison is very silly but I don't see any other way to make people understand. Consider this: if you own land and house on that land, are you free to do whatever you wish there? Are you free to commit crimes there? No, despite the fact it's your property and you've put tons of money into it, you're not free to do whatever you wish.

I think the same rule applies here. Yes, Apple built those devices, written the OS and gave birth to AppStore. However, they offer no other way to install apps other than AppStore. They are also direct competitor to other streaming services. This on its own is material for lawsuit and is reminiscent of what Microsoft did in 90's, except Microsoft was giving you ways to install whatever you wish and use it however you wish.

In such cases Apple's walled garden approach works against them and Spotify makes valid points. Apple breaks it's own rules (adviertisement notifications) and uses special APIs reserved for themselves (Siri, HomePod etc) which gives them unfair advantage. It'd be easier to see without Apple-tinted glasses, but then again, this is MacRumors forum.

PS.: What a times to live in. Apple is: phone manufacturer, computers manufacturer, software manufacturer, a payment broker, books store, music store, music streaming service, music gear manufacturer, watch manufacturer, fashion items manufacturer and soon TV shows producer. I guess groceries is next.

They are also direct competitor to other streaming services. This on its own is material for lawsuit and is reminiscent of what Microsoft did in 90's, except Microsoft was giving you ways to install whatever you wish and use it however you wish.

Should there be a lawsuit on Amazon ?
Amazon sells Amazon basics (Batteries, Cables etc) stuff on Amazon which compete with other sellers.
Should there be a lawsuit on grocery chains ? Grocery chains sell their own products which compete with other products.
Should there be a lawsuit on Walgreens, Rite Aid, CVS pharmacy ? all these 3 store sell their own drugs which compete with name brands.

Why single out Apple.

 

[slomojoe]

agree with spotify on this one ... it took 27 years to begin to regulate telephones and the time has come to being to think about regulating apple

i have a yearly sub to apple music but will switch to spotify on my anniversary in a couple months both because spotify is more widely available and also to support spotify

 

[DNichter]

People used to say that Apple users aren't the product. Seem they very much are the product for Apple Services Inc.

No, their App Store is a product. It’s a distribution platform Apple manages that connects any developer with a large lucrative base of customers.

 

[jomuyo]

I agree that Apple aren't being fair in this field. Whether or not they can be sued for it is a whole another matter, but we've now reached a point where dozens of high profile companies are trying to dodge around Apple's revenue sharing systems, from HBO to Spotify etc. etc. Even Disney and Pixar are mad, and the latter of those companies was founded by, among others, Steve Jobs

There is no way that Apple receiving a 30% cut is fair in a scenario such as this. Apple is not offering any services other than billing the customer, for which 30% is massively, massively too high. They don't host the music, they don't pay for the bandwidth, they don't offer the catalogue, they don't protect customer nor provider from anything whatsoever. The only thing they've provided is the platform iOS. If Microsoft can have an anti-trust case just by pre-installing Internet Explorer, surely this more than qualifies as an anti-trust case.

There is more to Apple's 30% than billing. Apple hosts all the apps in the app store, pays for someone to review all app updates, maintains a searchable directory for all apps (not trivial by the way), provides an editorial staff to help promote peoples app (all those Today articles), server maintenance, data center employees, security auditors, utilities (renewable power is not cheap), etc.

Not to mention support for that app thinning service that Apple rolled out years ago. That allows developers to upload a release package that contains binaries for multiple iOS products (potentially iPhone, iPad, Apple Watch, and Apple TV), both 32 and 64-bit variants, and UI assets for all supported iOS products. Then when a user pushes the Install or Update button. Apple's servers identifies what type of device is requesting the app. It then creates a custom app download and package that strips out the unnecessary binaries and assets so that it is the smallest possible app download. It also cryptographically signs and packages the download so that only the device asking for the app can install it.

All of this does not come cheap, and neither does improving and maintaining it. So that is where Apple's 30% goes to. Some apps don't pay it, and only play the yearly developer fee that also covers a hole lot of other stuff like that free IDE. But some apps do have to pay that 30% to make this whole app store sustainable.

 

[jeremiah256]

I think everyone fails to understand how this works, and why it's so much.
1) Apple created the platform (AppStore)
2) They created an EASY way to purchase (renewals/subscriptions) via this store for ALL the apps that need it.
3) Customers (You and Me) don't have to worry about the apps being "Safe" or correct or anything like that.
4) You deal with Apple if something is wrong on ANY app purchase.
5) Apple has wide reach GLOBALLY. Big platform (Store if you will). Everyone gets to see your app IMMEDIATELY.
6) A physical store would upcharge to sell any item it has. This is no different.
7) You can just have an app on the store that requires an account to use. But, you have to do the activation outside of the app.
8) 30% cut maybe high, I don't know. But, it's not like that doesn't get them anything. So it should be an argument over price.

They could just be a web app or something, and for-go the appstore. But, they know there is money to be made on the platform.
So, they have a choice and ways around if they want to use it. It's not as clean and convenient. But, that's what 30% gets you.
Spotify didn't make the AppStore. Apple did, just like Googles PlayStore etc. There is a cost to selling any product in any store.
Just like if you go to a grocery store. They don't all carry the same thing every other store carries. Most things, yes. But, one store will carry something the other doesn't. Or even for different prices, sales etc.

It's never as black and white as that. Concern for the public good frequently overrides what is good for business, especially in the EU, where Spotify is bringing their protest. An example of putting the public before profits, even here in the United States, is making it illegal to price gouge (gasoline, water, food) after an emergency. Airlines are constantly watched for collusion on prices. Although Apple is the one in the hot seat right now, the duopoly of Apple and Google will be reviewed by the EU...and it be should.

 

[Eso]

What I'm hearing from Spotify is: "Apple did a lot of work creating this fantastic distribution platform and Apple did a lot of work creating a fantastic integration between their Store and their devices and Apple amassed a huge database of satisfied returning customers, but now WE want to benefit from all that for nothing."

This argument and others like it is ridiculous. What Apple built is an app distribution platform. That’s all they have any right to take payment for. Instead they demand to take 30% revenue for steaming music from Spotify’s servers, providing features that Spotify designed and implemented.

It boggles my mind how any consumer defends this. It’s nothing but bad for you, as you either get more expensive service on Apple devices, none at all, or have to subscribe via a workaround.

The App Store payment model was invented a decade ago and has hardly changed since. There’s no foul in pushing Apple into making changes that are better for customers. They decided to host and distribute free apps for no charge. I’d they don’t want to get screwed by the costs of doing so, then charge for it. But fairly charge for the service they are providing, not demanding payment for services that they aren’t.

eBay, Etsy and Amazon take a cut of everything I sell on their platforms. Sure, I could sell my item without them, but I'd have to find the customers and handle the transactions myself...

And what is sold on the “App Store”? Apps. By all means, charge Spotify to “sell” their iOS app, but that’s all. Don’t demand payment for the services that they provided through their own platform (i.e. their servers)

 

[MadeTheSwitch]

I think it comes down to the degree to which consuming the good in question involves your Apple device. For a service like Uber, you use the app on your phone to hail a ride, then the rest of experience comes from waiting for your driver to arrive and getting to your destination, all of which occur outside of your smartphone.

What difference does that make though? Without the smartphone in question, the Uber experience would not happen. And the drivers of Uber still have to use said smartphone the entire time, as well as the end user using it at the conclusion of the ride too. So the smartphone is involved in the entire process.

Apple doesn't play by the rules, you say? Well, you'd be wrong. They do in fact pay the 30% transaction fee to Apple just like all the other developers.

Is paying yourself really the same thing though? I think not.

All of this does not come cheap, and neither does improving and maintaining it. So that is where Apple's 30% goes to. Some apps don't pay it, and only play the yearly developer fee that also covers a hole lot of other stuff like that free IDE. But some apps do have to pay that 30% to make this whole app store sustainable.

And that’s the problem right there. Why should some developers be subsidizing the cost for others? Everyone should be paying. It’s not a level playing field if some are and some aren’t. Then the cost could be spread out and lower for everyone.

 

[jomuyo]

agree with spotify on this one ... it took 27 years to begin to regulate telephones and the time has come to being to think about regulating apple

i have a yearly sub to apple music but will switch to spotify on my anniversary in a couple months both because spotify is more widely available and also to support spotify

I wouldn't paint Spotify as a sorry little company getting picked on by a larger company like Apple. Sure by revenue Apple is much larger than Spotify, but Apple does other things besides music. Most of the money Apple makes goes right back into the development of its hardware.

As for Spotify, it is the clear dominant music streaming service globally, and in Europe Android phones are even more dominant than in North America. Spotify is just trying to mine out more revenue from its iOS install base to appease its share holders. If Apple keeps its app store policies in place, it should not do much damage to their bottom line. But all of this those damage Spotify's largest competitor, and will help cement its market dominance.

 

[slomojoe]

I wouldn't paint Spotify as a sorry little company getting picked on by a larger company like Apple. Sure by revenue Apple is much larger than Spotify, but Apple does other things besides music. Most of the money Apple makes goes right back into the development of its hardware.

As for Spotify, it is the clear dominant music streaming service globally, and in Europe Android phones are even more dominant than in North America. Spotify is just trying to mine out more revenue from its iOS install base to appease its share holders. If Apple keeps its app store policies in place, it should not do much damage to their bottom line. But all of this those damage Spotify's largest competitor, and will help cement its market dominance.

sure, spotify is a company trying to maximize revenue for shareholders but increasingly phones and the apps that go with them are necessary technologies, much the telephone in the 20’s and 30’s

it is unfair for apple to control the platform and then advantage its own product (apple music) vs spotify

the rules for the platform should be universally applied

 

[jeremiah256]

This argument and others like it is ridiculous. What Apple built is an app distribution platform. That’s all they have any right to take payment for. Instead they demand to take 30% revenue for steaming music from Spotify’s servers, providing features that Spotify designed and implemented.

It boggles my mind how any consumer defends this. It’s nothing but bad for you, as you either get more expensive service on Apple devices, none at all, or have to subscribe via a workaround.

The App Store payment model was invented a decade ago and has hardly changed since. There’s no foul in pushing Apple into making changes that are better for customers. They decided to host and distribute free apps for no charge. I’d they don’t want to get screwed by the costs of doing so, then charge for it. But fairly charge for the service they are providing, not demanding payment for services that they aren’t.



And what is sold on the “App Store”? Apps. By all means, charge Spotify to “sell” their iOS app, but that’s all. Don’t demand payment for the services that they provided through their own platform (i.e. their servers)

You have to take into account that here in America, we lean strongly toward self-determination and individualism. That sometimes results in a clash with our de facto motto of 'E Pluribus Unum' or "Out of many, one". We haven't been one people for a long time, so individuals, and this includes companies, are put on a pedestal above the group.

We run into this even in cases where some voters resist laws that enforce rationing of resources during hard times, or limit price gouging during a state of emergency.

 

[binney]

How about "all of computing since forever?" You used to be able to easily build an application for a Mac or PC and distribute it on your own, and pay absolutely nothing to Apple or Microsoft. Now, with the creation of these walled gardens and app platforms, Microsoft and Apple (and others) are finding ways to extract money from consumers and developers for basically just inserting themselves as middle men.

[doublepost=1552607485][/doublepost]Aren't there software companies that you can purchase software directly from their website and not go through the App Store? I have many titles that go to their website to update to the latest version. No Apple App Store!

 

[omihek]

Is paying yourself really the same thing though? I think not.

Of course it's not, but the point I'm trying to make is that Apple can't really pay someone else that 30%. They could just charge 30% less for the service, but then they're undercutting Spotify again and we're back to the same problem. Apple is completely within their rights to host their own service on their own platform. And in fact if they already had Apple Music way back when the iPhone first came out, I wouldn't be surprised if other music streaming services weren't even allowed on the platform at all. Spotify is reaping the benefits of the tens of millions of iPhone owners that Apple has accumulated by building an amazing product (iPhone) and service (App Store). The fact that Spotify is complaining just seems petty to me.

 

[imageWIS]

This is incredibly similar to what got Microsoft in trouble with IE back in the day. When you are the OS and by extension the platform, you are put in a special position where you have to play fair, even with your competitors. Apple is not playing fair, and Spotify is exactly right to complain about it. Compete on the service, don't compete on business leverage.

They have zero reason to be on Apple's platform. they could stick to the other platforms if they wish. While Apple's cost is high, it's Apple's rules and they can set whatever split they want. IF enough developers pulled their apps from the App Store, Apple might lower their split, but until they do, (Tim) Apple is going to try to maximize shareholder value this quarter... regardless if it might be bad business long term.

 

[MadeTheSwitch]

And in fact if they already had Apple Music way back when the iPhone first came out, I wouldn't be surprised if other music streaming services weren't even allowed on the platform at all.

That makes no sense considering Apple has Pages, Keynote and Numbers, yet still allows Microsoft Office products. Also Google Maps, despite Apple maps. And Google Photos, despite Apple’s photo solutions. Then there all the video editors on the app store despite iMovie being present. And cloud storage apps that compete with icloud storage. On and on it goes.

Spotify is reaping the benefits of the tens of millions of iPhone owners that Apple has accumulated by building an amazing product (iPhone) and service (App Store).

So is Uber and other similar companies. But they aren’t paying the same.
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They have zero reason to be on Apple's platform

How many ios users are there? That looks like a whole lot of reasons to me. Certainly a lot more than zero.

 

[ctyrider]

Don't like Apple's policies? Don't use Apple's services. Easy.

"Don't use Apple's services" would make some sense, if there was a way for Spotify to distribute their iOS app outside of App Store, i.e. via their website. But Apple doesn't make this possible either (unlike Google or Microsoft).

Contrary to what you might believe - hundreds of millions of iOS device users are not "Apple's users". Third parties must be given an option to sell content directly to iOS device owners, without any Apple's involvement.

Apple artificially restricts third parties from distributing apps to those users, and engages in rent seeking behavior by charging extortionately high 30% rent for content services it itself did not create and has nothing to do with.

This is a fundamentally anti-competitive behavior, and I predict Apple won't be able to get away with it for much longer, especially in more consumer friendly jurisdictions, such as EU.

 

[budselectjr]

Why is he crying to the EU?

 

[Shanghaichica]

Why is he crying to the EU?

Because the EU don’t like this kind of thing and are likely to find In Spotify’s favour.

 

[MadeTheSwitch]

Why is he crying to the EU?

Spotify is a European based company. So it is logical to start there.

 

[Macintoshrumors]

Spotify sounds like greedy crying little babies
[doublepost=1552612634][/doublepost]

Read the story again. Spotify just wants to be able to tell their customers it is cheaper 2 sign up via the web page. Spotify doesn't want anything free.

That’s not apples responsiblity. That is solely on the consumer to do their research before buying anything