Spotify Executive Justifies Antitrust Pressure on Apple and Calls for Other App Store Payment Providers

[MacRumors]

Spotify executive Horacio Gutierrez has explained in a wide-reaching interview with The Verge why the company believes Apple is a "ruthless bully" and what it would like to see change.

Last month, Gutierrez penned an op-ed in the Wall Street Journal that chastised Apple and some of its business practices. Now, Spotify's head of global affairs and chief legal officer has expanded on the logic behind the company's antitrust dispute with Apple.

Gutierrez's main justification underpinning the argument that Apple's App Store payment system is not a necessary part of its business is that it "wasn't part of the App Store in the beginning."

Concretely, when it comes to the App Store, it is very clear that the choice to tie Apple's proprietary payment system to the App Store was an arbitrary choice. It wasn't part of the App Store in the beginning, just as the 30 percent Apple tax wasn't a requirement when we made it into the App Store. They bolted that on later in the process and in doing that, they created this environment in which competing apps really have to contend with Apple's own music streaming service as well as other competing products on what's not really a level playing field.

Apple's 30 percent commission on App Store sales and in-app purchases was also raised as an "arbitrary rate," and Gutierrez explained that it is not merely a reduction in commission that Spotify is looking to achieve.

The issue is not whether the rate is 30 or 15 or 10 percent, the issue is that the rate is arbitrary and they get to set it unilaterally because they've insulated themselves from competition. What should happen is Apple should be able to charge 30, or 50 percent, if they can convince users in a market economy that the value that they provide justifies the 30 percent, or the 15 percent, or the 50 percent. What we're saying is they actually prevent competitors from coming in and offering alternative payment systems, and therefore there is no market.

Gutierrez explained that Spotify would like to see Apple return to its previous approach with the App Store and loosen its grip on rules and penalties.

We want Apple to go back to the situation that existed at the time when we joined the App Store. We want them to undo the tying of their proprietary payment system to the App Store and all of the other anti-steering provisions, which is a fancy way of saying punishments and penalties that they've created for those people who do not want to use their proprietary payment system. Basically, restore the situation to the way it was before their anti-competitive abuse started.

Specifically, Gutierrez said that the market should be able to choose from a selection of payment systems on the App Store, and that Apple should be able to contend with other payment technology in a more competitive environment.

There is a monopoly on payment systems, which is why they can afford to impose the 30 percent. Let the market decide. Enable PayPal and Mastercard and other new payment systems to come in and then let users decide, vote with their dollars on whether Apple's technology is so superior when it comes to payment and all these other things that they’re willing to pay 30 percent more.

Addressing criticisms that Apple's rules and fees are valid given it built and maintains the App Store and the devices apps run on, Gutierrez explained that Spotify believes this should not be a reason to allow anticompetitive conduct.

There is no reason why a platform provider that's supposed to be a neutral platform provider like Apple would be allowed to create conditions that would force companies like ours to have to make that choice. They say, "Well, but we built it." Yeah, you built it. But when you built it it wasn't like that. It was significantly built on the backs of the work of many app developers that came to the App Store that you touted as the reason why people should come and use your platform. And whether you built it or not, it really doesn't matter from an antitrust perspective. The railroad companies built the railroads, the steel companies built the steel mills, and the telephone companies built the telephone lines… The biggest cases in the history of antitrust enforcement in the U.S. had to do with companies that had built that infrastructure and then used the power that that control gave them to hurt competitors.

In April, the European Commission found that Apple had breached EU competition law with ‌Apple Music‌ and the Senate Judiciary Antitrust Subcommittee questioned Apple's App Store policies.

See the full transcript of The Verge's interview with Gutierrez for more information.

Article Link: Spotify Executive Justifies Antitrust Pressure on Apple and Calls for Other App Store Payment Providers

 

[Hayden_]

Someone is mad about lossless audio

 

[thejadedmonkey]

The biggest cases in the history of antitrust enforcement in the U.S. had to do with companies that had built that infrastructure and then used the power that that control gave them to hurt competitors.

That's a very good argument. Kudos to Spotify's lawyers.

Now hopefully with the money saved, they can use it to hire more developers. You hear that, Spotify? I want Spotify Connect to work on my Homepod!

 

[easy4lif]

they're the number one streaming music provider under current rules and yet they still complain.

 

[_Spinn_]

I absolutely do not want other payment options in apps. I don’t want to give my payment info to every app under the sun and risk potential data leaks where my credit card number gets stolen. I trust Apple to keep my payment info secure.

 

[kcslc]

I absolutely do not want other payment options in apps. I don’t want to give my payment info to every app under the sun and risk potential data leaks where my credit card number gets stolen. I trust Apple to keep my payment info secure.

I do want alternatives. Why can’t we have choices?

 

[Caviar_X]

I absolutely do not want other payment options in apps. I don’t want to give my payment info to every app under the sun and risk potential data leaks where my credit card number gets stolen. I trust Apple to keep my payment info secure.

Well then don't use apps maintain their own payment systems. If Apple gave a damn about "open markets" then they would give customers a choice.

 

[heov]

I absolutely do not want other payment options in apps. I don’t want to give my payment info to every app under the sun and risk potential data leaks where my credit card number gets stolen. I trust Apple to keep my payment info secure.

No one is saying to block Apple. Just allow alternatives. What if Apple then decided to only allow the Apple Card? You see the problem here?

of course you don't. Apple does no wrong! They've got the perfect system in place.

 

[neuropsychguy]

This line of reasoning is much better than what Epic is spouting. Spotify is arguing for different payment systems on the App Store whereas Epic is essentially arguing for multiple app stores.

However, since you can no longer subscribe to Spotify through an in-app purchase (and haven't been able to for years), Spotify isn't paying the 15% commission on most Spotify users on iOS.

Spotify just wants it to be easier to have more paying iOS users without having to pay Apple anything to use the ecosystem.

 

[heov]

Spotify makes a very strong argument here. Users should have a choice on payment methods.

If Android didn't exist, this would be a clear cut antitrust violation. But Android does, so it's not so clear cut, but the argument should be discussed and perhaps a Judge should rule on it.

 

[Mrjetsondc]

PLEASE WORK THIS OUT!
I love Spotify. I’ve tried every streaming service. They suck.

 

[Dolmio]

I’m not sure I understand Spotify’s logic in that if other payment systems exist then still Apple will charge a cut on sales for access to the App Store much like you go to a clothing shop and the retailer has its cut. So might even end up being 30% cut plus Amex fees on top 🤣

 

[carlhancock]

PLEASE WORK THIS OUT!
I love Spotify. I’ve tried every streaming service. They suck.

What is there to work out? Last I checked Spotify works just fine on iOS and iPadOS devices. There is nothing preventing Spotify users from using it.

 

[Cosmosent]

I'm in favor of New Law that would require Apple to disclose per-Category Revenue Numbers for (at least) the iOS App Store here in the States, & require them to do so at the end of each work week.

Also, that the per-week per-Category Reports should include what percentage was generated by the Top 10 Apps in each category, as well as what percentage of apps in each category generated NO revenue.

So, three columns of data per Category, reported by Apple every week.

At this time, I'm NOT in favor of full-blown third-party App Stores.

I am, however, in favor of third-party "App Discovery" App Stores (again, at least here in the States), & specifically for the NON-Game portion of the iOS App Store.

Such "App Discovery" App Stores would compete with Apple head-on, & receive 1/3 of Apple's cut for ALL financial transactions (while an app is in their App Store).

Furthermore, that each app could be listed in ONE & ONLY ONE third-party "App Discovery" App Store, with the ability to switch to another on the 1st & 16th of every month.

Here I use a modified version of the Free Agent Model used by Pro Sports here in the States, which works extremely well for talented athletes.

And very specifically, under this plan, ALL third-party App Store financial transactions would occur under Apple's control.

I refer to this as a compromise / middle-ground solution.

 

[WaffleBoi_15]

Not surprising the company known for not paying artists doesn’t wanna pay the Apple tax either. Greedy bastards.

 

[raindogg]

I signed up for Spotify outside of the App Store so there's no issues there. As far as "Subscription Apps" I would like to see that come to an end. I get it for streaming apps, but other than that it's BS. Some of these apps are insane with the subscription fees. Just charge a one time fee like the old days.

 

[Mrjetsondc]

What is there to work out? Last I checked Spotify works just fine on iOS and iPadOS devices. There is nothing preventing Spotify users from using it.

Yes I know, I mean I don’t want a situation like Fortnite.

 

[Andregant]

Maybe I need to go to law school to get my head wrapped around all of this because I just don’t agree with these companies complaining about the rules of a platform that wasn’t created by them and is not mandatory for their business to survive. I am aware of AT&T’s past regarding monopolies and yes we can learn from that but damn it must really suck for Apple to have grown it’s business from the ground up- like Spotify, and for someone else to have someone else tell you that your success is hurting their business. I’m sure my analogy is not that cut and dry as there are caveats. However, my initial feeling is just that. Oh well.

 

[raindogg]

I’m not sure I understand Spotify’s logic in that if other payment systems exist then still Apple will charge a cut on sales for access to the App Store much like you go to a clothing shop and the retailer has its cut. So might even end up being 30% cut plus Amex fees on top 🤣

I think the issue is, if a user subscribes to Spotify outside of the App Store they get the full $10 a month. If a user subscribes to Spotify within the App Store, Spotify only gets $7 a month while apple gets $3. If Spotify says "cost within App Store is $13 a month but cost when subscribing on our website $10 a month, they will get fined by apple. Which actually makes Apple Music cheaper than Spotify.

 

[mookwoo]

Everyone wants Apple to have an alternative payment system in place, but why would you want to give your personal information to every developer that uses a different payment system? Most of these developers don’t store your information correctly as it is. Then, all of a sudden there’s a data breach. Most of the people that would be affected by this leak aren’t going to blame the developer, they’re going to blame Apple. Arguing for Apple to implement this is like going to Walmart or Target and asking them to use your payment system instead of theirs because of…whatever.

 

[BWhaler]

Serious question: is what he saying true, because I don’t remember it that way. I thought when the App Store launched, you had to use Apple’s payment. I know rules were created down the road to stop cross-promotion, but the fundamental was the same.

But maybe I have forgotten.

 

[mookwoo]

No one is saying to block Apple. Just allow alternatives. What if Apple then decided to only allow the Apple Card? You see the problem here?

of course you don't. Apple does no wrong! They've got the perfect system in place.

They do compared to the way a lot of these companies operate. They’re making you think it’s about fair competition, but it’s not.

 

[now i see it]

Greedy monopolists can't help themselves

 

[Rogifan]

Hate Spotify all you want but he’s not wrong. Allow other payment options and then let Apple prove why 30% or 15% is justified. And no one can bring up privacy or security because Apple’s IAP only applies to digital goods. I can buy all kinds of physical goods in-app not using Apple’s IAP. I can also buy all kinds of physical and digital goods via the browser which also doesn’t use Apple’s IAP. Plus Apple created the reader app category so certain digital goods wouldn’t have to offer in-app purchasing using Apple’s payment system.

In the beginning of the App Store it was easier to argue Apple is brining customers to developers. Can we really say that now? Name the last non-Apple app you downloaded and use on a regular basis because of Apple promotion/marketing. Or that can only exist because of specific Apple technology. I can’t think of one. Also in 2008 Steve Jobs said the following about the App Store in a WSJ interview. Clearly Jobs wasn’t expecting the App Store to be a big profit center. That all changed with Cook and Schiller and once Apple’s hardware sales growth started to slow making the App Store (aka services) a big profit center was the goal.

 

[dscottbuch]

It seems that everyone wants to skip over the fact that the underlying premise is false. Apple does NOT have a monopoly in any pre-apple definition of the term. There are many alternatives, Android being the most obvious and even larger market share than iOS/Apple. What Apple has is the most lucrative market for app providers, that's all. While those arguing can try and put lipstick on the pig with mis-direction and appeals to the emotion of the underdog (although how multi million, or billion, $ companies can be underdogs I'm not sure) the bottom line is this is all, and only about profits. Every app maker on iOS makes good to very good incremental profits by being on iOS, else they wouldn't be there. They don't need to be on iOS to exist as there are competitors to iOS App Store, in which these same companies make profits.

The argument that Apple has a price advantage is also unprovable and likely specious. App Store charges 30% for use of all the facilities the App Store provide, not just the payment system. I seriously doubt that any one of these companies could put together the marketing, tech, etc. for an App Store for anything approaching what they pay Apple.

Also, where is it decreed that iOS is a 'neutral' platform like the railways. Railways used public lands and provided very little added value (read technology) beyond the rails themselves (and some safety and use rules). iOS is an Apple platform which has been opened up under very clear rules promulgated by its owner, Apple.

One again, Spotify, Fortnight/Epic, ... don't have to be on iOS. There are literally billions of other devices out there on which to build a business. They fact that they have chosen, note - chosen, to be in iOS is because they make $ there, a lot of $. This is, once again, only and all about more $ ( on both sides by the way but Apple if very forthright on that. Tim Cook said it, we need to monetize our IP).