Spotify's CEO Expects Apple to Further 'Open Up' After EU Antitrust Complaint

[ksec]

I simply think it is wrong to charge 15% on a product that the Store owner has a product competing against AND the store owner is the ONLY Store available in its market AND one of the ONLY TWO store in the international market ( excluding China ).

People use often use WalMart as an example, but no one in your town forces you to buy from WalMart. In Apple's cases you can only buy from App Store.

It is an extremely complicated problem. And I dont have a solution for it. Because you could argue for or against it easily.

 

[mariusignorello]

You pay up to $1,000+ for an iPhone and that price subsidises the running of the App Store and the development of the OS. Apple are the biggest beneficiaries of a vibrant third-party developer ecosystem; an iPhone without third-party apps would not be a compelling product.

Apple are engaging in rent seeking behaviour by double-dipping on the premium prices for their products and fees they extract from the monopoly they have over developers.

It’s the cost of doing business for developers. If they don’t like it they don’t have to develop apps, there’s plenty of other jobs out there.

You are correct but Apple doesn’t let developers push their own sign up mechanisms in their apps nor advertise them to go to their site otherwise to do it.

Yes because every developer will mooch off Apple’s backend and then not let them have a cut of the proceeds.

Why do developers feel entitled to not pay commission on their sales?

Keep in mind, there are far more free apps than paid ones on the App Store that pay no commission and their backend is essentially comped. If Apple charged them fees I’d definitely change my stance.

Anytime someone assists you in doing a business transaction, some sort of commission is usually expected.

 

[brinary001]

I’m not saying Apple shouldn’t open up their systems a little more, but it‘s just so hard for me to feel bad for the company that: a) is doing just fine as the dominant music streaming service in the market, b) doesn’t pay nearly enough attention to APIs, and c) ****ed over indie artists on their platform.

Yeah, cry me a river...

 

[pasamio]

No, it's like requiring denim companies to pay Apple 30% of any profits made while giving Apple free promotional placement for their house brand.

The company is paying to utilise the Apple payment infrastructure, hosting infrastructure and to an extent support of the broader OS infrastructure that made their app available to the consumer to use. In this case Apple is only taking a slice of what was sold directly within their infrastructure with the requirement that payments in their ecosystem use their infrastructure.

The denim company is welcome to build up all of that infrastructure themselves, and many denim companies do. They then get to have greater profits than going via a retailer adding their own markup.

If Apple ran their app store like a normal store, then a denim company would tell Apple how much they need to pay for their product. Apple would then mark up the price in order to make their profit.

Spotify could set a price that includes the 30% markup that Apple will take if they wanted to, then when they made sales outside of the Apple ecosystem they'd be directly pocketing that 30% (or more likely applying it to paying their own payment processors, handling chargeback costs, disputes, etc). Any normal store will apply some form of markup, that's why "wholesalers" or other stores the "remove the middle men" exist to provide the same product at a cheaper price. Do you think what you pay any retailer is what the retailer paid?

The app store is the opposite of normal business, Apple is like the mafia. If you don't play their game then you are out.

Walmart quite frequently will tell a supplier how much they're willing to sell their product for and if the supplier doesn't like this then Walmart won't carry their item. For many retailers if you don't play their game, they won't carry your product.

In this case Apple is actually quite generous. They continue to host and provide the infrastructure to support the distribution of the Spotify app at no cost per unit to Spotify. If the App Store were like a normal business, if your product wasn't revenue generating then it'd be taken off the shelves. Instead Apple generous distribute apps at what ever price point the developer sets less their fee and even distribute apps for which they gain no direct monetary value. There aren't many retailers who would stock their shelves with a product that doesn't some how help their bottom line.

 

[JKAussieSkater]

So hosting the in-app purchase content, payment processing, APIs to enable in-app purchasing is all nothing?

Yes. Your literal clarification is correct. Your contrary implicit sarcasm, however, is incorrect.

Let’s be honest here: payment processing and APIs cost nothing per transaction. Maybe a hundredth of a cent. So yes, it’s nothing. Certainly not 30% of $12.99 or $9.99 (which is $3.90 and $3.00 respectively). [EDIT: I'm talking about the literal cost per transaction (electricity, internet, computer processing energy usage, etc.), not the fees that VISA or some other provider charge their merchants.]

Can you imagine buying 3 beers for $9.90 but when you go to pay with ApplePay the cashier says ”oh wait, since Apple charge us 30% to use their payment services and APIs, we’re offloading that cost to you, so it'll be $12.87 with the $2.97 ApplePay surcharge”.

No way! That’s ridiculous! Apple know they can’t get away with that in a market they can’t control, it’s anti-competitive. So they don’t do that. From what I understand the ApplePay transactional fee is less than 1% or 2%. But Apple do control the App Store market for iOS users, so they can be anticompetitive. And they are being anticompetitive. So Spotify have a very good case against Apple.

As per hosting in-app content: Apple doesn’t. Spotify hosts the music database for Spotify, Apple don’t pay a thing. So this part does literally cost Apple nothing.

… Netflix finally got smart about that and moved on and they're bigger and better than ever. I'm reminded of that today with Spotify's attitude. Don't like what Apple's doing? Figure out something better. Your business shouldn't rely on telling other companies what they have to do.

Spotify IS getting smart about this, they’re lodging an anticompetitive complaint to the EU.

But suppose they could indeed ”figure out something better”: Should they campaign all iOS users to jailbreak their devices so they can choose which market they download their apps from? Freedom to the people?

Beyond shifting their app to the jailbreak market or hoping their users pay their subscriptions via their own hosted website, there really isn’t an option to ”figure out” other than legal action.

Tell me where I am wrong here

Okay, sure.

> dmylrea said:
> First, Apple has made it so that the App Store is the only source of apps.

Wrong. Apple’s market share is 14% world-wide and 40% in the US. It has no majority share anywhere. Spotify has plenty of other distribution options.

Read the room. This is about iOS users.

iOS users can’t download apps from 3rd party internet websites or 3rd party marketplaces or even the jailbreak app stores. Only a jailbroken iPhone (or iOS device) can download apps from 3rd parties. (excluding internal enterprise company apps, obviously).

For iOS customers, Spotify have zero other distribution options.

Google Play charges Spotify the same exact for distribution on its platform. Why is Spotify not suing Google as well?

This part is misguided. Android users can change a system setting to permit downloading apps from 3rd parties. That is, you can download apps from app stores/websites other than the Google Play store. Spotify can choose this option.

Tell me where I am wrong here

I quoted this part again because your foolish arrogance is humorous.

 

[Akiainavas]

Came for comments from people defending a multi-billion corporation limiting their options and choices for their own financial gain - was not disappointed...

I understand why Android fans call us, Apple users “brainless sheep”

 

[Veinticinco]

What an arrogant SOB.

As opposed to the sanctimonious hypocrite in the other corner?

Thank god for Spotify, still a significantly superior product despite profitability issues, with the music space one of the few areas of genuine competition where Apple or Google or Amazon doesn’t dominate.

 

[FlyingDutch]

Spotify could always build its own platform, and stop whining like this.

 

[JKAussieSkater]

Spotify could always build its own platform, and stop whining like this.

What exactly do you mean? Spotify should build their own iPhone?
You can't be serious?

 

[FlyingDutch]

Still waiting for Spotify to make it so the Apple Watch can use songs offline or stream, why so long Spotify? API is available, guess lawyers are more valuable than paying software devs

They are too busy whining on courts.

 

[threesixty360]

Lets put the shoe on the other foot...
Say Apple needed a streaming music service on their platform because they couldn't buy Beats. And Spotify DIDN'T want to be on the iphone for whatever reason and Spotify are by far the biggest streaming service in the world.
And Apple is losing customers because of this..
Would any court in the land force Spotify to make a client for iOS under those circumstances?

Because in the past that is EXACTLY what happened for Apple with Adobe / Microsoft and lots of other vendors when they wouldn't make Mac software. Slowly killing the platform. It was for this reason Apple started buying key software and had a policy to offer Apple made alternatives so that THEIR customers could always function out the box with an apple product.

And this is what is now a contentious issue. Users on iOS are Apple's users. Apple spent the money and effort to market and build products to get those users. They are users that trust Apple. That user base is pure gold. They pay more and buy more digitally than anyone else and are literally worth more per person.

Should apple give access to that user base for free?

It's not about server costs and all that other rubbish. It's simply that apple have spent billions assembling a user base and now other companies want to sell to that user base for free via apples hardware and software.

Apple are prepared for other companies to not help them. That is why they built final cut, logic pro, garage band, apple music etc... They are self sufficient for a reason. Had they not had Apple music Spotify would have had them over a barrel. Now Spotify dont dare play hard ball because they could lose lucrative customers to Apple music. Which is why they have told a story to the European courts because they cant fight this in a business way.

Ultimately business is business.
You should be able to exploit the fruits of your labour unless it becomes unfair for customers or its illegal because the market doesn't have an alternative. None of this is happening here. I don't see the legal argument. Might as well say Nintendo and Sony should let anyone make a game on their systems, same thing.

Nowhere has Apple said that iOS is a personal computer that allows any third party product to run on it like Windows does. iOS is the operating system for a device they sell and they dont license iOS to any one else. In the same way that a Fridge company doesnt sell its OS to anyone else either. All licensees for apple software get similar terms so its not like Spotify is being singled out even if Apple have a music app. Is adobe having issues with Apple because apple have iMovie?

So many illogical things in the way Spotify are dealing with this.
Apple will relax things I'm sure because overall they feel its good for business, not because of court pressure. I dont know how a court would uphold spotifys complaint as it would have so many implications for other big businesses (Oracle, MS etc..) and how they exploit their own products.

 

[FlyingDutch]

What exactly do you mean? Spotify should build their own iPhone?
You can't be serious?

If they don’t like Apple ‘s service conditions, they could build their own operative system, gain some millions of users and then set their fair conditions.
Exactly.
But I think it is easier to exploit Apple user base and then complain about Apple being evil to request THE SAME percentage Google is requesting.
The only reason most of the people here like Spotify is that it’s free (but full of ad).

 

[jimZon]

Apple should just make Apple Music for free and kill Spotiy, it's not like they can't afford it.

Yeah, Apple and free in the same sentence won't work...

 

[one more]

I get it, Apple is the "gate keeper" and one might say they have a strangle hold on IOS distribution, but could you imagine someone suing Walmart for refusing to sell their product.

Not a fair analogy, as in this case there are plenty of other shops to sell a product from. In our case, however, how else can you get an app on your iOS/iPadOS device if not from Apple store? So yes, Apple do have control there and can use it to their unfair advantage.
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Apple should just make Apple Music for free and kill Spotiy, it's not like they can't afford it.

Not a good plan for anyone in the streaming business.

 

[Merode]

All those 'imagine someone suing Walmart for refusing to sell their product' should take into account that in that analogy users are forced to buy from Walmart.

 

[one more]

I’m an Apple Music user but I would go with Spotify in a heart beat if it sound better. To be honest it’s better in almost every single way.

You can tweak Spotify's sound settings so it sounds better. The difference between AM & Spotify is that:

1) Spotify has its volume normalisation set to ON by default, while AM - OFF by default. This muffles Spotify’s sound quite a bit, making it sound as if coming from a jar; and
2) Spotify uses the lowest acceptable quality while streaming by default, AM - the highest.

Adjusting the above settings in Spotify can actually make it sound better than AP, depending on your setup, with crispier highs and more balanced bass. Try it.

 

[one more]

What is the EU going to do — set the App Store commission? If so, then say goodbye to the free market.

The App Store did not just appear out of thin air. Apple created this, fine tuned it, and made it possible for developers to distribute their apps to a wider audience. Their cut is justified. Deal with it.

As others have mentioned, it was not about the 30% cut on the app itself, but applying the same cut to recurrent monthly subscription services while also preventing Spotify from placing a link to subscribe to their paid plan within the app. So Spotify either had to lose 30% of their paid subscription fees or overcharge their subscribers by 30% to break even with Apple’s own pricing (9,99$). This was the core of an issue. The Apple Watch, AirPod, Apple TV blockages did not help either. Both streaming services have their pluses and minuses, but Apple is obviously biased here towards their own offering. I am quite sure that if iOS was as open to third party apps as macOS is, Spotify would not complain at all.

 

[threesixty360]

As others have mentioned, it was not about the 30% cut on the app itself, but applying the same cut to recurrent monthly subscription services while also preventing Spotify from placing a link to subscribe to their paid plan within the app. So Spotify either had to lose 30% of their paid subscription fees or overcharge their subscribers by 30% to break even with Apple’s own pricing (9,99$). This was the core of an issue. The Apple Watch, AirPod, Apple TV blockages did not help either. Both streaming services have their pluses and minuses, but Apple is obviously biased here towards their own offering. I am quite sure that if iOS was as open to third party apps as macOS is, Spotify would not complain at all.

Its not 30% for ever is it? I think it tapers down after a year or so.

Anyway, I think there is a philosophical question here:

Should Walmart be forced to sell whole foods groceries in its store?
Should Walmart allow a sign in their store that tells people to go elsewhere to buy something?
Is Walmart the only shop you can buy from?
If Walmart decides to make the same sausages that whole foods want to sell in their store what business is it of whole foods?

 

[Abazigal]

As others have mentioned, it was not about the 30% cut on the app itself, but applying the same cut to recurrent monthly subscription services while also preventing Spotify from placing a link to subscribe to their paid plan within the app. So Spotify either had to lose 30% of their paid subscription fees or overcharge their subscribers by 30% to break even with Apple’s own pricing (9,99$). This was the core of an issue. The Apple Watch, AirPod, Apple TV blockages did not help either. Both streaming services have their pluses and minuses, but Apple is obviously biased here towards their own offering. I am quite sure that if iOS was as open to third party apps as macOS is, Spotify would not complain at all.

So what’s the alternative? At which point should Spotify (or any subscription-based app for that matter) be entitled to 100% of their revenue?

The App Store costs money to run. Apple has invested a ton of resources in building it up, and spends a lot of money every day in curating and managing it. This money has to come somewhere.

The issue then comes as to how to best extract this value from the app developers. Based on the current model, free apps don’t earn Apple any money (while costing them money to host and vet, and no, I don’t think that $99/year comes anywhere close to covering this).

I don’t think it’s unreasonable that developers pay Apple their cut of their earnings to help cover the costs of running the App Store. And the more you earn, the more you pay. It’s not a perfect system, but I am interested to hear from anyone who thinks they have a better alternative that doesn’t involve Apple just opening their doors to everyone for free.

My personal recommendation is 30% for the first year (representing the value Apple brings in app discovery), 15% for the second, then a nominal 5% in the subsequent years to cover processing fees (by this time, if you are still subscribed to said app, it’s due to its merits and not Apple’s).

As it stands, Spotify appears to have successfully converted the majority of their iOS users to pay via other means so as to avoid paying Apple their cut, so I am not sure what more they hope to get out of this arrangement.

 

[koil]

There are changes Apple can and perhaps should make. But I have a hard time feeling sorry for Spotify when they don't even take advantage of the apis currently available.

It's about setting precedent. By implementing the APIs that are available, they are setting a precedent that those APIs suffice to deliver a good user experience, and in the process hurting their own claim that they don't.

If you look at the initial Siri integration on iOS (Siri Shortcuts), that just simply did not cut it. What Apple released later made it possible to actually create a meaningful Siri integration for music services like Spotify. Who knows what would have happened if all other music streaming services like Spotify and Google Music had just given up and implemented Siri shortcuts in some way, would Apple even have released the APIs currently in use by Spotify?

When it comes to the watch I don't know what Spotify are doing, it's clear that a good watch app can actually be made.

 

[jlc1978]

That's the not point. First, Apple has made it so that the App Store is the only source of apps. Walmart is not the only source of food, clothes, electronics, etc.

For iPhones. There are plenty of other choices when it comes to phones running Apps.

Second, imagine buying a TV at Walmart, and then any streaming services you subscribe to, you have to get them through Walmart's TV App Portal, and the services are 30% higher than everyone else. Hardly fair.

Except you can subscribe to Spotify outside of Apple, along with plenty of other streaming services, and stream pon Apple devices. Spotify is whining becaus etehy want more money and not lose the subscribers they get from Apple.

Not quite equal because Walmart doesn't have a stranglehold on TV's, whereas the App Store has a stranglehold on apps.

For the iPhone, but not the total app market; just like Walmart doesn't have a stranglehold on TVs

Should Apple make something on in-app purchases? Sure. They can't run an App Store for free (although they've made it so people need it), but 30% for something they had nothing to do with whatsoever? Maybe a couple percent, at most, for the convenience.

Developers have a choice - pay Apple or forgo developing for the iPhone. Maybe Spotify shopuld look at how big a cut they take and cut it down so they can lower their prices.
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Apple are engaging in rent seeking behaviour by double-dipping on the premium prices for their products and fees they extract from the monopoly they have over developers.

Monopoly? Developers have plenty of choices when it comes to platforms; and the iPhone is what 20+% of the total market? Hardly a monopoly.

 

[Ethosik]

I simply think it is wrong to charge 15% on a product that the Store owner has a product competing against AND the store owner is the ONLY Store available in its market AND one of the ONLY TWO store in the international market ( excluding China ).

People use often use WalMart as an example, but no one in your town forces you to buy from WalMart. In Apple's cases you can only buy from App Store.

It is an extremely complicated problem. And I dont have a solution for it. Because you could argue for or against it easily.

Do you think Microsoft pays itself 15%-30% for Halo games? If I want to create my own First Person Shooter to compete with it, I need to give Microsoft money to release it on their platform too.

Same with Valve - if I wanted to create a Portal competitor, Vavle get 30% from me where they don't get 30% from their own Portal.

 

[2010mini]

Did someone not tell Spotify that they do not have to do IAP??

 

[Vjosullivan]

Apple should just make Apple Music for free and kill Spotiy, it's not like they can't afford it.

That would be the ultimate proof of antitrust activity. (Probably not a route that Apple would seriously consider.)

 

[Picard J.L.]

Couldn't care about Spotify even if my life depended on it.
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Do you think Microsoft pays itself 15%-30% for Halo games? If I want to create my own First Person Shooter to compete with it, I need to give Microsoft money to release it on their platform too.

Same with Valve - if I wanted to create a Portal competitor, Vavle get 30% from me where they don't get 30% from their own Portal.

Please, logic is not allowed here. Thank you.