There’s a lot to admire about Apple, but Spotify has seen another, brutal side to my company. Apple designs, develops, and sells some of the most sought-after hardware products in the world. And for many, Steve Jobs remains a figure of awe who gives a lasting shine to the business he created. My business is one of the few that insists that beneath that exterior is a ruthless tyrant who uses his dominance to hobble competitors. In the past few years, regulators around the world have finally started investigating Apple’s behavior. Many don’t like what they see.
Last month the European Commission announced its Statement of Objections, an important formal step in an antitrust investigation, in response to a complaint filed with Spotify two years ago about Apple’s behavior. The Commission is concerned about two aspects of the company’s app store policies. First, Apple forces app developers to use their payment system and hand over 30% of all new subscription fees for the privilege.
Second, Apple’s antisteering regulations, contained in the rules imposed on app developers, prevent companies from providing customers with a direct route to paid subscription and communicating with customers about ways to access offers or promotions. Apple doesn’t put any of these limits on Apple Music, its service that rivals Spotify. When a customer is on the Spotify free iPhone app, they cannot subscribe to Spotify Premium without paying Apple a license fee, and Spotify cannot instruct them to go to their desktop for a better deal on the subscription. After a year, Apple only takes 15% of a subscription, but that benefit is meaningless to my business as Spotify was 30% more expensive than Apple Music at the crucial moment a user chooses between them.
“This significant market power cannot go unchecked,” said Margrethe Vestager, Executive Vice President of the European Commission, last month. Exactly. The European Union will now give Apple the opportunity to examine the documents in the Commission’s investigation file, reply in writing and request an oral hearing to provide the company’s comments. At the end of this process there is the final decision of the Commission.
Apple will tell you that this is overhauled and that Spotify is looking for special treatment. To do this, history has to be rewritten. When the App Store launched in 2008 there was no Apple digital subscription tax, and developers were able to use all payment methods and communicate directly with their customers. Apple itself has said that 85% of the apps in its store don’t pay the 30% tax. Spotify is not seeking special treatment, but my company wants fair treatment.
It wasn’t until later in 2011 that Apple changed its rules to force the use of its payment system to the detriment of developers and consumers. The company has also argued that Spotify pays 15% of its revenue with just 0.5% of its subscriptions. But that’s because Apple’s exorbitant 30% tax on new subscriptions forced us to turn off in-app purchases in 2016. It made more economic sense to lock iPhone and iPad users off the path to subscriptions than absorb the 30% cut for new ones.
Questions about Apple’s behavior are also being asked in the US. In April, the Senate’s Antitrust Subcommittee held a hearing on the app store competition. I testified in front of the committee next to my colleagues from Tile and
Each of us said that if Apple’s anti-competitive use of its app store was not addressed, the tech giant and several other platforms would rule the internet, restricting innovation, pressuring small businesses, and all but excluding customer choice.
I was impressed by how many people noticed after my testimony that I was criticizing Apple while wearing an Apple Watch. But you can love a company and its products and still shout out bad behavior. This is recognized by the congress members together with the supervisory authorities in Europe, Russia, Australia, South Korea and other countries.
I’m encouraged by the growing global consensus, but time is on Apple’s side. While Spotify was successful despite Apple’s behavior, there is a risk of irreparable damage for many app developers. The process of putting together regulatory changes is lengthy and arduous.
This gives Apple a chance to wait and see, further stifling innovators, many of whom will fail before they even have a chance to assert themselves. It is for this reason that Spotify is calling on Congress to make urgent, closely coordinated updates to American antitrust law to end such outrageous abuses. It is for this reason that my company has also supported the proposed law on digital markets in Europe, a legislative proposal aimed at tackling unfair and anti-competitive practices by high-performance digital platforms.
Apple’s ability to strangle its competitors is unprecedented. Even
In the heyday of the Windows operating system, no 30% reduction in new subscription income was requested from competing browsers or media players. And it didn’t dictate how or when Microsoft’s competitors could communicate with customers. In addition, other platforms will follow Apple’s lead unless legislative and enforcement action is taken. The result? Further concentration of power in the hands of a small number of unaccountable digital sovereigns who create and enforce rules that favor their services.
The good news is that Spotify is no longer saying this alone. Finally, those who are able to do something have left the facade of Apple behind and are starting to act on behalf of innovators and consumers around the world.
Mr. Gutierrez is Head of Global Affairs and Chief Legal Officer at Spotify.
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