March 15, 2019
Apple March 15 responded to Spotify’s decision to file a complaint against Apple Music with the European Commission citing unfair business practices, including taxes and restrictions on tech and user-enhancements, among other issues.
Spotify ended its most-recent fiscal period with 87 million paid subscribers, compared with about 50 million for Apple Music. Both services operate through the App Store, which is owned and operated by Apple — and at the center of Spotify’s gripe.
Specifically, Swedish-based Spotify takes issue with the 30% tax it and other digital services must pay utilizing Apple’s payment system. If the service opts out of the payment platform, Spotify alleges Apple restricts how it can communicate with its subscribers outside the app.
“In some cases, we aren’t even allowed to send emails to our customers who use Apple,” Spotify founder/CEO Daniel Elk wrote in a March 13 post.
In a 1,124-word response on its website, Apple said Spotify wants to enjoy the benefits of the App Store without paying for them.
“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 wrote.
The tech giant said the App Store has created “many millions of jobs,” generating more than $120 billion for developers while creating new industries such as subscription music streaming via through businesses like Spotify started and grown entirely in the App Store ecosystem.
“After using the App Store for years to dramatically grow their business, Spotify seeks to keep all the benefits of the App Store — including the substantial revenue that they draw from the App Store’s customers — without making any contributions to that marketplace,” Apple wrote.
The iPhone/iPad/Apple Watch creator said the 30% tax imposed on app payments drops to 15% after one year.
Apple said the majority of Spotify customers use their free, ad-supported product, which makes no financial contribution to the App Store. A significant portion of Spotify’s users come through partnerships with mobile carriers, which Apple claimed generates no App Store contribution but requires Spotify to pay a similar distribution fee to retailers and carriers.
“Even now, only a tiny fraction of their subscriptions fall under Apple’s revenue-sharing model. Spotify is asking for that number to be zero,” Apple wrote.
“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.”