Spotify is accusing Apple of some pretty sketchy business practices. In a letter to Apple general counsel Bruce Sewell, Spotify claims Apple is blocking updates to its app to get it’s 30 percent cut and help Apple Music shine.
Specifically, Spotify says Apple is refusing updates citing “business model rules,” adding that Spotify must use its in-app billing system (which earns Apple a 30 percent cut, mind you) if Spotify “wants to use the app to acquire new customers and sell subscriptions.”
In the letter, Spotify general counsel Horacio Gutierrez added the following:
This latest episode raises serious concerns under both U.S. and EU competition law. It continues a troubling pattern of behavior by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple’s previous anticompetitive conduct aimed at Spotify … we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors.
Subscribe or die
In its last earnings call, Apple noted it was now earning more from subscriptions to services like iCloud and Apple Music than via Mac hardware sales — a first for the company.
Similarly, it’s making service subscriptions harder to avoid. With macOS Sierra, my pick for the ‘killer feature’ was iCloud, which allowed you to sync desktops across devices seamlessly and keep files available in the cloud.
Apple also announced that Mac apps not distributed via the App Store would be able to take advantage of iCloud, essentially forcing you to spend at least $0.99 per month (for 50GB of iCloud storage versus the 5GB Apple gives away free) to sync your content.
— Nate Swanner (@NateSwanner) June 13, 2016
And some Mac apps, like Sketch, forgo the App Store entirely to avoid paying Apple’s toll. But that’s the Mac: iOS isn’t as fortunate. Apple has a stranglehold on how iOS apps are distributed and monetize.
Spotify has run afoul of Apple before with regard to in-app purchases. While you may know the service is $10 per month, it was once charging $13 via its iOS app to make up for Apple’s 30 percent take.
In doing so, it encouraged users to sign up via the Spotify website for $10 per month instead, essentially cutting Apple out of the mix. Spotify also cut off in-app purchases for iOS users, effectively making them jump through hoops to subscribe.
It’s Spotify’s end-around play that seems to be frustrating Apple. As it gets increasingly interested in subscription income, Apple seems to be stepping on Spotify’s throat to have that $13 per month in-app purchase option turned back on. A more long-term question would be whether or not Spotify would cut your subscription fee to $11.50 after one year, since Apple cuts its take in half at that point.
While it doesn’t seem as though Apple is outright saying as much, the underccurent seems to be that iOS monetization needs to flow through Apple’s system — or at least have it as an option.
In that scenario, nobody really wins. Apple and Spotify have a strained relationship and users may end up paying more for Spotify. Some could even make Apple Music the scapegoat in this situation.
The only answer is that Apple’s ecosystem has rules, and everyone has to play by them. The alternative is for Spotify to simply eschew iOS altogether, and that’s not going to happen. If it thinks $3 per month affects its revenue stream, I can only imagine that eliminating iOS from the mix would put it out of business.
And I’m sure Apple knows that.