Apple on Spotify App Store complaint: It’s all about the money

Apple has accused Spotify of simply wanting to “make more money” off the backs of others.

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Apple has hit back against Spotify after the latter filed a complaint against the iPad and iPhone maker with the EC, alleging that Apple's App Store is anti-competitive and limits customer choice.

Earlier this week, Spotify founder and CEO Daniel Ek revealed the complaint, filed with the European Commission (EC), which is based on the premise that new rules introduced by Apple impact the App Store and have caused the platform to "purposely limit choice and stifle innovation at the expense of the user experience."

Ek claimed that Apple's App Store now acts as a means to "deliberately disadvantage other app developers" in order to benefit Apple itself.

"Apple operates a platform that, for over a billion people around the world, is the gateway to the Internet," the CEO said. "Apple is both the owner of the iOS platform and the App Store -- and a competitor to services like Spotify. In theory, this is fine. But in Apple's case, they continue to give themselves an unfair advantage at every turn."

According to the executive, Spotify and Apple were unable to directly resolve their dispute, which led to the complaint.

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In an unusual move, Apple directly and publicly refuted Spotify's reasons for the complaint on Thursday.

Ek used the example of the App Store payment system to illustrate his complaint. The executive said that Spotify and other digital services are required to pay a 30 percent tax on purchases, which includes the Spotify Free to Premium upgrade.

"If we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music," Spotify said. "And to keep our price competitive for our customers, that isn't something we can do."

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Apple, however, has strongly refuted these claims and says that while the 30 percent levy is in place, the music streaming service failed to mention that this drops to 15 percent after the first year.

Spotify also said that the company is not seeking "special treatment" but wants to be on the same playing field as companies such as Uber and Deliveroo which do not pay the "Apple tax."

The iPad and iPhone maker has dismissed the idea of discrimination and says that far from it, a total of 84 percent of apps in the App Store are exempt from levies "by design."

Apps which are free to consumers, apps which earn revenue through adverts, those which sell digital goods outside of the app, and apps which sell physical goods -- which Apple notes include ride-hailing services and food delivery such as Uber and Deliveroo -- are all exempt from the revenue model.  

The alternative, then, is to not use Apple's payment service to avoid these fees, which then results in app limitations, including the blockage of "experience-enhancing upgrades" and sometimes even the "sending [of] emails to our customers who use Apple," according to Spotify.

"Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch," the company added.

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Apple has also refuted these allegations and says that close to 200 app updates have been distributed on Spotify's behalf, and "the only time we have requested adjustments is when Spotify has tried to sidestep the same rules that every other app follows" -- although no details on these incidents have been released.

The tech giant added that Spotify's mention of the Apple Watch was "especially surprising" as the Spotify Watch app was reviewed and accepted back in 2018 and currently holds the top spot in the Watch Music category.

Spotify says that "apps should be able to compete fairly on the merits, and not based on who owns the App Store." Apple has responded by saying "Spotify wants all the benefits of a free app without being free."

"After using the App Store for years to dramatically grow their business, Spotify seeks to keep all the benefits of the App Store ecosystem -- including the substantial revenue that they draw from the App Store's customers -- without making any contributions to that marketplace," the company added.

Apple also noted that only a tiny fraction of Spotify subscribers currently fall under the 'Apple tax,' and while Spotify would like to see this number drop to zero, Spotify's only aim is to "make more money off others' work" by squeezing the App Store as well as content creators.

See also: Spotify files complaint in EU over Apple App Store: Why it may change developer economics

A potential investigation conducted by the EC could prompt some interesting results into the App Store's licensing terms and the anti-competitiveness claims, but the timing of the complaint is somewhat ironic.

Earlier this month, Spotify -- alongside Google, Amazon, and Pandora -- came under fire for "suing songwriters" in response to a Copyright Royalty Board (CRB) decision to increase the commission earned by content creators by 44 percent.

Spotify said that the companies in question are appealing the ruling as a wish to earn more "cannot come at the expense of continuing to grow the industry via streaming."

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