Spotify files a complaint against Apple with the European Commission over “Apple tax” and restrictive rules

Spotify is taking its
gloves off in what has up to now been a behind-the-scenes
tug-of-war with Apple, where it competes against Apple Music but
also relies heavily on the company for distribution in its app on
iOS devices. Today CEO Daniel Ek
announced that his company has filed a complaint against the iPhone
with the European Commission, over how Apple has
“introduced rules to the App Store that purposely limit choice
and stifle innovation at the expense of the user
experience—essentially acting as both a player and referee to
deliberately disadvantage other app developers.”

While the EC complaint is confidential so will not be shared
publicly, Spotify has created a public site, appropriately
called Time to Play
, which details all of the ways in which Apple has
“tilted the playing field,” in the words of Spotify general
counsel Horacio Gutierrez in remarks, “in a set of ever
increasing restrictions.” The company has not specified damages
but believes that “we could have been even more successful” had
it not been restricted. Notably, on Google Play, Spotify is not
required to use Google’s payment system and is allowed to offer a
choice to users. “The situation is completely different.”

Ek said the complaint and request for regulatory interference to
ensure fair competition comes “after trying unsuccessfully to
resolve the issues directly with Apple.” One crucial issue, he
notes, are Apple’s high fees for accepting payments in apps, a 30
percent tariff, which he refers to as the “Apple tax.”

The base of Spotify’s claim is that the company wants to be
treated like “numerous other apps on the App Store, like Uber or
Deliveroo, who aren’t subject to the Apple tax and therefore
don’t have the same restrictions.”

Gutierrez declined to say if Spotify had talked with other
companies to join the suit. “We know others feel equally
frustrated with [Apple’s] restrictions… but we will not speak
for them,” he told TechCrunch in response to the question. He
added that the EC will likely seek input from others as part of its
investigation, which could be one way that other companies become a
part of this complaint.

In his blog post announcing the suit, Ek detailed three requests
to the Commission: that people not be forced — “locked in”
— to Apple’s payment platform and tariffs that it dictates;
that apps compete on merits and just just who owns the app store,
specifically Apple Music should be subject to the same rules as
Spotify; and finally that app stores should not be able to control
communications between users and app publishers, “including
placing unfair restrictions on marketing and promotions that
benefit consumers.”

This is a huge move for Spotify to make. A lot of developers
have made noise about Apple’s policies, but generally it holds a
lot of power and so many are careful to limit how much they
complain. Spotify is the biggest company so far to speak out loud,
and more to the point,formally file a regulatory complaint over how
Apple treats developers.

The move underscores how the two companies have
long been frenemies
— Spotify relies on Apple for
distribution of its app, but at the same time the two are in hot
competition in the music streaming market, an area that is only
going to become more fraught with tension as Apple continues its
strategy of building up its services and content businesses to
offset slowing growth in hardware sales. The company is expected to
announce a new slate of entertainment services in an
event on March 25
, although Gutierrez said that timing was
“just coincidental.”

The complaint extends to a range of business initiatives, not
just payments. “We’re pretty much on every speaker or wearable
out there except for Apple’s,” Gutierrez noted in the press
conference today.

But Spotify is not the only one that’s been looking for
alternatives while at the same time continuing to play in Apple’s
walled garden. Netflix,
similar to Spotify, has been bypassing Apple’s subscription
model, which requires the app developer to pay Apple a fee of for
charging users to use the service, by asking users to pay outside
of the app. This works to some extent, but making it harder to pay
will also put some buyers off.

For now, Spotify’s billing gripes will mostly concern subscriptions,
which fall under a 30/70 revenue split (Spotify getting 70%) for
the first year, and then that figure changing to 85% in subsequent
years. But presumably it’s also laying the groundwork for how
that will become an even bigger problem down the line for in-app
purchases of one-off items, such as podcasts.

Last month, the company made waves when it announced that it
acquire a pair of startups
, Gimlet and Anchor, for about $400
million to further its ambitions in spoken word content, and to
diversify its business into more than music (and specifically
costly licensing deals with record labels).

The company has continued to see business grow for its existing
products. In Q4 it noted
that monthly active users were up 20 percent to 207 million, but it
also missed analyst expectations on revenues of $1.7 billion.

Although its own video ambitions have not expanded too much
(yet) beyond a small selection of music-related content, it has
teamed up with Hulu
to expand its offerings with bundles. That
could, at some point, also see Spotify looking to offer more a la
carte content alongside subscriptions.

We are now listening to the conference call from Spotify and
will update this post as we learn more.

Source: FS – All Tech News 2
Spotify files a complaint against Apple with the European Commission over “Apple tax” and restrictive rules