Spotify CEO and cofounder Daniel Ek doubled down on his company’s criticism of Apple for what it says are “anticompetitive” practices on its app store during a speech Thursday at the International Conference on Competition in Berlin. Spotify filed an official complaint with the European Commission against Apple in Europe on Wednesday, contending that the company unfairly limits choice and competition through the rules of its app store.
“It’s fairly widely known that Steve Jobs initially wanted only Apple content on the App Store,” Ek said. “But his reversal just a year later to invite outside partners in, increased consumer demand and altered the fate of the app market overall. [But] what initially felt like a mutually beneficial partnership, increasingly felt very one-sided. And it’s now become completely unsustainable.”
Reps for Apple did not immediately respond to Variety‘s requests for comment. Spotify has been in an unusually competitive mood itself in recent weeks: Due to a disagreement over licensing fees, it launched in India late last month without Warner Music, and last week it joined with Amazon, Google and SiriusXM/Pandora in appealing the rates recently decided upon by the U.S. Copyright Royalty Board.
Spotify got some perhaps unexpected support Wednesday from Senator Elizabeth Warren of Massachusetts, who last week proposed breaking up the tech giants, including Apple, as a remedy to their unfair advantages.
“Spotify’s complaint is just the latest example of what can happen when these enormous companies abuse their power to undermine competition,” Warren told the New York Times. “We need a level playing field, and that starts by breaking up giant tech companies who both own a marketplace and operate in that same marketplace.”
Spotify has long decried a 30% tax that Spotify and other digital services must pay on purchases made through Apple’s payment system, including when Spotify users upgrade from free to premium packages. Ek detailed the issue in his speech.
“As you are aware, Apple is both the owner of the iOS platform and its App Store and a competitor to services like Spotify. In theory, this is fine,” Ek said. “But in Apple’s case, they continue to give themselves an unfair advantage at every turn — setting themselves up to be both referee and player in the world of audio streaming. This deliberately hurts Apple’s competitors, like Spotify, but even more importantly, it harms consumers. I believe we are approaching an important time in history where we have to make a choice: Do we want a few, select dominant platforms to have the power to strong arm others and tax the rest of the ecosystem, taking away the ability for smaller companies to effectively compete? Or…do we want a healthy ecosystem where real competition flourishes and where consumer choice wins?
“Let’s call this 30% revenue-share exactly what it is – a competitor tax,” he continued. “Importantly, Apple’s posture towards Spotify became increasingly hostile after Apple acquired a rival music streaming service and launched Apple Music. But until now, we felt like we didn’t have much of a choice.”
While many have pointed out that Spotify has other ways of selling its app and communicating with customers besides the app store, and the company says it stopped paying the tax in 2015, Ek pointed to its commercial importance.
“As we all know, iOS and the App Store is the only way to offer our service to anyone with an iPhone or iPad. That’s over a billion people around the world. So not being on their platform is just not an option for us — or really for any competing internet service in this day and age. Apple knows this. If we wish to use Apple’s payment system to allow our customers to upgrade to our Premium service, we must pay that 30% tax. This means we cannot be price competitive because we are forced to increase our cost to consumers. While Apple avoids the tax all together and can offer Apple Music at a much lower, more attractive rate.This is especially damaging to a company like ours who already pays out a significant portion of our revenues to record labels and music publishers.”
While many observers say that raising the monthly subscription price is the only path to a profitable future for streaming services, Ek pointed out that doing so on the App Store puts Spotify at a significant disadvantage.
“We even tried it their way,” he said. “At one point, to cover the Apple tax, we increased our price on the iOS app from €9.99 per month to €12.99 per month. It shouldn’t come as any surprise to you that because Apple wasn’t subject to the same requirements, Apple Music was offered to consumers at €9.99 per month. You can easily imagine that from a consumer acquisition perspective, this situation was untenable.
“I am not here to argue for the removal – or even reduction – of this tax,” he continued. “[But] based on our choice not to pay the tax — the result is that our customers must upgrade to Premium elsewhere, such as on their desktop. The catch 22 is that we are not allowed to tell users how to upgrade. We are essentially faced with a “gag order” that prevents us from communicating with our own users about our service. From dictating how we communicate with our own customers to imposing an unjustified tax, Apple isn’t playing fair. Let me be clear: We have no desire to step into the spotlight on this issue. But we also believe we have no other choice.”
Ek then concluded by stating the metaphor behind the ubiquitous ping-pong tables at Spotify offices. “At Spotify, we love to compete. And when it comes to winning consumers, we want to compete fiercely. We have ping pong tables in every major office for this very reason. It’s really in our DNA,” he said. “Yes, Apple should be able to impose certain restrictions on the apps that can be purchased for use on its devices. But they shouldn’t be permitted to impose restrictions that break the law and cause consumers harm in the process, for the sole purpose of disadvantaging competitors. It’s like inviting you to a match on our ping pong table and then forcing you to play blindfolded while [Apple] change the rules throughout the game.
“This complaint isn’t about two companies — Apple or Spotify. It’s about the companies just getting off the ground, the ones fighting for a shot, the ones that are still an idea in some young person’s mind. We are early in the process of building this new digital economy that has no borders, whose virtues are real and whose potential is limitless.”