Zach McKinley / The Daily Gamecock

Column: Spotify challenges Apple's business practices in European antitrust suit

Just a few weeks ago, Spotify filed an antitrust complaint against Apple and its streaming service, Apple Music, through a subcommittee of the European Union.

In tandem with this complaint, Spotify released a YouTube video that portrayed Apple as an unfair gatekeeper, keeping Spotify from being competitive in the digital streaming market.

Spotify claims Apple is abusing its position as a platform provider by forcing Spotify and other third-party apps to choose between paying a 30% tax on every in-app purchase or jump through hoops to have users upgrade to a premium service through other methods.

Spotify can’t afford to pay the 30% tax, so its only option is to encourage viewers to sign up for the premium upgrade through avenues other than in-app purchases. Spotify would benefit if users could purchase premium outside the app, because then 100% of that purchase would go to Spotify.

Apple's own apps, of course, are not subject to this tax. So Spotify, its biggest competitor, feels as though it is not being treated equally in the market. 

Spotify and Apple Music have long been the top two in terms of music streaming worldwide. As of December 2018, Spotify had 96 million paid subscribers and Apple Music had 50 million. So, it’s questionable that Spotify is trying to position itself as the “little guy” when they are, in fact, the largest digital music streaming platform in the world.

It’s quite interesting that Spotify is taking this stance as the content provider for a platform when it just filed an appeal with Amazon, Google and Pandora against the recent rise in songwriter royalties. Songwriters provide content to the streaming market similar to the way apps provide content for an app store. With Spotify attempting to further devalue its content providers, it’s rather ironic that Spotify is portraying themselves as victims of a similar attack.

Despite a massive user base, Spotify has failed to turn a significant profit in the past, often operating with negative revenue from quarter to quarter. With Spotify finally going public on April 3 of last year, the pressure is on for Spotify to turn into a more profitable company. With a forced increase in songwriters’ royalties as well, Spotify is facing immense pressure to find a way to maximize profits. 

After seeing an 8% increase in users from 191 million to 207 million at the end of last year, it makes sense for Spotify to try a power grab while it has this momentum. Instead of focusing on creating a better product, Spotify seems to be more focused on how they can retain more of its profit with its massive market share.

The free version of Spotify is supported by ads, and premium plans are promoted by carriers, which contributes nothing to Apple as a hosting platform. Spotify is demanding the benefits of a paid application while remaining free.

This is absurd. Although Apple does provide exceptions on the tax to its own apps, it would make no sense for Apple to treat Spotify differently from other apps to which it doesn't grant exceptions. When an app is free and supported solely by ads, there is no “Apple tax” being paid, and Spotify has over 100 million ad-supported users to contribute to their tax-less profits.

As far as I can see, Spotify is being treated fairly in the Apple ecosystem. The Swedish streaming service has also complained of compatibility issues with Apple devices, claiming they favor Apple Music and other Apple software. Even these claims seem far-fetched, though.

Apple recently showed their willingness to collaborate with other streaming services when it comes to device compatibility issues in an online statement.

"We reached out to Spotify about Siri and AirPlay 2 support on several occasions, they’ve told us they’re working on it, and we stand ready to help them where we can," Apple said.

This lawsuit comes at a time when Spotify seems to seek a stronger position in the streaming industry. Although it has the largest user base, it claims to suffer under a business model that puts Apple's profits ahead of a fair competitive market.

Apple has no obligation to place Spotify in a better position considering the Spotify user base is almost double Apple's own. Spotify can find other ways to be competitive in the market besides creating smear pieces that only tell half the truth and devaluing other content providers and competitors.

Comments powered by Disqus

Please note All comments are eligible for publication in The Daily Gamecock.