To quote the Jonas Brothers, “I just wanna play my music.” But between Spotify and Apple Music, the music streaming industry is not as simple as it seems.
On March 14, Spotify’s co-founder and CEO Daniel Ek filed a complaint with the European Commission, accusing Apple of anti-competitive behavior and abuse of dominance. Spotify also launched the website TimetoPlayFair.com which contains facts, timelines, and even an animated video explaining their case against Apple’s behavior.
Apple Inc., who controls the App Store, charges companies a 30% revenue-share (or a “competitor tax” as Ek calls it) on in-app purchases and subscriptions. Spotify avoided this cut by electing to not use Apple’s In-App Purchase service. As a result, Spotify was restricted from releasing certain notifications to its users, including announcements of promotions and special offers, and users could no longer upgrade to Spotify Premium in the Spotify app.
Spotify finally gave into Apple’s In-App Purchase service in 2014 but raised their Spotify Premium subscription price from $9.99/month to $12.99/month as a result.
The situation escalated in 2015 when Apple released its own music streaming platform, Apple Music for Spotify’s previous rate of $9.99/month. Apple also began to release the very push notifications that it restricted its competitor, Spotify from releasing.
From a consumer point of view, it appears that Spotify was robbing users of an extra $3 per month, but clearly, that wasn’t the case. Spotify claimed that they had to raise their rates in order to pay the 30% tax.
In 2016, Spotify opted out of In-App purchases in order to revert their price back to their original $9.99/month in order to compete with Apple Music’s prices. As a result, users could no longer upgrade to Spotify Premium in the app. This added an inconvenience that Apple Music users did not have to encounter.
“Apple has designed privileges that they alone can benefit from,” said Daniel Ek.
As owners of Apple Music, the App Store, and Apple devices, Apple Inc. has a big advantage as gatekeepers of the technology industry. Apple Inc. can control which apps are available to its users, and on which devices those apps are available.
Spotify has been presenting its case as separate unethical policies that Apple has imposed on them. However, it is avoiding the In-App Purchase service that resulted in restrictions of advertisements and the inability to upgrade in the app. Apple is trying to compensate for the loss of their 30% cut, and prevent other companies from circumventing the In-App Purchase service, by imposing certain restrictions on Spotify.
Apple has not technically or legally infringed on Spotify’s rights or business. Whether or not Apple’s policies are moral is now up to the European Commission to decide.
It is also up to Spotify and Apple Music users to decide whether or not they would like to support either platform. Spotify’s Time to Play Fair campaign is targeted toward their users through their clean and simple website design, and catchy video. Spotify is attempting to involve the general public by turning their backs on Apple. In the Time to Play Fair campaign video, Spotify is painted as good-natured citizens, while Apple is portrayed as shady crooks. The video appeals to the audience’s morals and emotions by making Spotify seem like David in this David and Goliath story that this campaign creates.
In the end, this Spotify-Apple Music dispute is a business deal. Both companies are trying to maximize their profits by attracting the most customers. Consumers benefit from this competition because businesses are inclined to offer their best services for the best price. If Spotify can’t compete, Apple may be able to monopolize this industry and be able to raise their prices without healthy competition to bring it back down. On the other hand, Apple has earned the right to control their competition by owning multiple platforms such as Apple Music and the App Store.
Without healthy competition, we may see a situation similar to that of the exorbitant prices of Disneyland admission. Disneyland is able to raise their prices as much as they want, and people will still pay for tickets because there is nothing else quite like Disneyland — there is no competition.
Competition is a key asset of a free-market. Without it, the quality of services may go down, and prices may go up.
“Consumers win and our industry thrives when we’re able to challenge each other on a fair footing. That’s what competition on the merits is all about,” said Daniel Ek.
Does Apple have a right to control how digital items are sold as owners of the App Store and Apple Music? Or is it Apple’s “Time to Play Fair”?