Apple Vs. Spotify, Round One!

Who needs who?

Apple’s just saddled up, taken its arsenal and set foot on the battleground. The Internet Radio battleground.

Now, when Apple normally enters an arena, it comes in late, and it comes in strong. That may well not be the case here, because their entry (resplendent as it may be with an elaborate service bouquet), may be a trifle too late.

Spotify, the streaming music company that holds a subscriber base of a whopping 30 million is clearly in it’s sights. But Spotify has seen adversity and competition earlier, and has prevailed. Always.

Let’s dig into the details of this Tom and Jerry style row and find out what led to all this.

Spotify has claimed that Apple is making it difficult for the streaming music company to compete by blocking an upgraded version of its iPhone app from being launched in Apple’s App Store.
Spotify sent an official letter to Apple, whereby Spotify highlighted the damage that is being caused to them by Apple’s rejection of an update to Spotify’s iOS app. Spotify said Apple is “causing grave harm to Spotify and its customers”.
The letter mentions that Apple turned down a new version of the app while quoting “business model rules” and was of the view that Spotify should use Apple’s billing system if “Spotify wants to use the app to acquire new customers and sell subscriptions”.

For the past year, Spotify has been in the limelight as it tried to highlight the snags of Apple’s subscription policies at various public forums in the U.S. and Europe, whereby Apple tries to promote the use of its own music platform. Spotify claims that the brunt of this approach is borne by third-party music services like Spotify.

Apple naturally isn’t required to pay any subscription charges to use its own iTunes billing service, but in case of other app makers who use iTunes billing service, Apple charges a monthly fee of up to 30%.

You must be wondering that, in that case other app makers like Spotify could simply opt out of the billing system and use alternate subscription options outside the apps. Well, my friend, Apple has laid out all its cards very smartly and has made sure that its throne remains intact.

Spotify for years, had been using Apple’s billing system and very intelligently passed on the burden of Apple’s fee to its customers by charging $12.99 a month instead of the $9.99 a month — the charge that one has to pay to use Spotify outside Apple’s store.

Apple launched its own music service in the past year and it seems that since then, Spotify is pushing it’s users to pay for the service outside of iTunes.

This antagonism and constant efforts to outsmart each other have been going on between the two parties for long. We have an instance to back this statement.

Last fall, Spotify started a new promotional campaign whereby new subscribers had a chance to get three months of the service for just $0.99. The only condition here was that the subscribers should sign up outside the app available on the Apple store, i.e. via Spotify’s own website.

This month Spotify employed the same strategy but Apple put its trump card out as it threatened to remove the app from its store (as per Gutierrez, who is the General Counsel for Spotify) unless Spotify stopped selling its vigorous promotional campaign to iPhone users.

Spotify did submit and stopped advertising the promotion but at the same time acted like a mischievous child who will do what he has been advised against by his parents and turned off its App Store billing option!

Now you know what acted as fuel to this current dispute between Apple and Spotify.

In the letter that Spotify General Counsel, Horacio Gutierrez sent to Apple’s General Counsel, Bruce Sewell on June 26, there are indications that Spotify intends to use the impasse as ammunition in its fight over Apple’s rules dictating subscription services for those who use its App store.

Gutierrez throwing light over Apple’s unfair policies wrote in the letter wrote — “This latest episode raises serious concerns under both U.S. and EU competition law, It continues a troubling pattern of behaviour by Apple to exclude and diminish the competitiveness of Spotify on iOS and as a rival to Apple Music, particularly when seen against the backdrop of Apple’s previous anticompetitive conduct aimed at Spotify … we cannot stand by as Apple uses the App Store approval process as a weapon to harm competitors.”

Spotify has made sure to spread the word and has distributed copies of the letter to some Congressional staff in Washington, D.C.
Senator Elizabeth Warren for that matter criticized Apple, Amazon and Google for what she termed as anticompetitive practices; Warren said “Apple has long used its control of iOS to squash competition in music.”

The whole buzz created due to Apple’s policy is not new. As far back as 2011, when the policy was introduced, a lot of publishers dissented but eventually had to assent in order to use Apple’s in-app billing option and paying Apple it’s fee.

A minority like Amazon who didn’t relent, decided to offer limited versions of their apps in Apple’s app store thereby forcing the users to switch to the website to enjoy a wider array of products. In fact, Amazon CEO Jeff Bezos recently suggested that Apple’s subscription rules led Amazon to stop selling the Apple TV box in its store.

Apple Music, introduced last year was a little late in the game and seems like it is trying to catch up in the competition (with half the subscribers as compared to Spotify) by moves like blocking a new version of Spotify’s iOS app. Apple clearly is using its privileged position on platforms like iPads and iPhones to push Apple Music at the expense of third-party services.

This whole incident highlights the vulnerable stand that third-party services like Spotify, Netflix, Amazon and others have when it comes to paying on platforms like Apple and Google, who themselves provide competing services.

But then again, Apple, Google and other such platforms are in the business to make money for their respective shareholders, and to grow value year after year. If any of the service providers really don’t want to put up with any platform’s policies, they do have the option to not participate on said platform. Therein lies the rub — because these same fundamentals of ‘capitalism’ that the ‘aggrieved’ platforms are banding about, are the very reasons why they are attracted to the platform in the first place. Money talks, all else walks, don’t they say?

With that perspective, it’s an interesting question — who needs who? Whosever’s need is greater, get with the program!

Originally published at Chip-Monks.