Less than 1pc of Spotify’s customers paid the App Store tax, according to Apple.
Apple is claiming that Spotify’s recent antitrust complaint exaggerates how much money the Swedish streaming service has potentially lost out on due to a tax Apple charged on subscriptions through its App Store between 2014 and 2016.
In March 2019, Spotify filed the antitrust complaint with the European Commission. In this complaint, Spotify alleged that Apple was engaging in anticompetitive behaviour, leaving music streaming services such as Spotify, Tidal and Deezer at a disadvantage.
The conflict between Apple and Spotify can be dated back to 2015, when Spotify emailed iPhone customers to let them know that Spotify subscriptions made through Apple’s App Store were more expensive than subscriptions made through Spotify.com.
The email read: “In case you didn’t know, the normal Premium price is only $9.99, but Apple charges 30pc on all payments made through iTunes. You can get the exact same Spotify for only $9.99/month, and it’s super simple.”
In 2016, Spotify stopped offering subscriptions through iOS in order to avoid paying the fee to Apple. To this day, Spotify maintains in its EC complaint that this 30pc tax is the reason why Spotify and other streaming services have to charge more for premium services than Apple Music does. Spotify also mentioned the fact that Apple’s smart speaker, HomePod, does not support Spotify. They believe this may be further evidence that the Californian company is trying to leave competitors at a disadvantage.
Back in March, Spotify CEO Daniel Ek wrote a blogpost in which he blamed Apple for the ‘artificially inflated’ price of a Spotify subscription: “Apple requires that Spotify and other digital services pay a 30pc tax on purchases made through Apple’s payment system, including upgrading from our free to our Premium service. If we pay this tax, it would force us to artificially inflate the price of our Premium membership well above the price of Apple Music. And, to keep our price competitive for our customers, that isn’t something we can do.”
Apple responded to these claims in early May but the response was only made public on Monday (24 June). Apple defended itself by pointing out that the 30pc tax was applicable only in the first year of each subscription and, beyond that, the tax is reduced to 15pc. As this solely applied to customers who subscribed to Spotify through iOS between 2014 and 2016, Apple is only taking a cut from 680,000 of Spotify’s customers. Apple noted that this represents just 0.5pc of Spotify’s 100m Premium subscribers.
Although Apple is brushing off Spotify’s complaint as an exaggeration, this case has drawn a great deal of attention to the struggles other companies can face when it comes to competing against Apple.
When Apple launched a website at the end of May to counter Spotify’s argument and defend itself, the company was met with even more criticism.
The Verge pointed out that although Apple’s new site listed alternatives to the built-in iOS apps (eg suggesting Facebook Messenger, Slack, Snapchat and Viber as alternatives to the iPhone’s native iMessage app), the company “fails to mention that none of these apps can be chosen as the default messaging app, maps service, email client, web browser or music player”.
Apple’s website also failed to address one of Spotify’s main complaints, which numerous other developers have vocalised frustration with over the years. Apps that opt out of Apple’s in-app purchase system have no way to redirect customers to another website to sign up or subscribe, because Apple will not allow them to link to external websites. This is something that affects more companies and developers than just Spotify.
While the investigation continues, the EC informed Spiegel Online that they did not want to provide any information on the duration and status of the complaint procedure initiated by Spotify.
Spotify app. Image: Daviles/Depositphotos