One of the key points of the week was Spotify's allegations against Apple, a conflict that ended with a formal complaint from the company to the European Commission Consider that Apple is not playing fairly with regard to the control exercised over the applications available in the App Store. And specifically for the competition that Spotify assumes for some services from the Cupertino. And it's not the first time this has happened.
Spotify recently published a website with the, in his opinion, bad practices that Apple implements when faced with the competition they represent. A kind of manifest with half truths that clashes with reality. In addition, Spotify even accuses Apple of not applying a fair game when developers can exercise their freedom of publication in the store.
One of the most troubled issues that Spotify addresses, about which we have responded several times, has to do with what they Apple tax. In other words, the commission that the company applies to all those skinners who use their platform to sell digital content, about 30%. Spotify notes that it is harming its business model by not giving the company a margin to apply more competitive prices, you Offers that your fans love [SIC], in contrast to Apple Music, according to them, by not having to pay for it tax because they are from Apple themselves, they have more room to keep the prices more attractive.
The blame list covers almost the full spectrum of Apple & # 39; s digital business. From the impossibility of direct streaming to Home Pod or the alleged problems (always from the point of view of Spotify) that the company has had in developing an application for the Apple Watch that supports streaming of their service. The truth is that under that animated and friendly web, full of reproaches and truths from the context, hides a series of requirements that are more related to Spotify's need to increase its profit margin at the expense of making a standard – the App Store rules that are universal to everyone – more flexible, for its own benefit.
In response to this series of accusations, Apple wanted to make a statement in which, like most of what they already know a bit about the App Store operating system and Apple's digital services, the majority of the arguments of the streaming company to which it maintains the alleged position of Apple's rule and that which it accuses him of not playing cleanly. It is interesting to know Apple's position as brings a lot of perspective when it comes to knowing how your business works and therefore the relationship with the rest of the developers.
What Spotify demands is something completely different. After using the App Store for years to grow your business in a spectacular way, Spotify tries to preserve all the benefits of the App Store ecosystem, including the substantial revenue they receive from App Store customers, without contribute to this. market. At the same time, they distribute the music you love while making increasingly smaller contributions to the artists, musicians, and composers they make, even to the extent that they bring these makers to justice.
Spotify has every right to determine its own business model, but we feel obliged to respond when Spotify wraps its financial motives in a deceptive rhetoric about who we are, what we have built and what we do to independent developers, musicians, composers to support and makers of all stripes. – Apple statement.
In that sense, one of Apple's main arguments has to do with the advantage of the App Store, its rules and control, for both users and developers. Spotify has been benefiting since the establishment of this safe ecosystem and therefore it is a bit strange in the opinion of those who subscribe to these rules who want to change the rules in the middle of the game; especially when those rules are universal for other developers: the App Store offers developers a secure channel to publish their applications, a technology infrastructure for hosting and distribution, and a hugely simple payment platform that reduces friction when it comes to making a digital payment, an unpredictable added value required per company it must be universal for all developersand for which Apple cannot apply arbitrary benefits to the needs of a particular developer.
The business model of the App Store is universal for all developers and the same rules apply
Because it is structured, the App Store business model makes it especially useful for developers, for a number of reasons that Apple is very important when assessing the Spotify case:
The applications do not pay taxes. The only thing they pay Apple is the $ 99 of the cost of the license to access the App Store, which is paid by everyone, regardless of whether it is a large company such as Spotify or an independent developer. The only exception is the rate for companies who want to distribute their internal applications for their employees in the store, which is $ 299. In addition, licensing fees for young developers or educational institutions may even be free if certain requirements are met.
The App Store does not charge commissions or commissions for the sale of goods or physical services in the apps. So order a pizza, buy from Amazon, ask for a taxi or pay Uber, do not wear a commission.
Apple only applies a commission – which is actually the case a revenue share of 70% for the developer and 30% for Apple– when the transaction relates to digital content, a payment application or in-app purchases. Said that rate is reduced to 15% in the second year and subsequent years when it is a subscription.
Every developer – including Spotify – can offer advertisements and promotions in its apps; therefore, the App Store does not charge commission, but uses the same requirements for secure data and privacy that applications without advertising are. This is a very important point.
In addition, Apple implements all infrastructure, support, security measures, privacy and payment gateways in an extremely safe environment, in 28 languages, in 155 countries and 45 different currencies.
The reality of the "Apple tax"
They all clash with Spotify's demands or allegations of abuse of power against Apple, while all these rules and conditions apply, as we say, universally to all developers. More specifically, Spotify accuses Apple of blocking access to products and updates of the application, but since it has reached the App Store, Apple has approved and distributed nearly 200 application updates on behalf of Spotify, which resulted in more than 300 million copies downloaded from the Spotify application. 300 million copies distributed in an extremely safe environment that are entirely at Apple's expense. And more interesting data that Apple offers:
Most users of the Store use, according to Apple, free Spotify with advertising, which means that no commission is paid or Apple tax to the App Store. Only a small portion of its subscriptions are part of Apple & # 39; s revenue share model, that is, it pays Spotify through the App Store.
A significant proportion of Spotify's customers come from associations with mobile operators. This does not contribute to the App Store, but requires a similar distribution fee from retailers and operators from Spotify.
As Spotify points out, that share of sales is 30 percent during the first year of an annual subscription, but they were set apart to be reduced to 15 percent in the following years.
Spotify accuses Apple of curbing its expansion in the devices
Apple points out that the only time Spotify updates were rejected has been when the company has tried to bypass the same rules that all other applications follow. Because it has happened on countless occasions for other applications, some have been enormously downloaded as Uber and his controversy over privacy, Facebook or Tumblr. The same applies to Spotify & # 39; s allegations against Apple to delay the expansion of Apple & # 39; s hardware. Some recent examples:
When we communicated several times with Spotify about supporting Siri and AirPlay 2, they told us that they are working on it and we are ready to help them as much as possible. Spotify is deeply integrated into platforms such as CarPlay and they have access to the same tools and application development resources as any other developer.
A very interesting point has to do with how Spotify accuses Apple of stopping its expansion in the Apple Watch. A recurring request from its users, but the truth is that, as Apple points out, when Spotify presented its Apple Watch application in September 2018, the company reviewed and approved it with the same process and speed as any other application. And it points to something very interesting: The Spotify Watch app is currently the number 1 application in the Watch Music category.
And here it is the heart of the matter, when with the data in hand, we can better know how the Spotify company works and the relationship with the App Store, what Apple offers them and the pretensions derived from the internet from fair game from Spotify.
Let's be clear about what that means. Apple connects Spotify with our users. We offer the platform with which users download and update their application. We share essential software development tools to support the construction of Spotify applications. And we have developed a secure payment system that users can trust in transactions within the application. Spotify requires that all these benefits be retained and at the same time 100% of the income is retained.
Spotify would not be the company they now have without the App Store ecosystem, but they are now taking advantage of the scale to prevent them from contributing to the preservation of that ecosystem for the next generation of application entrepreneurs.
So the reality is far from the blame and half truths of Spotify.