Apple doesn’t always respond immediately to situations where they are attacked or criticized. They don’t usually make pointed public responses, either. However, Tim Cook and company have made an exception in the case of Spotify, releasing a detailed and aggressively worded press release that not only answers each of their competitor’s complaints, but also takes shots for them for some of their own recent activities.
If you want to revisit Spotify’s clams, feel free to look here or visit the site they set up to cry about Apple bullying them. To lead off their response, which is simply titled Addressing Spotify’s Claims, Apple makes pretty much the same assessment that I did in my post a couple of days ago- Spotify wants a free ride in the marketplace that Apple built and operates.
Here is Apple’s opening statement:
We believe that technology achieves its true potential when we infuse it with human creativity and ingenuity. From our earliest days, we’ve built our devices, software and services to help artists, musicians, creators and visionaries do what they do best.
Sixteen years ago, we launched the iTunes Store with the idea that there should be a trusted place where users discover and purchase great music and every creator is treated fairly. The result revolutionized the music industry, and our love of music and the people who make it are deeply engrained in Apple.
Eleven years ago, the App Store brought that same passion for creativity to mobile apps. In the decade since, the App Store has helped create many millions of jobs, generated more than $120 billion for developers and created new industries through businesses started and grown entirely in the App Store ecosystem.
At its core, the App Store is a safe, secure platform where users can have faith in the apps they discover and the transactions they make. And developers, from first-time engineers to larger companies, can rest assured that everyone is playing by the same set of rules.
That’s how it should be. We want more app businesses to thrive — including the ones that compete with some aspect of our business, because they drive us to be better.
What Spotify is demanding is something very different. After using the App Store for years to dramatically grow their business, Spotify seeks to keep all the benefits of the App Store ecosystem — including the substantial revenue that they draw from the App Store’s customers — without making any contributions to that marketplace. At the same time, they distribute the music you love while making ever-smaller contributions to the artists, musicians and songwriters who create it — even going so far as to take these creators to court.
Spotify has every right to determine their own business model, but we feel an obligation to respond when Spotify wraps its financial motivations in misleading rhetoric about who we are, what we’ve built and what we do to support independent developers, musicians, songwriters and creators of all stripes.
The last two paragraphs are key here. Spotify, along with Amazon, Google and Pandora, is protesting an increase in the royalties that artists receive that was set by the Copyright Royalty Board here in the Unites States. This a controversial move that has brought Spotify a lot of criticism from artists and those in the music business.
Another key point to keep in mind here- Apple is notably absent from these protests over royalties, and they aren’t shy about that fact. None of this played into Spotify’s anti-trust arguments, but that isn’t stopping Apple from drawing connections and bringing it up to use as a weapon against them. Like I said earlier, this isn’t a typical Apple response. You can tell this is personal.
After this opening statement, Apple goes on to address each of Spotify’s complaints one by one. Again, this is not something that Apple usually does, especially this quickly after a complaint arises.
Spotify claims we’re blocking their access to products and updates to their app.
Let’s clear this one up right away. We’ve approved and distributed nearly 200 app updates on Spotify’s behalf, resulting in over 300 million downloaded copies of the Spotify app. The only time we have requested adjustments is when Spotify has tried to sidestep the same rules that every other app follows.
We’ve worked with Spotify frequently to help them bring their service to more devices and platforms:
- When 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.
- Spotify is deeply integrated into platforms like CarPlay, and they have access to the same app development tools and resources that any other developer has.
- We found Spotify’s claims about Apple Watch especially surprising. When Spotify submitted their Apple Watch app in September 2018, we reviewed and approved it with the same process and speed with which we would any other app. In fact, the Spotify Watch app is currently the No. 1 app in the Watch Music category.
Spotify is free to build apps for — and compete on — our products and platforms, and we hope they do.
If this thing ever comes to blows, it will be interesting to see who has some actual proof to back up their statements. If it ever lands in court, the discovery documents will be fascinating. Spotify claims that Apple has threatened to kick them out of the Apple Store. Do they have proof? Can Apple prove just how much help they have provided Spotify, or that they have legitimately offered it, as stated above. Some of these claims in both directions are easy to see, but some could be unfounded or exaggerated.
I won’t shy away from the fact that I think Spotify overplayed its hand in talking about app support, especially when Apple made a big deal about promoting them on CarPlay, even going as far as putting their logo on advertisements for the platform. If Apple really wanted to restrict them here, it had plenty of opportunity.
At the end of the day, these are side arguments. The main complaint is addressed here:
Spotify wants all the benefits of a free app without being free.
A full 84 percent of the apps in the App Store pay nothing to Apple when you download or use the app. That’s not discrimination, as Spotify claims; it’s by design:
- Apps that are free to you aren’t charged by Apple.
- Apps that earn revenue exclusively through advertising — like some of your favorite free games — aren’t charged by Apple.
- App business transactions where users sign up or purchase digital goods outside the app aren’t charged by Apple.
- Apps that sell physical goods — including ride-hailing and food delivery services, to name a few — aren’t charged by Apple.
The only contribution that Apple requires is for digital goods and services that are purchased inside the app using our secure in-app purchase system. As Spotify points out, that revenue share is 30 percent for the first year of an annual subscription — but they left out that it drops to 15 percent in the years after.
That’s not the only information Spotify left out about how their business works:
- The majority of customers use their free, ad-supported product, which makes no contribution to the App Store.
- A significant portion of Spotify’s customers come through partnerships with mobile carriers. This generates no App Store contribution, but requires Spotify to pay a similar distribution fee to retailers and carriers.
- Even now, only a tiny fraction of their subscriptions fall under Apple’s revenue-sharing model. Spotify is asking for that number to be zero.
Let’s be clear about what that means. Apple connects Spotify to our users. We provide the platform by which users download and update their app. We share critical software development tools to support Spotify’s app building. And we built a secure payment system — no small undertaking — which allows users to have faith in in-app transactions. Spotify is asking to keep all those benefits while also retaining 100 percent of the revenue.
Spotify wouldn’t be the business they are today without the App Store ecosystem, but now they’re leveraging their scale to avoid contributing to maintaining that ecosystem for the next generation of app entrepreneurs. We think that’s wrong.
Apple makes a lot of the same points that I and others who criticized Spotify brought up a couple of days ago with one in addition. Spotify and their advocates conveniently left out Apple’s recent change to lower the subscription revenue split from 30% to 15% after year one. That certainly doesn’t help Spotify’s argument.
I do think that Apple is laying it on a little thick here, but I still think they have a good point, overall. What they are doing isn’t killing Spotify by any means. They have plenty of revenue coming from plenty of other sources. They have the ability subscribe users through the App Store and get this cheaper rate if they want to.
Should Apple come off it’s 30% model for subscriptions in year one? Probably so, and I wouldn’t be surprised to see this get addressed at WWDC this summer, either. Should Spotify get a free ride on Apple’s back? Absolutely not. There is a lot of room between these two extremes. The companies would both be better off finding the sweet spot on their own, rather than it being set randomly by some government bureaucrat.
In closing, Apple says:
What does that have to do with music? A lot.
We share Spotify’s love of music and their vision of sharing it with the world. Where we differ is how you achieve that goal. Underneath the rhetoric, Spotify’s aim is to make more money off others’ work. And it’s not just the App Store that they’re trying to squeeze — it’s also artists, musicians and songwriters.
Just this week, Spotify sued music creators after a decision by the US Copyright Royalty Board required Spotify to increase its royalty payments. This isn’t just wrong, it represents a real, meaningful and damaging step backwards for the music industry.
Apple’s approach has always been to grow the pie. By creating new marketplaces, we can create more opportunities not just for our business, but for artists, creators, entrepreneurs and every “crazy one” with a big idea. That’s in our DNA, it’s the right model to grow the next big app ideas and, ultimately, it’s better for customers.
We’re proud of the work we’ve done to help Spotify build a successful business reaching hundreds of millions of music lovers, and we wish them continued success — after all, that was the whole point of creating the App Store in the first place.
Again with the backhand over Spotify’s music royalties dispute. Apple really went hard after that point, trying to make Spotify look like the bad guy. I am glad that Apple is willing to pay artists more in royalties, and I don’t blame them for promoting it. However, at the end of the day, that point really doesn’t apply to this argument with Spotify over the App Store other than to add extra sprinkles to the saltiness.
I still agree with Apple in this dispute and believe, as they do, that Spotify is just taking advantage of the current political climate to get a free ride. The only new point this statement brings to the debate is the 15% drop in the subscription rate after year one that Spotify conveniently omitted. However, even though I don’t side with Spotify or their methods here, I do think that Apple is going to have to be more flexible and move a little faster to adjust rates and keep up with other app platforms and keep developers, especially those they may compete with, happy. However, no app or service should get a free ride on anyone’s platform.
It will be interesting to see how this plays out over time. The EU is going to be more sympathetic to Spotify’s claims because of their location and because of how differently they look at anti-trust, as opposed to here in the US. That said, I think this statement makes it very clear that Apple isn’t going to back down one bit. They obviously see this as a fight, and if their current worldwide litigation with Qualcomm is any indication, Spotify had better prepare for a long and costly war.