Spotify, the largest streaming music player in the world with 100 million premium paid subscribers, is beefing with Apple, which has aspirations of taking the throne. If Spotify is to be unseated, however, it will not be without a fight. Spotify is very much being proactive in its battle with Apple, and has lodged a complaint with the European Union over Apple's business practices. The EU has decided to investigate.
The complaint has to do with Apple's App Store policies, with Spotify alleging that Apple is unfairly and illegally "tilting the playing field to disadvantage competitors." Spotify's main issue is that Apple charges digital content providers a 30 percent royalty for using its payment system for subscriptions sold in the App Store.
That royalty rate applies to subscription services like Spotify, but not to apps like Uber. According to Spotify, this would force the company's hand in raising its rates to customers.
"Apple requires that Spotify and other digital services pay a 30 percent 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," Spotify explains.
That is not Spotify's only complaint. The streaming music giant also claims Apple imposes certain technical limitations that it says do not exist for Apple's own streaming music service.
"For example, they limit our communication with our customers—including our outreach beyond the app. In some cases, we aren’t even allowed to send emails to our customers who use Apple. Apple also routinely blocks our experience-enhancing upgrades. Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch," Spotify says.
Apple, of course, is calling nonsense on Spotify's claims. Regarding the 30 percent royalty, Apple says that's only for the first year of an annual subscription, and that Spotify conveniently leaves out that it drops to 15 percent in the years after.
"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 said in March.
Which side is in the right and which is in the wrong? That depends on who you ask. However, the EU is planning to launch a formal antitrust investigation into Apple, so we may have some answers soon, at least from the European regulatory body's perspective.
It's not clear how long the investigation will take, though if the EU deems there is foul play on Apple's part, it could force the company to alter its business practices and levy a hefty fine. The EU has not shied away from hitting major tech companies with big fines in the past, having most recently smacked Google with a $1.9 billion penalty for antitrust violations related to AdSense.