EU lumbers towards Apple probe as Spotify cries foul over App Store's 30% cut

The European Commission is to investigate Apple over charges to music streaming services, according to the Financial Times. The probe comes after Spotify complained that Apple was exploiting its App Store to make life tougher for competing content services. The commission has decided there are grounds to investigate further, …

[Anonymous Coward]

Just a thought but if you go into Sainsburys or Tesco do you expect them to stack the selves with your branded product and expect them to do it for free ?

I'm not defending Apple here but I am defending the right to run a business and make a profit on your investment of billions of dollars.

[The Original Steve]

Nope, but I would expect them to levy the same charges on both my product and their own brand product at the point of retail without special exclusions or rebates for their own brand vs everyone else.

Of course if Tesco can buy their own brand at a lower cost than I sell them my product, then sure, they are more than welcome to charge less at retail. But if the cost price was the same as what I was selling my product at, but the Tesco stores decided to not put their standard 10% markup on their own brand product but enforce a minimum 10% margin on all other products - that would also be very unfair.

Swap out Spotify for "TalkTalk" and for Apple as "BT". BT Openreach must provide equal and open access to their network, so that retail companies can resell it. If BT Openreach charged $$$$ for access to TalkTalk Retail, but charged BT Retail only $, then that also would be very unfair and illegal.

The fact that Apple allow some large companies that don't compete with their own apps a discounted rate for the store / free pass entirely stinks to high heaven. Stifles competition and increases costs for the consumer.

[gnasher729]

"The fact that Apple allow some large companies that don't compete with their own apps a discounted rate for the store / free pass entirely stinks to high heaven. Stifles competition and increases costs for the consumer."

Where are you getting that from? Terms and conditions are _exactly_ the same for everyone. 30 percent for the purchase price of the app, 30 percent for in-app purchases, 30 percent for subscriptions in the first year, 15 percent thereafter. For everyone.

What probably will be a lot in Apple's favour is what Netflix did: They just stopped offering anything through their app. If you want to subscribe to Netflix, you do it on their website. Result: Apple gets 30% of nothing. And Apple has no problem with that whatsoever. There is no reason Spotify can't do the same. Actually, you _can_ subscribe to Spotify on their website, and Apple gets 30% of nothing for these subscriptions.

[Tabor]

@gnasher729

“Where are you getting that from?”

Actually, from TFA: Spotify argues that for instance Uber and Deliveroo don’t have to pay the 30% on in-app “purchases”. I can imagine that a lot of parties will follow this with interest.

[gnasher729]

Re: @gnasher729

"Actually, from TFA: Spotify argues that for instance Uber and Deliveroo don’t have to pay the 30% on in-app “purchases”. I can imagine that a lot of parties will follow this with interest."

If that is what Spotify argues, then they are dishonest:

In-app purchases are for things that end up on your iPhone or iPad, like music, videos, gold coins for your latest game, and so on. In-app purchases need not and actually MUST NOT be used for things outside your phone, like purchasing from Amazon, eBay or your supermarket, paying for transportation, booking hotels and so on.

And Uber and Deliveroo are in the category that need not and MUST NOT use in-app purchases for buying transport or food.

[The Dogs Meevonks]

A friend of mine once worked for a company that packaged meats for supermarkets.

On one day they witnessed that sliced ham was being packaged with 8 slices for a certain large chain of supermarkets that rhymes with Fresco... the packaging was branded either as normal or value.

Later that morning, when that particular run was complete... the packaging was changed from the normal/value brand to the 'Finest' brand packaging and the EXACT SAME SLICED HAM was then packed up but this time with just 4 slices per pack.

Now if you've been to those supermarkets... you'll probably know that the cost one is twice the price of the other for half the contents.

Now these meat packaging firms supply multiple supermarkets and are likely using the exact same product and it's only the packaging & number of slices that changes.

Now this isn't that much of an issue because people can choose 'where' they shop and what products they buy.

If you buy anything from Apples App store... you don't have that choice. you are locked into a walled garden subject to the whims and greed of that company.

So 'if' Apple 'are' being selective about who pays those 'taxes' based on if they are competing directly with Apple or not... Then that is the very definition of anti competitive practices. Now that may be fine and dandy in some parts of the US where greed is the only motivation and capitalism has been taken to such an extreme that it's just as evil as they perceive communism to be... But for the rest of the civilised world... Monopolies and captive markets will 'eventually' be dealt with (how effective that dealing with them is a whole different debate)

[MiguelC]

That and putting their own product on bulk sale under a named brand as they are effectively the same. You just have to know which brands sell them their brand (and if it is the same quality as their branded product, something that's quite often not the case) to save a pretty penny

[Anonymous Coward]

So what's your remedy?

Of course if Tesco can buy their own brand at a lower cost than I sell them my product, then sure, they are more than welcome to charge less at retail.

So you are assuming that Apple's costs to run Apple Music are the same as Spotify's? Would you be happier if Apple Music had a list price of $6.99, and then added an extra $3 when you paid to match Spotify's price? I have a feeling you'd then be calling them out for false advertising by indicating a lower price than what they actually charge.

What you are really saying is that Apple should give Spotify free shelf space - charge them nothing to put their app in the store, charge them nothing to process monthly payments for their service, and let them free ride on the platform Apple spent billions to create. Let me know when you find a brick and mortar retail store that will let ANYONE have shelf space, and not charge any markup for selling their products.

[Anonymous Coward]

Sure but, it's still sleazy in the same way Kroger's eliminates hundreds of quality brands with their generic one.

Considering the licensing costs, it's entirely possible that Apple could make just 20 cents per dollar song. If you can only make 0.2 dollars on a 1.0 dollar song, a 30% added fee takes you to 1.04 dollars and you haven't made anything yet. I can see how this is considered unfair, especially when you have counter examples (unless they start charging Uber 30% in the future... doubt it).

Eventually every company is going to host thier own software.

[katrinab]

iTunes take 30 cents for a 99 cent song. That is for hosting and distribution costs as well as payment handling. They charge Spotify 30% just for the payment handling.

For comparison, iZettle, owned by Paypal, charge 1.75% for payment handling, but Spotify are not allowed, under App Store rules to find a cheaper supplier.

[Kristian Walsh]

The problem with your analogy is that if I see that the product I want is too expensive in Tesco (because perhaps Tesco has an own-brand that it wants to sell instead), I can go and buy it in Asda, Lidl, Morrisons, etc. That way, the businesses compete on offering the best product to the consumer, and the one that does that best thrives.

Businesses indeed have the right to make a profit on their investments. But monopolies are subject to a few conditions on that, particularly about abusing their control of one market (e.g., iOS app distribution) to undermine competitors in another (e.g., Music streaming services).

Apple is the monopoly distributor of applications and services on iOS. Spotify is right to highlight the arbitrary distinction Apple has made between apps that take your credit-card to pay for services you book with the app (Uber) and apps that take your credit-cart to pay for services you consume via the app (Spotify). Also, the rules seem to differ for video: streaming services like Netflix don't pay Apple a cut on subscriptions, so why are music-streaming services singled out?

[Anonymous Coward]

The problem with your analogy is that if I see that the product I want is too expensive in Tesco (because perhaps Tesco has an own-brand that it wants to sell instead), I can go and buy it in Asda, Lidl, Morrisons, etc. That way, the businesses compete on offering the best product to the consumer, and the one that does that best thrives.

Well you can, there is nothing stopping you sourcing tracks from elsewhere and loading your phone up with them. The real problem here is streaming, you own bugger all with it and they want control, not you.

[eldakka]

Well you can, there is nothing stopping you sourcing tracks from elsewhere and loading your phone up with them.

Sure, but in the analogy you are responding to, rather than just going to a different store (Asda, Lidl, Morrisons,), the comparison would be spending several hours be going to the farm, picking up the live chicken, taking it home and slaughtering it yourself, draining, plucking and cleaning it, all in preparation for tonights dinner.

[Anonymous Coward]

Apple is not a "monopoly" as the only iOS distributor

By your reckoning there are millions of monopolies. I can only buy Kentucky Fried Chicken from Yum! brands, I can only buy Special K from Kellogg's, and so on. Do you want Yum! brands to be forced to license KFC's "secret formula" so one can get it everywhere instead of only at KFC restaurants?

If Apple was the only smartphone provider, or had a dominant market share then you'd have a point. They have 10-15% of worldwide share and don't have even 50% share in any country. That's not a monopoly, you have dozens of other smartphone brands you can choose from. Some run Android with Google's stuff, others run Android stripped of Google's stuff in favor of other stuff (i.e. mostly Chinese brands) and you can install your own 'bare' Android if you wish on many of those phones. You have the kind of freedom you are looking for on the dominant smartphone platform, which is the only one that would be affected by monopoly concerns if any are.

Should Sony be forced to let others make and sell PS4 consoles? They have a "monopoly" in them, and get to control what games are permitted on the platform. Should Microsoft be forced to put competing Solitaire programs on Windows, since bundling their own obviously reduces sales of Solitaire software.

[NotARobotGod]

Do Apple charge 30% to make Amazon purcahses on the Amazon app? Do they charge Uber 30% to hail a ride?

No

Do they let certain companies use their own back end payment systems?

Yes

Do they let spotify/netflix etc. do the same?

No

Ever wondered why Apple let you buy anything on Amazon on the App apart from digital media? Hmmm I wonder why *cough*iTunes*cough*

Sent From My iPhone.

[katrinab]

"Do Apple charge 30% to make Amazon purcahses on the Amazon app? "

Yes to buy books from the Kindle Store, hence you can't do that, you get directed to the website to complete the purchase.

[NotARobotGod]

You just made a point to prove my point? You *can't* do that becasue Apple say so. Not becasue Amazon don't want to.

If you sell a Kindle book for £10 - you can't expect to absorb 30%. And when the iBook is availble for £10 - you can't execpt Amazon to add 30% on.

Apple let you buy a physical book without issue, no 30% there, yet, if you want a Amazon/Kindle digital book. Bang. 30% fee please. Why? iBooks, iTunes, Apple Music.

This is an iMonopoly app store.

[David Nash]

You can't buy digital media from the Amazon app on IOS?

Being an Android user I didn't know that. Astounding.

[gnasher729]

"Do they let certain companies use their own back end payment systems?

Yes

Do they let spotify/netflix etc. do the same?

No"

The answer to the last question is: Absolutely yes.

Spotify can and does sell through their own website, and with their own payment processing.

Spotify could also sell CDs, merchandise, show tickets, through their app, and they not only COULD but they would HAVE TO do this without using in-app purchases, using their own payment system, taking 100% of what the user pays.

The exception, same for everyone in the world, is purchases for things that stay on the iPhone. Spotify can just do exactly the same as Netflix, which allows subscriptions through their website exclusively, with not a penny going to Apple.

There's probably a million iOS developers who read and understood Apple's T's and C's and who _know_ that it is Spotify who wants to be treated differently from everyone else.

[DontFeedTheTrolls]

Not a comparable analogy, Apple are not stacking the shelves for Spotify. Apple are running a protection racket, either you pay through our payment provider or you can't run your service. It is a pure financial transaction.

Now, if you were to shop in Sainsburys and had to pay 30% to Tesco because your "bag for life" came from Tesco, then we have a comparison.

[katrinab]

Or, you can pay for your shopping at Sainsburys using a Tesco Bank credit card and there are no additional charges for doing so.

[BebopWeBop]

Its a matter of monopolies and exploiting a monopolistic position to gain a competitive advantage over your competitors - see Googles woes over promoting their in house services in searches over competitors. Apple also appears to treat non-competitors (Uber for example) differently.

[Anonymous Coward]

Hasn't Apple some financial interest in Uber?

[Anonymous Coward]

No they have a financial interest in Didi Chuxing, the dominant Chinese ride share company. They are in fact a competitor of Uber's to some degree.

[Anonymous Coward]

I read somewhere that Didi Chuxing bought the Uber Chinese operation and has a stake in Uber itself. If so, Apple has an indirect financial interest in Uber.

[Anonymous Coward]

Well they sort of combined, Uber got 20% of Didi in exchange for their Chinese operations (paying them to quit competing it sounds like) and Didi agreed to make a $1 billion investment in Uber. Apple owns about 4% of Didi and the $1 billion of Uber Didi owns is somewhere between 1-2%, so Apple owns less than 0.1% of Uber.

[DavCrav]

"I'm not defending Apple here"

Well, you are.

"but I am defending the right to run a business and make a profit on your investment of billions of dollars."

Should car manufacturers take a slice of all profits on drive-throughs? Lorry manufacturers take a cut of the value of goods delivered on their trucks? Apple has injected itself as a middleman into a transaction between Spotify and its customer base, demanding a toll. It's standard rentier capitalism, and regulations are always necessary to stop it.

[codejunky]

@DavCrav

"Should car manufacturers take a slice of all profits on drive-throughs? Lorry manufacturers take a cut of the value of goods delivered on their trucks?"

Why not? Lets see that applied, and of course others dont charge that way and so people wont buy that and will go elsewhere. Do the same with apps, there is android. There were other options too with M$.

In fact M$ didnt take off due to a lack of apps, it wasnt appealing to developers. If Apple price themselves out then they will lose the app community. Otherwise people are willing to pay.

The only real problem seems to be applying the pricing against different types of apps differently.

[Anonymous Coward]

Re: @DavCrav

>> If Apple price themselves out then they will lose the app community.

I think that is rather the point - Apple want to price Spotify out and get users to switch to Apple music. Apple are cutting into 30% of Spotify's revenue.

>> Why not?

They are adding no value. If the operate as a cartel(all car and lorry manufacturers) or gatekeepers (Apple app store + mandatory payment provider), it harms market competition.

Apple are basically charging Spotify 30% as pizzo..

[codejunky]

Re: @DavCrav

@AC

"I think that is rather the point - Apple want to price Spotify out and get users to switch to Apple music. Apple are cutting into 30% of Spotify's revenue."

No. The point is Apple can price themselves out of apps. If they choose to shaft developers then developers dont need to develop for Apple. As I said M$ didnt succeed in mobile because nobody would develop apps for it. The only real problem is Apple applying different charges to be protectionist about their own services.

"They are adding no value"

That is wrong. They are providing the very platform and vast numbers of users of the IPhone. If they provide no value then people wouldnt pay it. There is an alternative.

" If the operate as a cartel(all car and lorry manufacturers) or gatekeepers (Apple app store + mandatory payment provider), it harms market competition."

Apple itself doesnt have the capacity to act as a cartel. They have competition. Very successful competition. Which was the point with his car and lorry analogy that I have no problem with one of them trying to do that, they will be undercut and removed from business thanks to the market.

"Apple are basically charging Spotify 30% as pizzo.."

That they charge some apps a premium sounds to be the problem. It sounds as though it should be levelled against all developed apps. But thats it. Apple do provide value. Their overpriced handsets for a restrictive app environment must provide value or people would ditch it for the cheaper and more open Android. Even if the value is just to say 'I have an IPhone'. And if the value provided is a 30% charge or more then people will pay it. Otherwise they wont.

[Anonymous Coward]

It's been a long time coming

This has been a long time coming.

They charge 30% for being on their platform. It's a complete rip off.

Last time I checked they also have a 'most favoured nation' clause which means you can't charge lower prices anywhere else.

So if you charged desktop users £5.99 a month, you would have to charge the same to Apple fanbois, but Apple get their 30% cut.

There is no competition when it comes to the wall garden app stores.

I can't believe it's taken the EU so long to investigate.

[gnasher729]

Re: It's been a long time coming

"Last time I checked they also have a 'most favoured nation' clause which means you can't charge lower prices anywhere else."

You are confusing Apple and Amazon.

[Anonymous Coward]

Re: It's been a long time coming

No, Apple have the same thing, unless they have changed it in recent years.

I remember articles about why all the big newspapers were removing their apps from the app store.

[Anonymous Coward]

Re: It's been a long time coming

They don't have any MFN clause. Spotify is free to charge $9.99 without paying the 30% to Apple if their customers pay on Spotify's web site instead of via the iOS app. If there was a MFN clause Apple would tell them their customers could not be allowed to renew through the web site unless it also charged 30%.

[Anonymous Coward]

Re: It's been a long time coming

No, that's not the point. They wouldn't have to charge 30% on the website, they just wouldn't be allowed to charge a lower price.

If you were charged $9.99 on apple and $6.99 on the web people would cotton on to the fact that Apple are rip off merchants.

[gnasher729]

Re: It's been a long time coming

"If you were charged $9.99 on apple and $6.99 on the web people would cotton on to the fact that Apple are rip off merchants."

People would cotton on to the fact that the same product is cheaper on the website. Worked for a company that sold both ways, with the App Store prices quite constant, and special offers on the website, most of the time cheaper than in the app.

Apple was absolutely fine with that. No problem at all.

[gnasher729]

Re: It's been a long time coming

"You are confusing Apple and Amazon."

Shows how this site works. OP clearly attributed some Amazon sales practice to Apple. He was corrected. And that perfectly fine correction gets one thumb up and five thumbs down.

[John Robson]

Re: It's been a long time coming

Most favoured nation...

So do we have to sell two different things - an Apple subscription, available through our website or through the iOS store - you could limit it to one iOS device only...

Or an "any device" subscription, only available through the website.

At the website you can make a free upgrade from one to the other.

[Patched Out]

Can anyone tell me what this sentence is supposed to say?

"Not using Apple's payment service to dodge the charge limits the ways Spotify can contact its customers."

[Alan D]

Re: Can anyone tell me what this sentence is supposed to say?

Yes, I had to read it twice too, but my take on it was: Spotify could avoid Apple's charges by using other payment services and platofrms, but that limits its ability to sell to iPhone users who exclusively use Apple's AppStore.

[gnasher729]

Re: Can anyone tell me what this sentence is supposed to say?

"Yes, I had to read it twice too, but my take on it was: Spotify could avoid Apple's charges by using other payment services and platofrms, but that limits its ability to sell to iPhone users who exclusively use Apple's AppStore."

You mean they can just do the exact same thing that Netflix is doing?

[devTrail]

Re: Can anyone tell me what this sentence is supposed to say?

I don't know anything about iOS or other apple platform, but I guess it means that they could develop a browser based service instead of an app based service, but this would require to let the users log in again every time they clean their cookies.

[Anonymous Coward]

Apple Fanbois here

I love Apple products, but i REALLY hate how i have to go onto the amazon website to buy another Kindle book, it changed when Apple introduced the iBook app or whatever its called and forced the Kindle update, tried it didn't like it.

It went from a smooth transaction to get another book to a kludge, I don't get mad with Amazon about it, its Apple that annoys me.

Apple does need investigating because some of its practices are anti-competitive, that doesn't usually affect me liking their products

[Howard Hanek]

The Walrus and the Carpenter

As Lewis Carol expressed it in Through the Looking Glass....

I like the Walrus best," said Alice, "because you see he was a little sorry for the poor oysters."

[Steve Todd]

I have Spotify running under iOS and pay zilch to Apple for the privilege

The restriction is that, if you sell your subscriptions through the App then Apple get their 30% cut. Otherwise the likes of Spotify can publish their apps for free and collect the subs via their own website. Not much of a limitation.

[mark l 2]

I understand that Apple have invested in the software and hardware behind the app store, but taking a 30% cut is quite an eye watering amount to be skimming off for every transaction for doing very little other than processing a card payment which will cost them a few pence.

Even Ebay only charge 10% fees for selling through their app.

FYI I believe Google charge 30% as well, but I guess the difference is that you aren't required to take payments via Google pay if your putting your app on the Play store.