Streaming mad: EC charges Apple with abuse of dominance, distorting competition in Spotify case

The European Commission today said it believes Apple has abused its absolute control of app distribution on iOS, resulting in the disadvantage of third-party streaming services that compete with Apple Music. In its Statement of Objections, the Commission took umbrage with Apple’s strict (and non-negotiable) terms that all …

[Anonymous Coward]

"we lowered the commission rate for small developers to 15 per cent"

"Because that's not where we make real money from - we kept the 30% on big ones to ensure the money keep rolling in"

Classical economic theory would have said you charge large customers less than small ones - but in Apple's Alternative Reality (AAR...) everything works to make the Apple bigger and bigger - I guess Spotify can't care less about how much Apple charges Joe's App sold to a couple of relatives.

[iron]

Re: "we lowered the commission rate for small developers to 15 per cent"

The article states that Spotify pay 15% so what was your point?

[Anonymous Coward]

Re: "we lowered the commission rate for small developers to 15 per cent"

I never stated how much Spotify pays, because I don't know - Apple said it - and if it pays only the 15% it's because in-app sales generates less than a million only:

https://www.theregister.com/2020/11/18/apple_to_halve_commission_for_small_devs/

Still it's a roadblock to generate more revenues from in-app purchases because then Apple will apply its full 30% tax. It's more that the US government asks to businesses, and on revenues, not profits.

It still stand that Apple asks an higher tax to those that bring them more money - which is was I was saying - a win-win approach (for Apple only, of course).

But probably the party is over.

[Anonymous Coward]

Re: "we lowered the commission rate for small developers to 15 per cent"

@LDS

Do you actually use Spotify? I have just checked and I have used and paid for it since 11 02 2009.

So what in app purchases are we talking about? Please tell.

Anyone can set up an account on the Spotify website, download the app and login. I have paid via Paypal since the beginning.

Frankly, I would dump Spotify at the drop of a hat if I could transfer my playlists without having to enter my passwords. Deezer would be my favourite.

And whilst you are defending Spotify, why not ask them how come their streaming payments to artists are pretty much the lowest of the already low?

Oh, and ask them about how they used pirated music when they first started? And why they use major drm.

This case is all about breaking the contract that they willingly signed up for, and getting cash. Have you looked at their accounts? They need money badly.

And they have just put up their charges for a lot of accounts. Wonder if the artists will see any of it? Depends if you are Taylor Swift or someone with equal clout I suppose...

[Anonymous Coward]

"Anyone can set up an account on the Spotify website"

Yes, you can also buy a different phone, order a CD on Amazon or not use Spotify at all. That's not what antitrust agencies are interested in.

The problem is Apple use its dominant position to make competitor offerings less appealing than its own, and that can break antitrust regulations.

[dave 93]

Re: "Anyone can set up an account on the Spotify website"

How much does it cost to set up an Apple Music subscription on the Spotify website?

[Anonymous Coward]

Re: "we lowered the commission rate for small developers to 15 per cent"

"we lowered the commission rate for small developers to 15 per cent"

^{to forestall regulators and avoid the risk of being forced to lower it even more.}

[big_D]

Re: "we lowered the commission rate for small developers to 15 per cent"

Yes, normally economies of scale mean the more you purchase / the more you use a service, the less you pay per unit / per transaction.

[Charlie Clark]

Re: "we lowered the commission rate for small developers to 15 per cent"

You left out …in a competitive environment. The app stores show the risks inherent in any vertical integration.

[Anonymous Coward]

Nice article ...... pity about reality changing the actual result !!!

$27bn will buy a small country full of lawyers ..... :)

Apple will fight this through the courts, with pocket change, until they win.

Business as usual for Apple.

:)

[jmch]

Re: Nice article ...... pity about reality changing the actual result !!!

"Apple will fight this through the courts, with pocket change, until they win."

except that however much they pay their lawyers, thy are likely to lose, because the way they operate is precisely as described by the commission report - an abuse of monopoly status which results in consumers paying more than they otherwise would in an open market.

In the end it's highly unlikely that a fine anywhere near that magnitude will be levied, but more likely Apple will be forced to loosen their grip on the App Store (for EU customers at least)

[John Robson]

Re: Nice article ...... pity about reality changing the actual result !!!

Except that you can use Spotify on iOS without paying Apple anything for that Spotify subscription...

[IGotOut]

Re: Nice article ...... pity about reality changing the actual result !!!

I take it you got to the subtitle and then came straight to the comments.

[Anonymous Coward]

Re: Nice article ...... pity about reality changing the actual result !!!

@IGotout

Sorry mate but John Robson is totally right. Maybe you should have used Spotify the way he suggests. I did, on 11/02/.2009. Never paid a penny to Apple.

[Richard 12]

As it says in TFA and TFCR

Spotify are not permitted to tell you this in the app.

They cannot have a link to their own website subscription page.

This is a sharp practice by Apple, and it is a clear contravention of the regulation.

The only question left is what the consequences will be for Apple, and how much of their money pit they deem it worth giving to lawyers to argue the consequences.

[John Robson]

Re: As it says in TFA and TFCR

But it's well advertised elsewhere.

You know that Spotify costs X per month, because that's what all their ads say. Then you see it at x+30%, do you not look at why?

I'd half suggest withdrawing the payment option at all... then it's really obvious that you have to go elsewhere.

[MOV r0,r0]

Re: Nice article ...... pity about reality changing the actual result !!!

Business as usual is for Apple to make some cosmetic changes and pay a reduced fine, that way they can keep charging profit while the EU Commission still have something to fine again in future. They'll call it "compromise".

Apple have a very nice set of books, the EU has a massive debt pile while emerging late from a pandemic lockdown having lost their second biggest donor country - can't kill the host!

[Anonymous Coward]

There is a few hundred million IOS users

who don't give a f*** about streaming music.

I'm one of those who prefer music delivered in the old way and can't quite understand why you are suckered into paying for the stream AND the network bandwidth costs to deliver it to you. The artists get a pittance and the network operators get a lot of traffic.

But naturally, this service needs you to be connected to the Internet. I can go out for a walk from home and within 10 minutes I'm in a 'not spot'. Not even 3G. 4G and 5G are pure pipedreams and this is less than 50 miles from Westminster.

I guess I am really getting old but I can't help but think that this streaming c**p is all a con.

[Danny 14]

Re: There is a few hundred million IOS users

you are in the minority now. My grandchildren use spotify, they rarely listen to the same song twice. So whilst I will listen to albums over and over, they do not.

[jmch]

Re: There is a few hundred million IOS users

"My grandchildren use spotify, they rarely listen to the same song twice"

Be thankful. My children use spotify, and they listen to the same song an/or audiobook over and over and over and over until it either drives me nuts or I can't get it out of my head (or first (b) then (a) )

[John Robson]

Re: There is a few hundred million IOS users

Streaming is only one aspect of Spotify - I have various music downloaded from them, which I can listen to offline (since I don't use mobile data when I can avoid it).

[Anonymous Coward]

Re: There is a few hundred million IOS users

Calm down, Boomer. You'll give yourself an aneurysm.

[iron]

The Stripe analogy that keeps being made in these stories is false. All Stripe provide is payment processing, app stores provide:

* cloud storage for your app binaries

* a CDN so your users get a fast install experience anywhere in the world

* automatic updates for your users

* the review process so users know your app is safe to install (theoretically)

* placement in the store catalog

* promotional actiities (if your app is selected for such)

A much more apt analogy would be a retail store who expect at least 50% from the purchase price. Suddenly Apple, Google, Steam, etc don't look so bad huh.

[TimMaher]

Except....

I am allowed to sell my product through any retail store that wants to re-sell it and I don’t have to pay them an annual fee to use their stuff.

You are right about the effort required to make sure that product is in place and marketed but so do retailers.

I’m not convinced about the 50% bit either.

Needs more work.

[Ace2]

Re: Except....

That’s right, you are, but you’re not going to get anyway with walking into any random store and demanding that they stock your merchandise immediately. Their store, their terms, right?

[Anonymous Coward]

"A much more apt analogy would be a retail store"

A retail store buys the goods from you in advance and then try to resell them. So the analogy doesn't work at all.

It's OK for me if Apple buys from me a million apps licenses, and then try to sell them at 30-50% more than they paid them to me.

Given the average app size, probably the storage needed is just like my NAS. All the other activities any company large enough can provide itself, at a far cheaper price. Moreover companies selling music like Spotify don't really need to promote what it sell itself.

Even if you are a retail store and sell - for example - iPhones, you don't really need to promote them much yourself.

[Anonymous Coward]

Couple points you missed (or dodged)

Apple's cut is WAY over its costs for operating the App store. It also is the sole dictator of which apps get and stay listed, and has made sure that not third party app store with different or better terms can operate on their device platform.

If Apple was remotely transparent about its costs, and pinned the profit margin at something like 20% or even 25%(which is ridiculous) they might have staved this off a bit longer, but instead, they want 15-30% of total revenue, off the top, for what is probably costing them less than 1% out of that 15-30% and the remaining 14-29% is mountains of profit. Even at costs as high as 5% out of the 15% tier, you are looking at 300% returns, which is insane.

If the app developers, who shoulder the burden of App development, marketing, and support, were rolling in cash, that would still be an extortionate cut. But many small app developers are scraping for pennies and trying to live off addware returns, (which Apple may also get a cut of).

Sadly the US is once again abdicating leadership on anti-trust enforcement to the EU, AGAIN. I expect that they will also do a better job of it then we will over here.

[Ace2]

Re: Couple points you missed (or dodged)

Since when is any non-utility restricted to charging only what covers its costs?

[Anonymous Coward]

Re: Couple points you missed (or dodged)

Rules are different when you can abuse a dominant position....

[John Brown (no body)]

"All Stripe provide is payment processing, app stores provide:"

Doesn't matter who provides what. Apple still take a percentage of the app sales through their store. Why should they get a cut of the in-app payments, for which they provide nothing useful? Going back to Spotify, whatever their failings or alleged "pirate" activities in the past, why should Apple take a cut of peoples ongoing costs when the streaming or download data never touches the Apple servers?

[Slipoch]

Yes, however the issue is they are forced to pay for these services even if all they want to use is a payment system.

Automatic updates? sorry that's not a separate area, also as a small provider Apple wanted to up the cost to us based on how many updates we did.

Review process - You mean the one that missed all the ripped-off apps? or the virii infected ones? or just when they supplied that code to the Russian and Chinese governments?

Placement in store catalog - yep that's how a store works, they put product on shelves and sell it at a marked up price. In this case the seller isn't allowed to sell it to any competitor for a lower price. (anti-competitive)

Promotional activites - yup like any brick and mortar store, although if it is without your payment/permission then it cannot be used as a way to justify a higher cut or charging you more.

Also FYI Retail stores typically make ~5-15% on games (depending, sometimes they do bulk deals like epic does to get a lower overall price), consoles are lower margin. Why do you think most gaming stores started selling plushies etc. even prior to steam et. al.?

In fact in the store I worked for the vast majority of funding actually came through being paid to advertise a launch or the front window display.

[DS999]

There has to be a way to balance this

On the one hand, taking a 30% cut of a music subscription every month forever is a pretty big price, reaching into the hundreds of dollars after a few years. On the other hand, if Spotify distributes their app for free and Apple gets nothing from the subscription, then they get nothing from them to defray the cost of providing downloads/updates for Spotify's app or the cost of building/improving the platform which made Spotify's iOS app possible.

Is there no middle ground between "take a big cut every month forever" or "give them a total free ride"? I'm sure some will suggest a lower rate would be appropriate, but Spotify won't accept that. They want zero, hence the comparison with Apple's music streaming app.

That's the problem with the modern app economy. Everything is a free download, with subscriptions, in-app purchases, or advertising (sometimes all three!) but if the platform is cut out of all three they're just basically providing free distribution. Bet all the companies back in the brick and mortar days of software would have loved being able to force retailers to provide them shelf space and sales processing for free. There's a reason the "freemium" model didn't exist until app stores made it possible.

I wonder what would happen if Apple stopped allowing "free" apps that have a subscription or in-app component, and required they charge something up front?

[Tomato42]

Re: There has to be a way to balance this

There is middle ground, but the cost to Apple of distributing an the keeping the app updated is more like 1% or a fraction of percent of the in-app subscriptions, for an app like Spotify.

And that's already on top of the huge margins they have on the sold hardware.

> There's a reason the "freemium" model didn't exist

yes, 'cause we called it "shareware"

[Anonymous Coward]

"they get nothing from them to defray the cost of providing downloads/updates"

So let users download/update Spotify from somewhere else - it's Apple itself that doesn't let user get apps from anywhere else but its own store. I'm sure Spotify can provide downloads/updates from its own servers.

[DS999]

Re: "they get nothing from them to defray the cost of providing downloads/updates"

That's great, before long we'll have dozens of app stores that have one or two apps each as all the big players will want to run their own rather than trust someone else. I'm sure there's no downside to this at all lol! So much for Apple being able to enforce any sort of privacy for its customers.

And it still allows Spotify et al a free ride on the iOS platform Apple has spend untold billions of dollars developing.

[Anonymous Coward]

Re: "they get nothing from them to defray the cost of providing downloads/updates"

People were able to install software before the "Stores", you know? You don't really need a whole store - just a link to download and install an app from. You can still ask the apps to be signed by a reputable service to counter bad ones.

[doublelayer]

Re: "they get nothing from them to defray the cost of providing downloads/updates"

"And it still allows Spotify et al a free ride on the iOS platform Apple has spend untold billions of dollars developing."

No it doesn't. People paid for that, by buying IOS devices. In fact, Spotify has increased the value of IOS by being available on it, which means people who want Spotify won't leave. The developers of apps don't care about and don't benefit from a lot of the stuff Apple writes for IOS. The users do, and the users are the ones who pay the money for it.

[John Brown (no body)]

Re: There has to be a way to balance this

"There's a reason the "freemium" model didn't exist until app stores made it possible."

PD and Shareware (like "freemium", I guess, since many Shareware titles provides extras like new features or printed documentation if/when you paid) pre-dates the app stores or even easy access to getting on line at all. Most people who had a computer at home where aware of PD and Shareware back in the day from both magazine cover disks and the multi-page adverts in the mags.

[John Robson]

Not sure this is going to hold water....

Because you can pay for Spotify outside the Apple system they might find it hard to demonstrate serious issues here.

You can always require users of an app be logged in, and charge for the login from elsewhere.

[MiguelC]

Re: Not sure this is going to hold water....

Except Apple doesn't allow apps using its store to publicise that payment can be made outside of Apple Pay (which, in Spotify's case, makes it cheaper than subscribing through the app store, because they pass the 30% overhead cost to their customers)

[John Robson]

Re: Not sure this is going to hold water....

Can't publicise it *inside* the app... it's well known outside though.

[Diogenes]

Re: Not sure this is going to hold water....

But you cannot side load Spotify, or any other app, onto an iOS device, even if you can pay for it outside the store. If you could sideload it, then it costs Apple nothing and Apple is not justified in asking for any money.

Apple could offer a 'freemium' model itself. Choose to pay nothing upfront for a free listing, then you fork over n% of App revenue, or you can choose to pay for listing/hosting on a sliding scale per download.

[dave 93]

Re: Not sure this is going to hold water....

There are lots of free web browsers on iOS that can be used to access Spotify, etc. without having to share revenue with Apple...

[Ace2]

“Monopoly” is a stretch

Monopoly of what? iPhone users? Does Ford have a monopoly over Ford drivers?

People can try to force Apple to allow third-party apps, but you can count me out. I want nothing to do with the malware horrorshow that is the Android ecosystem.

[ExampleOne]

Re: “Monopoly” is a stretch

From the article:

The Commission noted that Apple users tend to be loyal to the platform, and seldom switch to competing operating systems, resulting in developers having limited (if any) leverage in disputes.

This would suggest the Commission are leaning towards defining the market as iPhone users, and not smartphone users. If the courts agree, Apple are dead in the water as far as defence is concerned.

[doublelayer]

Re: “Monopoly” is a stretch

"Monopoly of what? iPhone users?"

Yes, that's right.

"Does Ford have a monopoly over Ford drivers?"

Excellent parallel. No, they don't. If you buy a Ford car, you can install equipment made by other manufacturers. You can put any brand of tires on it as long as they fit. You can put anything you want into the car. They don't have exclusivity deals by which they charge people for the right to use items with the car.

[Kevin Johnston]

"At the core of this case is Spotify’s demand they should be able to advertise alternative deals on their iOS app, a practice that no store in the world allows"

So when you say 'No Store', you mean the 2 (OK, 3 with Microsoft) stores which claw money into their coffers with an iron fist by forcing all payments to be made through the store with a cut for the house, kind of a 'nice app, it would be a shame if people couldn't download it any more'. I also liked the bit about how Apple made Spotify a giant of a company implying that Spotify now owed Apple a pay-back

[Anonymous Coward]

The fact there's a cartel doesn't make its action legal. And probably Apple just admitted it's part of a cartel.

[DS999]

No, no store allows it

Would Walmart allow the product packaging to say "order this online at Amazon instead of buying it here and save 30%!" Of course not.

[Richard 12]

Re: No, no store allows it

Walmart don't force you to hand over your design and let them be the sole manufacturing, assembly, distribution, store and payment processor for your product.

Instead, you sell your already-manufactured and assembled product to Walmart, and ship it to the place(s) agreed.

If Walmart want exclusivity, you negotiate that with them and they pay you more for that privilege.

[John Brown (no body)]

Re: No, no store allows it

Yes, supermarkets have quite a bit of power over their suppliers. Product placement for example. Is your product at eye level in a high footfall area of the store? Or is it on the bottom shelf, "hidden" in the similar product section, eg at the end furthest from the most common direction of travel? Likewise, the BOGOF offers can shift 10x more product and it's common for the supermarkets to demand that they get the product at half price or not run the offer.

[DS999]

Re: No, no store allows it

Not only that, but supermarkets will usually give preferential placement to their own brand "generic" products, making people who want the "real" product walk past the store brand. When a non-generic has prime location, like an aisle endcap or a display island on its own, they have paid for it. Prime placement is never given away free, even to major players like Coke or Budweiser.

If you invent a new category, like the keto products craze of late, the grocery stores chains are watching how many they sell and will put out their own competing products if the new category is successful. Often with the same flavors, ingredients, even the picture on the package may look similar. Look at the clone/generic products at Walmart, or Lowes, or any other major retail chain if you think it is just supermarkets.

People complain that Apple sees someone have success with an app like Spotify and then "copy" it with their own app (as if music streaming was some sort of amazing invention that should have been patentable or something) but such copying/theft is 100x more blatant in the brick and mortar retail industry. And the cut of the sales price they take is often a lot higher than 30%, too.

Granted, they don't continue to take a cut after sale (like "buying" movies to play on a smart TV) but if someone wanted shelf space in Walmart for a product that would be offered for free with money made after the sale none of which Walmart would see, they'd get laughed out of the place so loudly it would still be ringing their in great grandchildren's ears a century from now.

If "selling products on Apple's platform" is an Apple "monopoly" in some people's minds, then how "selling products inside of Walmart stores / on Walmart's web site" not also a Walmart "monopoly"? Should they be required to offer some space in their stores for third party stores that take less of a cut than Walmart does? Maybe Coca Cola wants to sell its products in Walmart with their own little display and checkout area so they can collect 100% of the revenue? That's basically what Epic is demanding by wanting to force Apple to allow alternate app stores.

[doublelayer]

Re: No, no store allows it

"People complain that Apple sees someone have success with an app like Spotify and then "copy" it with their own app (as if music streaming was some sort of amazing invention that should have been patentable or something)"

I don't, at least. I complain that Apple used a monopoly power to advantage their service over competitors. It's not at all innovative and they can copy at will, but using such tactics to advantage it is illegal for a reason.

"If "selling products on Apple's platform" is an Apple "monopoly" in some people's minds, then how "selling products inside of Walmart stores / on Walmart's web site" not also a Walmart "monopoly"?"

Not yet. At the moment, if you don't like Walmart's offer, you can go sell it in a different store. Apple doesn't have that option. If, at some point, Walmart were to buy most of the competing stores, then they would have a monopoly or oligopoly position and would be similarly subject to regulation. For example, Amazon's large position in online shopping is already leading to it having antitrust investigations. It can happen there too.

[Slipoch]

Apple responded to El Reg!!!!!??????

do {

subjectLine += "!!??";

} while(true)

[Potemkine!]

Re: Apple responded to El Reg!!!!!??????

while(true){

subjectLine += "!!??";

}

// :-P

[dave 93]

Spotify and Fortnite want all the iPhone club benefits, but don't want to pay...

Why do Spotify think they deserve special treatment?

Apple Store rules are clear when you sign them, and the same for everyone.

There are many web browsers for iOS that allow users to access Spotify without an 'app'...

Rampant 'cakeism' reminds me of pointless Brexit.