Apple and Spotify trade barbs as decade-old European feud intensifies

Spotify says Apple’s new European fee structure remains anti-competitive. Apple rejects this, saying Spotify wants to use its services for free.

Spotify first complained about Apple’s App Store practices in 2013.

Spotify says Apple’s new fee structure is making a “mockery” of the EU’s Digital Markets Act as the US tech giant faces a potential €500m ($830.4m) fine from European regulators this week.

Apple has rejected Spotify’s complaint - which it first made more than a decade ago - saying it is seeking “limitless access to all of Apple’s tools without paying anything”. The complaint accuses Apple of unfairly favouring Apple Music by not letting it accept in-app purchases without paying a fee.

The Australian Competition and Consumer Commission is watching the European developments closely as part of its five year investigation into the market power of tech giants, Google, Microsoft, Meta and Amazon.

Apple has agreed to allow alternative app stores on its platform in the European Union, updating its business terms for developers in January - which Spotify and more than a dozen other European companies have criticised.

Apple’s changes included reducing its commission 30 to 17 per cent, as well as a 3 per cent payment processing fee and core technology fee of €0.50 for each new user each year after a million downloads.

Apple has highlighted that Spotify dominates the European digital music market, with a share of about 56 per cent. This compares with Apple Music having about an 8 per cent share of the European market, making it the continent’s fourth biggest music streaming platform behind Spotify, Amazon Music and YouTube Music.

But in an open letter sent to European Commissioner Thierry Breton at the weekend, Spotify and 17 other European companies - covering music streaming, crypto currency and fintech - said Apple’s proposal to open up its platform to alternative app stores remained anti-competitive.

“Apple’s new terms not only disregard both the spirit and letter of the law, but if left unchanged, make a mockery of the DMA (Digital Markets Act) and the considerable efforts by the European Commission and EU institutions to make digital markets competitive,” Spotify and the other companies wrote.

“The new fee structure in the proposed new terms seems designed to maintain and even amplify Apple’s exploitation of its dominance over app developers. With a hefty transaction fee and a Core Technology Fee (CTF), few app developers will agree to these unjust terms. These fees will deter app developers from providing seamless in-app experiences for consumers, and will hamper fair competition with potential alternative payment providers.

“In the absence of materially different proposals from Apple, we urge the European Commission to take swift, timely and decisive action against Apple, to protect developers and benefit consumers and do so as soon as the DMA obligations apply. This is the only way to guarantee the DMA remains both credible and delivers competitive digital markets.”

But Apple argues that its App Store has contributed to a large part of Spotify’s success, with the Swedish company paying it an annual developer’s fee of only $99. Given Spotify doesn’t sell subscriptions through its iOS app, it doesn’t pay Apple any commission beyond the one-off yearly fee for a developer account.

Further, Apple says there is no evidence of consumer harm or anti-competitive behaviour, with the number of digital music subscribers across all platforms growth from 25 million to 160 million in the past eight years, representing an annual growth rate of 27 per cent.

“We’re happy to support the success of all developers — including Spotify, which is the largest music streaming app in the world. Spotify pays Apple nothing for the services that have helped them build, update, and share their app with Apple users in 160 countries spanning the globe,” an Apple spokeswoman said.

“Fundamentally, their complaint is about trying to get limitless access to all of Apple’s tools without paying anything for the value Apple provides.”

Part of this value includes Apple engineers solving a number of problems that it says Spotify benefits from such as accelerated media playback and battery optimisation. It also argues that Spotify has other avenues to sell subscriptions outside the App Store, including via email, social media, text messages and web advertising.