Technolgy Rules: Apple says Spotify exaggerated how much ‘App Store tax’ it pays

Monday, June 24, 2019

Apple says Spotify exaggerated how much ‘App Store tax’ it pays

In March, Spotify filed a complaint against Apple with the European Commission over the so-called “Apple tax” and claims of restrictive rules regarding the App Store. In the time since, Apple has responded with the launch of a website that takes aim at the anti-trust, anti-competitive claims against it, and most recently, a deep dive into how the process of app approvals works, by way of a CNBC profile. Now, Apple has responded to the EC complaint with its own filing that says Spotify is only paying this “Apple tax” on less than 1 percent of its paid subscribers.

This news was first reported by Music Business Worldwide (MBW) and German site Der Spiegel.

Specifically, Apple’s filing says that Spotify only pays a 15% “app tax” (revenue share) on just 0.5% of its 100 million premium subscribers, or around 680,000 customers. This revenue share only impacts those customers Spotify acquired during the 2014-2016 time frame who signed up for the subscription through an in-app purchase. Afterward, Spotify switched off the option to sign up in the app.

This is in contrast to the claim made by Spotify CEO Daniel Ek on the company’s blog in March, where he wrote that “Apple requires that Spotify and other digital services pay a 30% tax on purchases made through Apple’s payment system.”

In addition, MBW reports, citing an unnamed source, that Spotify pays even less than the standard 15% for those customers who signed up through in-app purchase due to label discounts. The source told the outlet that Spotify just wants to “pay nothing.”

However, Spotify’s claim goes beyond the Apple tax.

It also said that Apple used its App Store power to penalize the competitor in other ways — like limiting Spotify’s ability to communicate with customers, or even send emails to its iOS users. Spotify said Apple also blocked its iOS upgrades — something it brought to light years ago. Apple, meanwhile, has always maintained it has treated Spotify like any other app developer.

Apple’s responses to these latter points were also sneaked into the recent CNBC piece where a “longtime Apple veteran” who was only identified as “Bill,” made certain to tell the news site that he had “called Spotify when an update was rejected” — e.g. because Spotify had been emailing customers and asking them to pay the music streamer directly outside the App Store.

In addition to Spotify’s EU complaint, Apple is facing other attacks against its App Store in the U.S. courts.

The U.S. Supreme Court in May ruled against Apple to allow an App Store antitrust case to proceed.

And in June, two app developers proceeded to sue Apple over its App Store practices, making similar claims about Apple’s 30% commission on app sales and its requirement to price apps in tiers ending in 99 cents.

Apple had earlier responded to Spotify’s complaint in length on its own website. The company, in part, said that:

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.

…

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.