A tale of two giants.
For those wrapping up their walkabouts in the Australian Outback, let me inform you of some major tech news. According to Daniel Ek, Spotify’s Founder and CEO, his company has filed a complaint with the European Commission alleging:
“Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience — essentially acting as both a player and referee to deliberately disadvantage other app developers…they continue to give themselves an unfair advantage at every turn.”
Spotify has gone so far as to even make a whole website dedicated to why Apple sucks and needs to be reigned in. Since then there’s been some pointed back and forth, with each company trying to make a case why the other is wrong.
This complaint, predicated on antitrust questions, cuts right to a central issue plaguing tech companies today, what happens when companies start to compete on the massive platforms that they themselves have created and fully control. Services are the name of the game nowadays for tech companies and as they move further and further into that space, they’ve increasingly had more run-ins with regulating authorities, most commonly in the European Union (EU)
Google was just hit with a massive fine from the European Commission today for forcing customers of its ad network to sign contracts that would prohibit them from working with any other competing search engine. This is the third fine they have received from the EU’s regulatory body in the past decade.
Aofie White, in Bloomburg, writes:
“EU antitrust chief, Margrethe Vestager, told reporters earlier this month that an early-stage probe into Amazon’s potential use of data to overtake smaller shops on its Marketplace platform is ‘quite advanced’ and she’d ‘like to take more decisive steps’ before she leaves office later this year. That might see the start of a full-blown investigation.
She’s also promised to examine a complaint Spotify Technology SA made targeting Apple’s app store and has said she ‘takes an interest’ in potential anti-competitive behavior by Facebook.”
All of this runs counter to the United States’ mostly hands off, chummy approach to tech in the last decade, but recently that tune seems to be changing. So what’s a tech company to do in such tough times?
Focusing in on the Spotify/Apple debacle, the heart of the complaint can be boiled down to the fact that Apple owns both the market square and Spotify’s only serious competitor, Apple Music. This isn’t necessarily a bad thing by itself if we assume that Apple can effectively occupy two competing mindsets simultaneously, neutrality and partisanship.
But Spotify alleges that’s not the case, listing a litany of abuses and anticompetitive behavior perpetrated by Apple, chief among them being the 30% cut that Apple takes of any revenue Spotify generates through its IOS app. This is coupled with Apple not allowing Spotify to use any alternative to Apple’s own payment processing system, and the fact that the App Store is the only way for Spotify to get its app on over 1.3 billion IOS devices across the world.
Apple of course categorically denies its wrongful treatment of Spotify, accusing the company of wanting a free ride, going so far as to say that its App Store has played a large part in making Spotify the company it is today and that the company should be grateful for that. Looking at the numbers, Spotify still has a significant lead worldwide in subscribers compared to Apple Music, and Apple claims that the only reason Spotify is complaining is because they have recently been forced to raise their royalty rates to artists on their platform.
Thrilling stuff. None of it matters though and I’ll tell you why: I don’t like the idea of big tech companies owning both a platform and the services that compete on said platforms. That’s why I must come down on Spotify’s side here. The profit incentive turns these companies into bullies. We see it time and time and time again. None of them can be trusted to operate outside of their own interests and it’s time something be done about it.
Absent of divorcing Apple completely from its services division, strict regulation must delineate how Apple and others separate their walled platforms from their other services. The U.S. government has been unfathomably slow in reacting to this growing problem so it’s good to see the EU stepping up to the plate, but more can always be done.
I love Apple. I use several of their products daily, but no matter how you feel about them, Spotify is a necessary critic of Apple and in a media-obsessed world that’s becoming increasingly consolidated by the year, removing one of the few remaining competitors to the big four is dangerous.
In Apple’s response to Spotify’s claim they write:
“At its core, the App Store is a safe, secure platform where users can have faith in the apps they discover and the transactions they make. And developers, from first-time engineers to larger companies, can rest assured that everyone is playing by the same set of rules.
That’s how it should be. We want more app businesses to thrive — including the ones that compete with some aspect of our business, because they drive us to be better.”
Somehow charging your only real music competitor a 30% tax on their business, while your own music service pays nothing doesn’t seem like you’re “playing by the same set of rules”. Apple is soon to be officially announcing a TV and Film subscription service à la Netflix, HBO, Hulu, and others. If Apple was serious about fostering competition they would exempt current competitor services from their tax, allowing a true competition on only merit to ensue.