EU Prepares to Charge Apple in Antitrust Dispute With Spotify

[mattspace]

The App Store is the virtual equivalent of a Department Store. In Dept stores brands get to sell their goods in set locations, and pay a commissions to the Dept. Store.

Your Department Store analogy omits a fundamental point which makes it largely inaccurate for describing the App Store...

The App Store is a sales incentiviser for the iPhone, which Apple sells for a profit (most of the company's profits). The presence of 3rd party apps, is a primary sales motivator for the iPhone.

For the Department Store analogy to be correct, you would have to include that the only way for people to get to the Department Store from their homes, is in cars they had to buy from the Department Store company, and that the existence of the stallholder's products in the Department Store was in fact the primary motivator for people to buy cars from the Department Store company in the first place.

Why should the stall holders be paying the Department Store owner's costs, for something whose primary purpose is to increase the Department Store owner's sales of their primary product (cars)? Why is the Department Store owner not required to pay a share of their car profits to the stall holders, whose products provide the root demand behind the Department Store company's profits?

 

[Ethosik]

You don't see any similarities between the way Microsoft leveraged Windows to advantage their native services (Internet Explorer) over competitors (Netscape).. and the way Apple leverages App Store rules to advantage TV and Music over say Netflix and Spotify? Maybe try harder?

Is Apple approaching Netflix or Spotify to attempt them the close their business? (Microsoft did this). Is Apple making code intentionally difficult to port to Android? (Microsoft did this with Sun Java part of the same case)

 

[deevey]

other way round!
Spotify would not be complaining like a child if they were not losing out!

A lot of Spotify users are on the free tier.

Artists will be the ones eventually losing out IMHO

Spotify has a point. Impossible to compete against Apple Music if Apple inflates your prices by 30%.

There is no increase in price unless the app developer initiates the sales / leads THOUGH the App Store - Spotify have decided that was the best route for them to facilitate sales rather than users signing up via their website.

They could have easily decided instead to release the app via the Netflix model, and spend that 15 or 30% on advertising costs promoting their service.

 

[hot-gril]

I am curious when you think they lost their dominant position, and to whom? I see two things that combined to make them much less important.

The public internet (in particular vs. MSN), with web applications and search.

The rise of smart phones with iOS/iPadOS being the critical starting point.

I had a friend on the PowerPoint team. They had an iOS version complete, but were not allowed to release it until Satya Nadella took over. They were first forced to produce a version for Windows based tablets that never worked that well. The big loss for MicroSoft was that it took so long that people started using KeyNote/Pages/Numbers and Google Slides/Docs/Sheets and realized they did not need MS Office. They still have a large share of the corporate office application, but no where near what it was.

Same reasons. I think it was 2009, which was when a broader shift in tech occurred, maybe somehow related to the great recession. Suddenly everything was new, not just smartphones. Social media was a hot commodity for the first time, Chrome was dethroning IE, Netflix streaming was killing DVD/BluRay, and Steam games were going mainstream. Open source was beginning to dominate in the places it dominates today, and general openness was big too. Even Facebook's API was more permissive back then than it is now. Microsoft under Ballmer was stagnant and missed out on everything at the time. Overall I consider 2009-2012 a more exciting time for tech than today.

MSFT is still one of the most valuable companies in the world, but they're sharing that with more competitors. I disagree with their high valuation, or at least I think MSFT and AMZN should be flipped.

 

[playtech1]

I would be curious to be a fly on the wall in the Apple strategy meetings about these various challenges.

Apple is big enough and smart enough to see that these probes would be coming, yet has taken virtually no pre-emptive action to see them off. Instead it seems to be adopting a strategy of fighting hard and looking to win - I assume because settling or backing down in one jurisdiction would be a precedent elsewhere and I guess it thinks it has a shot.

The one exception to being the cut in % for small devs from 30% to 15% in the face of the Epic suit - which (perhaps a bit cynically) I think is Apple trying to anchors 15% as the reasonable level it can charge should it lose the case.

At this point Apple is fighting on two fronts (payment processing and own-brand services) in three major markets (US, EU and UK). A finding against Apple in any of these would surely be followed by other jurisdictions. And I don't think it cuts both ways - the US may go easy on the Californian company, but the EU views Apple as a tax-dodging foreign tech company (with nice products), so it has little political capital to spend. Apple's Irish tax victory may bite them now.

At this point I think it likely Apple loses at least one of these cases, so maybe it's shooting for damage limitation - a modest cut in payment processing charges and looser app store rules would be a 'win' for Apple. Worst case Apple could be split up into some 21st century Baby Bells. I hope for something more like the former.

 

[0924487]

I believe this statement is not of any merit!
Spotify should be told to stop acting like petulant kids wanting their own way because they say so!
It is called business not charity!

We want to make sure that we have a competitive market where no party has disproportionate amount of power in the economy. We don’t want monopolistic rent seeking or oligopoly behaviour.

 

[Alan Wynn]

We want to make sure that we have a competitive market where no party has disproportionate amount of power in the economy. We don’t want monopolistic rent seeking or oligopoly behaviour.

We have that. Android has a dominant position in the market (in most places well over 75%, in many over 80%). There is a rich ecosystem of Android, Android OSP, and Linux Phone devices. Almost every service that Apple offers has substantial competitors that area much larger than Apple is.

• Amazon, Google, and Spotify compete with them for music streaming (with Spotify being the market leader).
• Box, Dropbox, Google and Microsoft compete with them for cloud-based file storage.
• Amazon, A&E, AT&T, CuriosityStream, BBC, Discovery, Disney, Google, Netflix, Paramount and Universal compete with them for video content.
• Google, Microsoft and a million ISPs and smaller players compete with them for mail.

I could go on, but despite the benefits of the integrated ecosystem, in each of these spaces, they remain a much smaller player than their competition.

 

[I7guy]

I would be curious to be a fly on the wall in the Apple strategy meetings about these various challenges.[...]

I would like to be a fly on the wall in their lawyers' offices.

 

[Alan Wynn]

Chrome was dethroning IE,

By adopting Microsoft’s Embrace and Extend strategy, making itself the new IE, rather than a nice Open Standard for web development.

Microsoft under Ballmer was stagnant and missed out on everything at the time.

They really pushed to create a walled competitor to the internet with MSN, but failed miserably (mostly because they could not compete on content and because they missed the fact that cable modems and FTTH would make dialup irrelevant). They also missed the mobile revolution that Apple created.

MSFT is still one of the most valuable companies in the world, but they're sharing that with more competitors.

They take in a lot of revenue, but they are less secure than they were. They are the number 2 cloud provider, because they were smart enough to begin competing with managed IT companies for hosting Exchange and Active Directory and they call that all cloud services. (Really it is just traditional managed hosting, but it works for them.)

I disagree with their high valuation, or at least I think MSFT and AMZN should be flipped.

They are really working to compete with AWS and unlike Google’s GCP, they seem to like having customers. AWS’s size makes it much easier for them to add services quickly, but while many of their services are not as good as those from Azure or GCP, there are more of them and they are good enough for most customers to stay put.

 

[Alan Wynn]

I would like to be a fly on the wall in their lawyers' offices.

I would like to collect the checks for their lawyers and take a small fee for processing. ?

 

[swingerofbirch]

The 30% fee only applies the first year and 15% year 2 and beyond. Remember Apple is responsible for maintaining the platform, facilitating the sale providing app related customer service, and refunds. It is also the reason they don’t take the option of finding their own customers via marketing and just use the AppStore for a free app. They want Apple to find the customers and give them over for free.
Remember it was the Iphone that allowed them to go
International in 2009 and grow to where they are now.

I think Facebook had more to do with Spotify's initial recognition than Apple. The App Store is not a great discovery mechanism.

The 15% thing is new, and I was responding directly to the original article saying that Spotify has to charge $12.99 to get $9.99. That math does not add up. With the mix of second year subscribers, who knows what they have to charge to reach that price as an average, but the $12.99 price predates Apple's change to 15% in the second year.

I don't know how it is you can know what Spotify wants Apple to do for them. It seems Spotify would prefer to be in control of their own future rather than give it to Apple.

Not every service can go out and build its own phone and app store, though, which is where you run into anti-trust issues.

 

[deevey]

I think Facebook had more to do with Spotify's initial recognition than Apple. The App Store is not a great discovery mechanism.

I think advertising as a whole had more to do with it. Not to mention the pre-installation of Spotify by default on oodles of Android devices and and insane low price (or free) promos with phone contracts.

 

[swingerofbirch]

I think advertising as a whole had more to do with it. Not to mention the pre-installation of Spotify by default on oodles of Android devices and and insane low price (or free) promos with phone contracts.

You're probably right. I just remember hearing about it first from Mark Zuckerberg saying how great it was, and for a while it seemed like there was a lot of Facebook integration. Like you would sign in with Facebook and see what friends were listening or something I think? Or maybe when you listened to a song it updated your Facebook status. I can't remember because I turned that off.

 

[I7guy]

We want to make sure that we have a competitive market where no party has disproportionate amount of power in the economy. We don’t want monopolistic rent seeking or oligopoly behaviour.

I couldn't disagree more. Apple is a minority player from every metric there is. Their app store is wildly successful and a model to be emulated. Not a model to be torn apart.

Apples' entire business model is opt-in. One has to opt-in to buy an iphone. A dev has to opt-in to become part of the Apple Developer Program for $99. That $99 buys a complete platform, technology, management and infrastructure. (I'll leave aside the possibility maybe all don't like the platform buy that's not the point). All for a paltry 15-30% commission.

If that is rent-seeking, Apple is clearly allowed to charge a reasonable and customary fee. Greedy Epic is an example of a dev who paid a few hundred million in fees to apple, but they had earn $700M to pay that few hundred million.

 

[I7guy]

Your Department Store analogy omits a fundamental point which makes it largely inaccurate for describing the App Store...

The App Store is a sales incentiviser for the iPhone, which Apple sells for a profit (most of the company's profits). The presence of 3rd party apps, is a primary sales motivator for the iPhone.

For the Department Store analogy to be correct, you would have to include that the only way for people to get to the Department Store from their homes, is in cars they had to buy from the Department Store company, and that the existence of the stallholder's products in the Department Store was in fact the primary motivator for people to buy cars from the Department Store company in the first place.

Why should the stall holders be paying the Department Store owner's costs, for something whose primary purpose is to increase the Department Store owner's sales of their primary product (cars)? Why is the Department Store owner not required to pay a share of their car profits to the stall holders, whose products provide the root demand behind the Department Store company's profits?

The iphone is actually an incentiviser for App Store and today the two are synonymous and symbiotic. The iphone is a draw to getting developers into the apple ecosystem.

I don't really care about deconstructing the analogy of the department store, but Apple is charging a reasonable and customary fee for the environment provided by the app store.

And sure while (in) the (US) government could step in and do what they do best, which is to screw things up (see AT&T), I wish all parties good luck with this dispute.

 

[hot-gril]

They are really working to compete with AWS and unlike Google’s GCP, they seem to like having customers. AWS’s size makes it much easier for them to add services quickly, but while many of their services are not as good as those from Azure or GCP, there are more of them and they are good enough for most customers to stay put.

Yeah, Azure is doing well, but IMO the company is still outdated in too many ways. So the valuation puzzles me. And I was bullish on AMZN for years until Bezos stepped down, and now I don't know enough about their future to keep my money parked there vs SPY.

After using GCP for small to medium size projects, I have no idea why anyone uses it. It's not like they're popular among corporate customers either. Maybe they have good ML tools.

 

[hot-gril]

You may not like the idea of government oversight of markets but time and time again it has been proven that Markets left to their own devices distort and become anti competitive, against the reasonable interests of consumers. Light touches are essential.

The opposite has been proven in high tech. Look how many giants have risen and fallen in only a few decades. The tech industry's healthy competition has always come from its free, unregulated nature and low barriers to entry.

Last time the US govt took serious antitrust action in tech was against MSFT, and in hindsight, it accomplished nothing.

 

[hot-gril]

Spotify has a point. Impossible to compete against Apple Music if Apple inflates your prices by 30%.

They can make users sign up online and keep the cut. Or they can ditch iPhone and profit from the 90% of the world market that's on Android.

 

[hot-gril]

How is the price of a service a good argument? Competing products in all areas of life have different pricing. And do you think Target charges themselves the same for their own branded products?

Careful with the store analogies. I think in the EU, stores can't sell their own brands alongside third-party brands either.

 

[Tech198]

A lot of Spotify users are on the free tier.

Artists will be the ones eventually losing out IMHO

There is no increase in price unless the app developer initiates the sales / leads THOUGH the App Store - Spotify have decided that was the best route for them to facilitate sales rather than users signing up via their website.

They could have easily decided instead to release the app via the Netflix model, and spend that 15 or 30% on advertising costs promoting their service.

Thy could have, but everyone goes for convenience noways.

 

[hot-gril]

Maybe the “best” software isn’t in the Mac App Store precisely because it can be downloaded from an external website.

Close up the Mac platform and I wonder just how many apps will suddenly make themselves available in the App Store because that’s the only way to access Mac users?

Dunno, but I'd buy a different laptop, that's for sure.

Partially because the Mac App Store app itself sucks. Everything is unresponsive, and when you download an app, it tends to get stuck in limbo. I've gotten into the habit of downloading Xcode directly from developer.apple.com/downloads.

Their CDNs used to also be bad. Devs in China were so fed up with slow Xcode downloads ~2015 that they started pirating Xcode. Pirating freeware. And some of those pirated versions were injecting malware into their apps.

 

[Alan Wynn]

Yeah, Azure is doing well, but IMO the company is still outdated in too many ways.

Everything that is not Azure and/or XBox is just not that interesting. Outlook/Exchange work well together and no one really offers that level of integration with others (for scheduling, etc.). I prefer having Contacts, Calendar, Mail and Notes be separate applications with integration through the infrastructure, but Calendar does not offer the same level of delegate and administrative services that Outlook/Exchange do.

Where Azure does really well is in the Machine Learning functionality.

So the valuation puzzles me. And I was bullish on AMZN for years until Bezos stepped down, and now I don't know enough about their future to keep my money parked there vs SPY.

I think AWS is their future, so I am not too worried, but one never knows.

After using GCP for small to medium size projects, I have no idea why anyone uses it. It's not like they're popular among corporate customers either. Maybe they have good ML tools.

Like Azure, they have some good Machine Learning functionality, and a few specific services that are better than AWS. That was really what I meant. AWS is the best overall, even if no one of its tools is the best across all three services (some actually are the best, but it does not matter) because the total package it offers is much better than either of the other two.

I completely agree with you about GCP. Google seems to actively discourage people from using it. They seem to hate having customers. That is why I try not to adopt any Google technology for development projects, unless it has been picked up by a large non-Google community. Everything that is not search or advertising for them seems not to be able to hold their interest for very long.

 

[Alan Wynn]

You may not like the idea of government oversight of markets but time and time again it has been proven that Markets left to their own devices distort and become anti competitive, against the reasonable interests of consumers. Light touches are essential.

Yup, that is why we are all still on AOL using Windows Phone talking to IBM mainframes. Tech dominance does not last, and in fact, very few other monopolies last very long either.

The only ones that last are those granted by the government (like electric power, phone service and cable tv). Even those get disrupted. The breakup of AT&T was not what brought about the end to its monopoly, but the advent of mobile phone service and the internet driven by a desire for cable companies to compete.

It was not the anti-trust case against IBM that caused it to lose its dominance, but the rise of Microsoft. In the same way, the anti-trust case again Microsoft accomplished nothing, but Google’s pushing Chrome as a development environment and Apple’s creation of the iPhone and App Store that took them down.

 

[Alan Wynn]

Spotify has a point. Impossible to compete against Apple Music if Apple inflates your prices by 30%.

This has to be the funniest comment of this whole thread. Spotify is the largest music streaming service. They have continued to grow despite even since Apple created Apple Music. I am not sure how you can make the statement given that one can see from what is actually happening that it is simply false.

On top of that, many of their customers enter their paid service after being an ad-supported customer for a period. All of those people have direct connections with Spotify who can easily explain to them how to upgrade not using the App Store.

Finally, they can charge more for signing up on the App Store (or not allow sign up there at all like Netflix do), and then send an email explaining that one can get cheaper service if one changes to a direct subscription.

 

[Joelist]

App Distribution for the Mobile Phone market.

Great. Android, Android OSP, iOS/iPadOS and Linux Phone are all part of the same mobile phone app market.

First, you can use PWA on iOS/iPadOS and those need not be purchased on the App Store.

Your definition of the market is too narrow. All of these devices can do basically the same thing and serve basically the same purpose. That is how the market is defined.

His market definition is ridiculous. Using the logic he put forth you would be able to isolate ANY business that has a product that differs from other businesses and call it a market.