Spotify has asked the EU Commission to intervene in its business relationship with Apple, citing the fact that Apple takes a 30% vig on all customer revenues from people who join the service or buy songs through an Iphone app, while Apple’s own competing Itunes store does not have to pay this commission.
That means that while Apple and Spotify pay the same wholesale rates for the music they sell, Spotify has to give 30% of its revenues to Apple, while either earning 30% less on each of its sales, or charging its customers 30% more. It’s as neat an example of the problem of a company providing both a platform and a service on that platform — and it’s why pre-Reagan antitrust regulators didn’t let railroad companies own subsidiaries that competed with the companies that bought freight shipping from them (under Elizabeth Warren’s proposed new antitrust regime, Apple would have to choose whether to supply a platform or apps for that platform, but couldn’t do both).
Spotify’s complaint takes a different approach. Rather than arguing that Apple shouldn’t own the App Store, Ek is seeking changes to Apple’s conduct on the App Store. Right now, he says, apps like Spotify that don’t pay a 30 percent commission to use Apple’s in-app payment system are penalized in certain ways. They’re prohibited, for instance, from emailing their own users directly or enabling them to upgrade to premium services inside the app. Ek isn’t suggesting anything as radical as Apple giving up the App Store entirely. Instead, he’s asking that all apps have control over which payment systems they use and have the ability to communicate with their users directly. He also asks for all apps to comply with the same rules—including Apple Music.
Ek’s brand of antitrust argument may be more appealing to US regulators at the Federal Trade Commission and the Department of Justice who are wary of overly disruptive action, says Martin Gaynor, professor of economics at Carnegie Mellon University and former director of the FTC’s Bureau of Economics. “There’s a set of very, very strong policy recommendations Senator Warren has put out. Many of them, particularly breakups, I would describe as last resorts,” Gaynor says. “Never use a sledgehammer when a pocket knife will do.”
Spotify’s Apple Complaint Cuts to a Core Antitrust Issue [Issie Lapowsky/Wired]