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Apple recently blocked a Spotify iOS app update, as the streaming music giant removed App Store in-app purchasing. Their legal representatives exchanged correspondence about the issue. Apple claims that Spotify needs to follow the rules and that there are high costs involved in running the App Store.
Major media outlets have been critical of Apple’s move, including ReCode and CBS News. There is an emerging consensus that Apple has gone too far and this is a purely competitive moved aimed at wiping out Spotify. The move could put Apple under antitrust scrutiny. Apple’s interest in acquiring Tidal seems to indicate that they are trying to build another monopoly.
The streaming music business is a winner-take-all competition. There are numerous players for now, but this will change. At best, it can be an oligopoly. This is due to the fact that artists make more money when a streaming service has more subscribers. The basic business model is that, after costs, the streaming music service pays proportional revenues back to rights holders. The more subscribers, the higher the revenues.
Rights holders are more inclined to sign exclusive deals with services that can provide the highest revenues. There are some exceptions, as Apple has managed to make deals with artists for temporary exclusivity. This practice can only continue and be profitable if Apple manages to dominate the music streaming industry. Unfortunately, they have been unable to do this by creating a better product. Spotify’s user base has grown almost as much as Apple’s since Apple Music was launched. Even with Apple’s three-month free trial, Spotify managed to attract almost as many paying subscribers in the same amount of time.
Apple Allows Other Apps to Ignore In-App Purchase Requirement
A lot of iOS apps don’t sell subscriptions as in-app purchases. In fact, one of Apple’s highly promoted tvOS apps, Sling TV, does not sell an in-app subscription. Amazon Video does not sell anything in-app in their iOS app. Apple’s rules are applied unevenly and with competitive motives. Sling TV doesn’t follow the rules. Amazon Video doesn’t follow the rules. There are a lot of apps that require users to subscribe and make purchases outside of the app. The App Store has some discretion in how they enforce these rules. For some developers, they look the other way. As Apple is trying to build their music streaming service, Spotify has become a target of this uneven enforcement of the rules.
Apple can’t take on Amazon in a legal battle without it being a Pyrrhic victory. For now, Sling TV, owned by the Dish Network, helps sell Apple TV devices. When Apple launches their own live TV service, which has been the subject of rumors for months, this will likely change.
Apple Has Copied and Benefitted from Spotify
Spotify isn’t a huge corporation. They can’t afford a long, drawn out legal battle with Apple. Apple Music has copied much of the Spotify UX/UI. Spotify did most of the negotiation with rights holders to create a library of 30 million songs. Music groups now have a standard package for any streaming service, thanks in large part to Spotify. Apple is taking a free ride on all of this hard work. These standard agreements, many of them negotiated by Spotify, are why there is a proliferation of music streaming services. (continue…)