Thanks to Spotify, the Music Is Stopping for Apple
Apple is now facing the prospect of significant fines and changes imposed on its business model, writes Alex Webb.
(Bloomberg Opinion) -- Has Apple Inc. exploited its dominance to squeeze out rivals? Whatever the technicalities, the fact that there are now formal charges against the world’s most valuable company should start to change its attitude toward competition.
The European Commission hit Apple with an antitrust complaint on Friday for abusing its role as the App Store gatekeeper and disadvantaging Spotify Technologies SA’s music-streaming service. The financial impact of any ruling is unlikely to move the needle on the California-based company’s earnings — its services segment, which includes the App Store, generated 19% of the company’s $90 billion in first-quarter revenue.
But although the iPhone maker has been embroiled in a multi-year tussle with the European Union over its tax affairs and is the subject of a U.S. Department of Justice investigation, this is the first time it has been charged with anticompetitive behavior.
That’s significant. In the past, Apple has often looked like a company that hasn’t worried too much about whether it has market dominance. Now that it’s facing the real prospect of significant fines and changes imposed on its business model, it will have to take seriously that its actions could be perceived as monopolistic.
Spotify asserts that this pushes users toward the rival Apple Music service, since it appears to be cheaper. Apple says in its defense that the App Store has always been this way and that Spotify has anyway built a successful business on its platform. But that’s also the heart of the problem.
When Apple first built the App Store 13 years ago, the company was a lot smaller than it is today. It didn’t have to worry too much about whether what it was doing could be considered anticompetitive, because there were plenty of rivals out there offering alternative smartphones and operating systems. But these days it’s a $2.2 trillion behemoth with more than 50% share in a lot of smartphone markets. It needs to think a little differently about the effect of its actions.
Evidence suggests that Apple has historically not been preoccupied with antitrust. Last year, a beta version of its operating system for mobile and desktop devices demonstrated plans to redirect news-story readers clicking on a link on a web browser to its News app, and away from news organizations’ own websites. (The released version abandoned this approach.)
Last week, emails from 2013 were published showing Apple software chief Craig Federighi objecting to the idea of making Apple’s iMessage service available on devices using Google’s Android software. “I am concerned [that] iMessage on Android would simply serve to remove an obstacle to iPhone families giving their kids Android phones,” he said, according to tech news website the Verge.
There are also moments when Apple’s seeming obliviousness benefits consumers. It’s currently rolling out new privacy options for iPhone that will make it harder for advertising technology companies such as Facebook Inc. to track user browsing activity. A company that was more cognizant of how its actions could be perceived might be less willing to take such steps.
But Microsoft Corp. sets an instructive precedent. One consequence of its decade-long antitrust battle in Europe and the U.S. at the turn of the millennium was that its employees became more circumspect about making moves that could be seen as anticompetitive. No one wanted to be subpoenaed for a congressional hearing. That contributed to its slowness to react to exciting new markets such as smartphones, but it has still managed to become a nearly $2 trillion market capitalization company by focusing on making better products for the cloud and enterprise.
It’s harder to move fast and break things when you’re worried about whether decisions could come back to haunt you. Of course, Apple is not exactly agile, often bringing products to market long after rivals. But it may now think a little more carefully about whether it’s using its heft to step too much on those rivals’ toes.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.
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