Spotify’s Apple Music Complaint Was a Near Decade in the Making
(Bloomberg) -- Spotify Technology SA latest complaint against Apple Inc. highlights the tensions that arise when a hardware powerhouse starts competing with companies that helped drive the appeal of its products in the first place.
Spotify on Wednesday demanded that Apple should be probed by the European Union’s powerful antitrust agency over how it allegedly squeezes rival music streaming services.
Whether intentional or not, Spotify’s approach to reshaping the music industry was -- for the most part -- subtle enough to not draw major concern from Apple. Its software has been a mainstay on the American company’s platforms since a desktop app was released for the Mac in 2007. The iPhone app arrived in 2009, and today support extends also to the iPad and Apple Watch.
But it was an event in 2010 that fundamentally changed Spotify’s ability to compete with Apple for the attention of music lovers, and it was a something Apple itself instigated. Previously, third-party apps could not "run in the background." This meant if you started playing music on Spotify and switched to reading email, Spotify would be forced to stop playing. This wasn’t so with Apple’s music app: it was allowed to multi-task.
When Apple announced in June 2010 that its iOS 4 operating system would let third-party developers build multi-tasking features into their software, Spotify could update its app to mirror the functionality of its biggest rival. It did so within a week of iOS 4 being released to the public.
It created parity between the competing products. Apple and Spotify both had music apps that gave access to millions of songs, supported background playback, and let users download tracks for offline listening.
The difference was that Apple charged about the same for one album download as Spotify charged for a month of limitless access to an entire catalog. Spotify grew into a $26.2 billion company, building up 100 million paying subscribers worldwide, and all but killed off the buy-to-own download model that Steve Jobs pioneered in 2003 with the launch of the iTunes Music Store.
Apple has been aggressively catching up. When it launched Apple Music in 2015, it took advantage of a massive install base of iPhones, iPads and Macs, which all come pre-installed with its music software. It also pulled on its vast cash reserves to subsidize three-month free trials for new sign-ups and discounts for families and students. By January this year, Apple reported its streaming service had 50 million paid users.
While a change to Apple’s operating system allowed Spotify to compete, the Swedish company now doesn’t want to fund its rival resurgence. The Spotify app can be downloaded for free from Apple’s app store, but to subscribe to the premium paid-for service a user needs to navigate to a separate web browser and manually register. This is because Spotify doesn’t want Apple to take the 30-percent cut from subscriptions that purchases within the App Store are subject to. It’s the same reason e-books can’t be purchased directly within Amazon.com Inc.’s Kindle app on the iPhone.
“Once Apple became a platform provider, but also a direct competitor, their incentive to disadvantage rival services, like Spotify, became even greater and their restrictions started to become more frequent and extreme,” Horacio Gutierrez, Spotify’s general counsel, told journalists in a briefing in Brussels on Wednesday.
©2019 Bloomberg L.P.