Battle between Apple, Spotify heats up

(Newshub.)
(Newshub.)

The battle between Apple and Spotify is heating up and it has highlighted the issue of the fees Apple charges developers for using its app store.

When do the fees go from being fair and reasonable to unfair and anti-competitive?

Apple charges a fee of up to 30 percent to developers selling their wares through Apple's app store.

Most developers view the fees as part of the cost of doing business. They absorb the fees in exchange for gaining access to Apple's platform and its vast customer base.

But what about subscriptions? Spotify doesn't like having to pay Apple the 30 percent fee month after month after month.

Until now Spotify had added the 30 percent fee onto the cost of the subscription. That meant someone subscribing to Spotify's premium service via the app store was paying more than someone who subscribed via Spotify's website.

It also meant they were paying more than they would if they subscribed to the rival Apple Music service.

Spotify believes Apple has been using the app store to disadvantage Spotify.

So Spotify has been increasingly trying to alert customers to the issue. Last year it began emailing users to encourage them to stop subscribing via the app store and instead subscribe directly through its website.

Things came to a head last week when Recode reported that Apple had blocked an update to Spotify iOS (Apple's mobile operating system) app.

The latest version of the app no longer allowed users to upgrade to Spotify's paid premium service from within the app. Instead they had to go to the Spotify website, where they would no longer have to pay the 30 percent fee.

Apple viewed that as a breach of its app store rules. Specifically rule 3.1.1 which says that apps may not include links or other text that encourages users to subscribe to services through homepages rather than through Apple's in-app purchase system.

In a letter obtained by Buzzfeed Apple's general counsel Bruce Sewell said: "We find it troubling that you are asking for exemptions to the rules we apply to all developers and are publicly resorting to rumours and half-truths about our service."

Spotify claims Apple is breaching US and European anti-competition rules.

The spat comes as Apple has agreed to lower the fees to 15 percent once users have been subscribing for a year.

But it does show the vulnerability that companies like Spotify face when selling apps through a giant platform like the app store. Especially when the owner of that platform has its own rival service.

The row has erupted at the same time that talk is growing that Apple might buy another music streaming service Tidal.

Tidal has around one million paying subscribers compared to Spotify's 30 million and Apple's ten to fifteen million.

One million users might seem a relatively small amount. But the Jay Z-owned service has successfully secured a lot of exclusives, including Prince's catalogue.

Newshub.

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