Competition laws place limitations on what a business can do. They're not free to sell or price entirely as they please.
In this case Spotify are arguing that Apple is using its dominance of the smartphone market to give an unfair advantage to its own music store. Whether or not this is true is up to the courts to decide, but it's not a frivilous case; there's a real risk to Apple that they lose.
As I said in a comment far below here, it's a funny thing, how to define anticompetitive and monopoly practices, depending on how you frame the scope of the market. See Peter Thiel's book for a chapter on this.
You could say that Apple has a monopoly over developers building apps and providing their services to people using iPhones. Someone else looking at it could say that Spotify has a multitude of ways to provide its content to customers -- web, it's own Windows + Mac desktop apps, Android, etc.
Which way is a regulator supposed to look at it?
The point about Apple Music is also interesting. Actually Apple Music (the streaming version) I believe came after Spotify. Anticompetitive regulations are about penalizing behavior that discourages new entrants to the market. Apple Music was actually the newer entrant in that case.
Market share argument:
Android has 71% market share in the EU, as of February 2019 - compared to iOS's 21%. [1]
Ease of customer switching argument:
If Apple pressed too much in a way that harmed consumers, there are many other cheaper alternative Android phones vs. iOS to which they can easily port their number over (say what you want about ISPs and Telecoms, I find this to be pretty easy in the US - unless you signed an unreasonably stifling contract. Admittedly I'm unsure how difficult this would be in most of the EU.)
Supply-Side Price elasticity argument:
In theory, if the 30% cut was too high, developers wouldn't want to develop on the iOS platform, and would instead focus resources on developing on Android; the specific cut would be at an equilibrium point that enough developers would find profitable, and would still provide choice in the app marketplace for customers.
If iOS had 100% share, you probably wouldn't say it doesn't have a monopoly on apps because you can just use desktop apps instead.
I also wouldn't say Comcast doesn't have a monopoly because they only have xx% share and you can move to a different state or country and get another provider. Or use your phone for internet instead.
> Ease of customer switching argument
This is confusing the consumer market for smartphones and the markets for distribution of smartphone app.
> Supply-Side Price elasticity argument
Yeah, if any monopoly's cut is too high, you can exit the market. This is not an argument that the monopoly is not a monopoly. This only means there is a limit to the monopoly's power.
It's bunkum and doesn't fit with 100 years of antitrust law.
However, he can buy an aftermarket part. It's a different product but the same market. So they don't have a monopoly.
I don't know much about antitrust law so I can't comment on that But I do understand basic economics. And from an economic perspective, Apple most definitely created a monopoly which they most definitely use for rent seeking.
An android phone is just as portable and has all of the same features as an Apple phone. The only day to day difference is having access to the apple ecosystem.
It’s nothing but a minor inconvenience to switch between android and iOS. The same can’t be said for any of your other comparisons.
Switching includes spending hundreds of dollars plus hours to setup and figure things out plus several days of frustrating adjustments.
You might call that a "minor inconvenience". It certainly is more minor than my examples above. But that absolutely is enough to separate the two app markets. Virtually nobody will switch systems for an app.
I think it's worth pointing out that Spotify is a Swedish company, where iOS has a 58% market share, according to the site you linked. It could be that Spotify's main markets are ones where iOS has a more significant share.
"In theory, if the 30% cut was too high, developers wouldn't want to develop on the iOS platform"
The problem is not just that Apple is taking a 30% cut; it's that it's also running a competing service. Spotify are arguing that Apple are unfairly using their supposed dominance in one market (phones) to achieve dominance in another market (streaming music).
I still find it true that a lot of the early iOS users still have their premium subscription. And I wouldn't be surprised if iOS is dominant in the premium users of Spotify today.
I found the response by Apple good and I think they've helped Spotify grow a lot. Suing Apple feels a bit like they are shooting themselves in the foot.
Well no, Apple's even admit that Spotify didn't get their subscriptions through them: "only a tiny fraction of their subscriptions fall under Apple’s revenue-sharing model"
A bit of apples to oranges comparison, but Internet Explorer was also the newer entrant in a previous case.
What? No, they're not just about protecting new entrants, and if you think about it for five seconds it should be obvious why. Microsoft lost it's 1998 antitrust case, despite Internet Explorer being released after Netscape.
I honestly cannot see the legal footing in this whole thing to claim that Apple has any sort of obligation to be "fair" here.
Or even just any legal depth. It's all just PR fluff speak.
Personally, I use Amazon Music because I get it as part of Amazon Prime. It has most of the music I want to listen to, but not all. I was considering Spotify, but with nonsense like this, this is one potential customer that they have lost.
I don't think you can say that the App Store is itself a relevant market. Especially when you consider that Spotify's exact same services are offered across many other platforms. When you can interchange Android Spotify and iOS Spotify and receive the exact same product and services from Spotify, then how can you frame Apple as a dominant undertaking?
Is Porsche more dominant than Toyota?
Like Microsoft bundling/treating IE differently to any other browser on its platform.
[1] https://www.forbes.com/sites/chuckjones/2018/03/02/apple-con...
I think that's an oversimplification.
When you control the platform and then use that control to favor your own products on that platform, that's anti-competitive.
I believe Spotify is claiming Apple is doing this with Apple Music vs Spotify and I didn't see this issue addressed by Apple's message.
I am not sure I agree with Spotify's claim, and US antitrust is in a parlous state, but this approach may get traction in the EU. However Apple's market share is far far from monopolistic.
"We're a duopoly not a monopoly" is not a particularly compelling argument.
In particular, "monopoly power" is typically not interpreted (in the US or EU) to mean literally a single supplier but rather whether you exert dominance in the market. You're correct that "it's a duopoly" is not a compelling argument but Apple would not bother to try to make that case either. They'll just point to the fact that they have about a quarter of the market world wide and slightly more than that in the EU alone; evening the US it's a little less than half the market.
I suspect they have a strong case legally, whatever the merits of Spotify's claim, and doubt they would prevail in court (though IANAL -- it doesn't matter what I think). However if the lawsuit is part of a strategy to get the EU competition commission to act, then it can be effective, even perhaps more effective if they lose!
There are many platforms which rigidly control what's allowed on it. For example, is Netflix comparable? Netflix can control which providers are represented on its platform.
I don't think Netflix is comparable. The App Store is a market place, where things are bought and sold. Netflix is not a consumer marketplace.
Netflix shows a wide variety of content to the buyer, the buyer pays and consumes certain (but not all) of the content. The content owners are ultimately paid in a way that reflects the demand for their product relative to the others available in that marketplace. (It's not per-unit pricing with a rev share, but you still get paid more to license big blockbuster content than little-watched niche stuff.)
Also similar to App Store, Netflix has certain "blessed" in-house products that it pays to create itself, and lists along side the externally-created products.
That is what Spotify is alleging, yes.
Netflix isn't comparable as you can choose any other content streaming services. And also you can use any ISP to access to Netflix.
You're correct that Apple Music may be a loss leader, but even if it is a loss leader, there's significantly more nuance involved before we can declare it to be predatory pricing.
That's not how that works. If you charge $50/hr as a freelance software developer and you work on your own stuff for a day you didn't "get $400 back", you paid $400 in opportunity cost.
If apple had a limited number of apps and they were declining other apps in lieu of its own, that would be true.
Since Spotify have ~36% of the global market (Apple have ~19%) that could reasonably be viewed as predatory pricing.
It's also worth noting that Spotify charge as much as Apple and you can subscribe to the service without using IAP.
But I would just caution people to consider whether your stance is truly based on what you think should apply generally, or just because you like the person/party in the specific case. (applies to a lot of things in life)
The power of platform providers versus app providers ebbs and flows back and forth with new technology, depending on who has the most market / customer pull. And you should try to deconfuse your principles about who should be able to charge what, from your liking of the provider -- because that can change in an instant.
Craigslist charges employers a significant fee to post their job listings. Employers have far less sway than Spotify does in that platform dispute. I'm guessing you (audience) like Craigslist, and support them in what they charge? Why?
Amazon charges companies to sell on their platform. You probably don't complain a lot about that, and that's probably just as restrictive as Apple+Spotify for some sellers. Why? Is it because you like Amazon's services?
Or you maybe like Grubhub, and don't care that it takes a huge cut from restaurant owners. (a cut that is more painful than what Spotify charges per month, to the restaurant on every single order you make)
I don't choose sides either way. What is "reasonable" is what the parties had the clout and market pull to agree to, and what the law says is acceptable in form.
Separate your principles from your preferences.
Craigslist charging employers to post job listings doesn't seem like it would have much of an impact on the consumer market. I'd guess that the business-to-business expense in this instance probably isn't significant enough for it to be passed on to the (employer's) customers or impact their experience.
Restaurants probably don't take as large of a chunk of their revenue or have as many restrictions placed upon them by Grubhub as Spotify does by Apple.
Amazon, on the other hand, is probably the closest comparison. However, I suspect Amazon's services to their sellers involve greater capital and operating expenses than the services Apple provides to their sellers. Both companies need to spend money on tech infrastructure, development, and support. In addition to this, Apple needs to employ reviewers to act as the gatekeepers of the App Store and possibly buy hardware for those reviewers to use. In contrast, Amazon needs to build/purchase/rent warehouses, employ warehouse workers, and purchase warehouse equipment (forklifts, etc.).
Amazon also doesn't take a cut of, for example, Microsoft's subscription fees if someone orders an Xbox and subscribes to Xbox Live. This might be different for Amazon's app store for their Fire OS devices, but I'm guessing you were referring to their general marketplace.
To be fair, I probably don't know enough about any of these markets for my opinions to hold much weight, but I'm not sure if the examples you gave really line up with the situation between Apple and Spotify. But I definitely agree that it's important for people to try to remember to stay unbiased with these things.
People always try to make businesses out as the unitary function organizations where their profit is completely disconnected from serving a market and keeping that market happy.
The only time when companies can operate without keeping customers happy are a) when they have an absolute monopoly and (often the same) b) when they are given some sort of political protection from the marketplace whether indirectly or directly.
You can also make money by giving customers no choice.
Important detail you left out: Comcast is a regulated utility.
Things are different at scale. There is absolutely ample precedent for regulating pricing for large scale utilities.
When you see ESPN and Comcast argue over showing the World Series, don't buy the argument that one of them is "trying to prevent loyal customers from being able to see their favorite game", or when your local hospital group withdraws from your employer health plan that "the other side is trying to deprive you of consumer choice".
Each side is wanting to make a share of the money, and they're disagreeing over the price (or often the royalties share). No one is entitled to any particular provision of service in any of these cases. Except in regulated industries there's no law governing the "fair" share that someone has to offer, or someone has to accept. And in most cases, each side could choose to compromise what it's asking for with no damage to its model of business (not talking about $, just the principles they claim).
Spotify wants a lower $ charge. Apple owns the platform and controls that access and $ charge. That's it.
This is a private contract dispute and only of interest because you care about listening to music. There's no public right to have a music app be charged a certain amount that's called "fair". Spotify could charge nothing to consumers, and be charged nothing by Apple. It's their choice. It's Apple's choice.
Don't be fooled into "principles" when there's money involved.