Tag: digital markets act

Apple’s Proposed Changes Reject the Goals of the DMA

January 26, 2024

For almost five years – 1,782 days – we have been asking the European Commission to take action against Apple. In a world that values competition and innovation, we found it unacceptable to stand by and allow gatekeepers like Apple to go unchecked.

So you can imagine our excitement when the Digital Markets Act (DMA) was created and passed into law to once and for all put an end to this unfair stifling of innovation disguised by Apple as security protections. We were proud of Europe for leading the way and assumed that Apple would have no choice but to comply with the letter and the spirit of the law. 

But as Apple has just shown the world, they don’t think the rules apply to them. 

Apple is nothing if not consistent. While they have behaved badly for years, this takes the level of arrogance to an entirely new place. Under the false pretense of compliance and concessions, they put forward a new plan that is a complete and total farce. Essentially, the old tax was rendered unacceptable under the DMA, so they created a new one masquerading as compliance with the law.

From the beginning, Apple has been clear that they didn’t like the idea of abiding by the DMA. So they’ve formulated an undesirable alternative to the status quo. This is why many of the most popular developers will never be able to choose it. And for the developers who feel like they have no other alternative, it’s a path that will punish their success. Let’s explore a few elements of Apple’s new demands:

  1. A completely new 0.50 cent Euro fee per download, every year, in perpetuity, to Apple for just allowing developers to exist on iOS – This is extortion, plain and simple. If Apple’s already charging a commission of 17% (and 10% for recurring payments) on digital goods purchased, why would they also need to charge an annual flat fee for every user? For any developer wondering if this might work for you, you need to have less than a million customers and essentially sign up for not growing in the long run. From our read of Apple’s proposal, a developer would have to pay this fee even if a user downloaded the app, never used it and forgot to delete it. This will hurt developers, potential start-ups and those offering free apps most: How will a developer pay Apple back if its free app goes viral – multiple millions of accounts install that free app, and then that developer owes Apple millions? And this would be just the beginning, because Apple changes its rules all the time. There’s nothing in the law prohibiting Apple from increasing that 0.50 cent Euro to 1 or 10 Euro over time.  
  2. Apple is still charging a 17% rent on developers for existing in the App Store if they offer alternative payment methods or link out to their own website– Apple is making a developer’s choice between the status quo and this new program as difficult as possible. Apple is now saying, ‘sure, we’ll let you link out or offer your own payment methods… but you still owe us a commission for even doing that (plus that new flat 0.50 cent Euro fee).’ This combination of fees means that, in most instances, if your app is popular, you would pay the same or even more to Apple than under the prior rules. Apple is making the DMA hurt even more for developers, throwing them an unworkable alternative that will stifle their businesses immediately.
  3. Apple is offering alternative app stores – but are they really? Spotify, like so many other developers, now faces an untenable situation. Under the new terms, if we stay in the App Store and want to offer our own in-app payment, we will pay a 17% commission and a 0.50 cent Euro Core Technology Fee per install and year. This equates for us to being the same or worse as under the old rules. And if we managed to remove our app from the App Store and only existed in the Alternative App Store, that would still not work. With our EU Apple install base in the 100 million user range, this new tax on downloads and updates could skyrocket our customer acquisition costs, potentially increasing them tenfold. This, as we have to pay on every install or update to our free or paid app, even for those who no longer use the service.

The only conclusion is: Apple is forcing developers to stay with the status quo – This alternative that offers no alternative at all completely negates the goal of the DMA. The European Commission designated Apple as a gatekeeper because of their excessive fees and anti-competitive terms. Apple has proposed an unworkable alternative that developers would have to be locked into until the end of their businesses. Essentially, Apple is rendering the DMA’s goals of offering more choice and more control to consumers useless.

In the hours since Apple dropped this update, developers have frantically plugged in their businesses’ numbers into Apple’s online ‘fee calculator’ only to see their worst fears confirmed. Apple has the control and they are confident that the European Commission will let them keep it. 

Earlier this week, thanks to the clear language in the DMA, we shared how we plan to offer customers in the EU more choice, more control and better experiences. Today, that future is less clear. And it comes down to a fundamental question: Will the European Commission follow through with its intent to right-size Apple’s abuse of power? Or will the DMA be nice in theory, but in practice, have no substantive meaning for most developers?

All that is required is enforcing the very law many worked so hard to accomplish. The ball is in your court, European Commissioners, and once and for all you must reject this blatant disregard of the very principles you worked so hard to establish.

Holding Apple Accountable: The Future of the Internet Economy Depends On It

September 18, 2023

Five years ago, I sat in a conference room with key members of our legal team, several antitrust experts and Spotify founder & CEO, Daniel Ek. The topic at hand: Apple denied Spotify’s app update and sent a new set of restrictions that would once again further limit our ability to conduct business in its app store. After careful consideration and lots of hand wringing, we decided we’d had enough. So weeks later, we took a step that seemed almost impossible but totally necessary: fight back against one of the biggest, most powerful (and beloved) companies in the world to protect the future of the internet economy. 

Of course, we did this because Apple’s practices were harming Spotify, but we also did it because we believe companies should be able to compete to the very best of their ability for the hearts and minds of consumers. And we also believe consumers should have access to all the information they need to make better, more affordable choices for them and their families. Sounds pretty reasonable to me. But sadly, these beliefs are in direct conflict with how companies, like Apple, have built their businesses to benefit their bottom lines. 

This isn’t some empty warning—the world is moving faster than ever. Every day that passes without regulatory intervention, consumers continue paying too much, many developers’ dreams die on the vine under a 30% tax they can’t afford and Apple’s monopolistic roots take an even stronger hold. 

Five years later, while we are finally seeing some momentum in Europe, there has not been enough progress worldwide. Apple has continued to enjoy—and profit from—the status quo while everything else in the world has seemingly advanced forward. In the absence of meaningful government action, Apple gets a free pass to do whatever it pleases and consumers are paying the price. 

This is incredibly frustrating—especially when I think about how many consumers around the world are being impacted. Apple denies consumers’ ability to choose for themselves, forcing them to pay more for apps, limiting their user experience and preventing them from hearing about cheaper options. 

It’s even more frustrating when you realize the actual reason Apple is doing this: to protect their own bottom line. As their product sales continue to slow, their services business becomes even more critical to their financial performance. So to defend their multi-trillion dollar monopoly, they are pouring even more resources into maintaining their stranglehold over the App Store. 

We feel this acutely at Spotify. As a company that always focuses on building a simple, intuitive and seamless experience for users, Apple’s artificial constraints are stifling and we know our users deserve better. 

Recently, we launched audiobooks on Spotify and we were beyond thrilled to connect authors with millions of fans. But Apple stood in the way and our engineers were forced to create a complicated, multi-step process for audiobooks that users don’t want or deserve. It was a subpar experience, that honestly, we were embarrassed to deliver but felt bullied into. (If you want to see what we wanted to deliver vs. what we had to, check it out here.)

But that’s not all. Outside of the audiobooks issue, we can’t do the following things on Apple: 

  • Tell customers what our prices are to upgrade Premium membership options;
  • Let our customers request an email or other communication telling them about the ways they can save money; 
  • Provide our customers with different payment options beyond what Apple mandates (e.g. a credit card or PayPal, etc.); or
  • Deliver new product enhancements or introduce new features to our customers without Apple’s explicit approval. 

In many cases to get these approvals, we first have to share our proprietary strategies with Apple—our competition—and there are no restrictions on what Apple can do with that information. I don’t know about you, but I’d prefer not to be forced to share sensitive business plans with our biggest competitor, giving them insights from which they can copy, learn and gain an unfair advantage. But that’s our reality as well as many other developers who also compete with Apple. 

Apple also picks and chooses which app developers in the App Store have to pay them a 30% tax. Often, customers end up paying this extra cost. In contrast, Apple’s own apps don’t have to pay this tax (like Apple Music), and they come pre-installed on the iPhone so consumers see and pay for Apple’s apps first.

I am proud that Spotify has helped to give a voice to a growing coalition of app developers big and small who are impacted by this behavior. But when does the talking stop and action finally start?

Knowing that Apple is not just going to change on their own volition, regulators in Europe have taken up the mantle to intervene in Apple’s app store dominance. With the passing of the Digital Markets Act (DMA), Europeans may start to feel relief soon, assuming Europe delivers effective enforcement.  

In the UK, Parliament is working on the Digital Markets, Competition and Consumers bill (DMCC), which will similarly target dominant companies like Apple and ideally force them to compete more fairly. I am hopeful that it will have the impact consumers need and deserve. 

And in the US, we also see light on the horizon with Congress poised to reintroduce the Open App Markets Act – a bill that would require Apple to stop its practices that prohibit other companies from providing options for consumers to pay in a variety of ways and letting companies like Spotify talk to customers directly. The fire has also been lit in countries like Japan, South Korea, and Brazil, which are realizing that Apple has been dictating the rules for far too long. 

Someone recently asked if we could win this fight. I truly believe that regulators will make the changes needed for a better and vibrant internet. There is a lot at stake and it goes beyond music, beyond apps, beyond even the companies that exist today. This fight is about shaping the future of the internet.

This all assumes, however, that Apple will take these actions seriously and demonstrate a commitment to changing their ways and allowing for competition that they’ve long avoided. We are working closely with regulators around the world but it will take all of us to ensure real and lasting change is made. 

Visit Time To Play Fair to learn more.

America Must Take the Lead in the Fight Against Tech Gatekeepers

April 19, 2023

As a Swedish entrepreneur, I’ve long admired the American marketplace, where principles like innovation, competition and initiative reign supreme. It’s home to some of the most successful companies around the world because of these factors. When I founded Spotify almost 17 years ago, I believed in many of these same principles. If you can build a better system and if you work hard enough and innovate like crazy, you might just have a real shot at changing an industry for the better – even one as long established as the music business.

But as any entrepreneur can tell you, building a business is full of twists and turns. While I expected some of these challenges, the one I didn’t anticipate is the ongoing fight for fair competition as the digital marketplace has taken shape.

Last year, Congress had an opportunity to address this very issue by passing the Open App Markets Act, a bill led by Democratic Senator Richard Blumenthal and Republican Senator Marsha Blackburn, which aimed to rein in clear abuses by gatekeepers like Apple. Despite broad bipartisan support and overwhelming approval from the Senate Judiciary Committee, Congress did not take it up before the end of the year. Today I’m in Washington to urge the new Congress to take a leadership role and pass the Open App Markets Act to promote competition by providing basic checks on the anti-competitive behavior that’s harming both developers and consumers.

It’s not easy to decide to go head-to-head with Apple – a company that makes some of the world’s most beloved products. Yet, it’s a choice that we felt we had to make because put simply, Spotify and countless developers across the world want to be able to speak to our customers and compete fairly for their business. Apple prohibits competition by not allowing developers to discuss new products, features, and deals with their own users. For instance, Apple promotes deals for Apple Music to Spotify customers, but denies us the same privilege. What’s even more unbelievable, is that we can’t even tell our users the basics of how to sign up for a Spotify subscription or how to purchase an audiobook. This leaves customers without the ability to make informed choices about the services and pricing options available to them. And we aren’t the only ones feeling this impact. I talk to developers daily being disadvantaged by the small number of gatekeepers controlling the internet. 

Left unchecked, any company doing business through an app store lives and dies at the mercy of whomever is the gatekeeper at the time. It’s like leasing retail space from one of the few landlords in town who can charge a huge rent, change any term of the lease at any moment’s notice, place its own competing store right next to yours, and then prohibit you from sharing any promotional signs or advertisements that may reveal cheaper prices to customers or any benefits that would enhance their experience in any other location.

It’s impossible to deny that the phone and tablet have become the most common gateways to the internet, and Apple played a major role in making this possible. But the internet was never built to be controlled by a small number of dominant players. Under this current system that enables gatekeepers to dictate their own self-serving terms, consumers often end up paying more. Additionally, any aspiring entrepreneur wanting to create a company not beholden to these arbitrary rules really doesn’t stand a chance. 

While I am fortunate that Spotify has been successful despite Apple’s stranglehold, I know that many others aren’t so lucky. In Europe, the Digital Markets Act is a monumental step in the fight for fairness, entrepreneurship, and digital innovation. Other countries, including the UK, South Korea, and Japan, are also pursuing stricter regulations to curb the dominance of gatekeepers. But with no action here in the States, I worry that America risks falling behind, which will ultimately lead to severe consequences for innovation and consumers alike. This is especially troubling given that the United States has long played a leadership role on the global stage and has extolled the values of open competition I believe so deeply in. 

This is why we’ve arrived at an inflection point with a clear choice: To fight for an open, competitive marketplace that fosters creativity and enables entrepreneurs to develop and promote their products, or to continue to allow a handful of companies to hold the keys to the internet and advantage themselves at the expense of others. I’m convinced that Congress passing the Open App Markets Act is the only real path to a fair digital future. Let us seize this pivotal moment to reshape the digital landscape, fostering a future of innovation, collaboration, and fair competition.

It’s Time To Act. The Internet Economy Depends on It

September 16, 2022

Spotify CEO Daniel Ek Speaking at an event in Brussels

In March 2019, Spotify took the bold step of filing a complaint against Apple with the European Commission for anti-competitive behavior and abuse of dominance in the music streaming market. For years, Apple has consistently tilted the playing field in favor of its own services to disadvantage rivals, stifle innovation, and make it harder for companies like Spotify to compete. 

But it’s not just Spotify who’s impacted.

Nearly every consumer now owns a smartphone and uses it as their primary means of accessing services on the internet, which means everyone is impacted, putting the internet economy at risk. 

Fast-forward to today, and the European Commission, while having built its own strong case against Apple over the last few years, still hasn’t brought the case to conclusion. This is especially problematic as we’ve seen Apple seek to circumvent or outright defy regulations in other markets around the world in order to evade meaningful changes to their behavior.  

This is why Spotify CEO Daniel Ek—joined by Global Head of Public Affairs Dustee Jenkins, General Counsel Eve Konstan, and others from our team—traveled to Brussels, the seat of the Commission, for a full day of meetings and events earlier this month. This included time with key Commissioners to ask that they deliver a robust decision against Apple as soon as possible, because the internet moves fast, and every day that passes without any action erodes companies’ ability to innovate on behalf of consumers—not just in Europe, but around the world. Remedies must be levied to drive impact. Otherwise, Apple will have no real incentive to change. 

But the Apple case wasn’t the only issue on our agenda. We shared our thoughts around the remarkable work the Commission has done to advance Europe’s digital economy, and the leadership role it has taken with the recent landmark tech regulations of the Digital Markets Act (DMA) and Digital Services Act (DSA). While we applaud these efforts, we don’t see the DMA specifically as a substitute to the case we filed in 2019. Instead, we view it as a much-needed complement and believe that a decision on our case is still key to ensuring significant and lasting change. 

We also spent time with students at Vlerick Business School, where Daniel discussed leadership, the importance of healthy debate, the challenges of continuous innovation, and Spotify’s relentless focus on speed and building culture and resiliency. He also talked about his desire to unleash Europe’s entrepreneurial potential and the role of business in driving meaningful solutions to some of society’s biggest issues. And realizing this is only possible when there is a level playing field. 

The day concluded with a Spotify-hosted reception that featured a fireside chat with Daniel moderated by renowned Brussels-based commentator Shada Islam and a musical performance by award-winning Belgian singer-songwriter and RADAR artist Meskerem Mees. During the conversation, Daniel reaffirmed just how critical it is to keep fair competition at the top of the Commission’s agenda, given the billions of developers and consumers who are at the mercy of gatekeeper platforms like Apple. 

Fair and open platforms enable better consumer experiences and allow developers to innovate, grow, and thrive. Spotify believes we have a duty to ensure that we’re helping to pave pathways to success for start-ups out there just looking for a shot. So we’ll continue to engage on these topics and advocate for an ecosystem in which fair competition is not only encouraged, but guaranteed. 

To learn more, please visit TimeToPlayFair.com