The Spotify Apple Issue

Many people who follow tech know that Spotify has filed a complaint with the European Commission regarding the challenges that Spotify has doing business in the iOS app store.

I am very sympathetic to Spotify’s complaint. In my post last week on The Warren Breakup Plan, I wrote:

The mobile app stores, in particular, have always seemed to me to be a constraint on innovation vs a contributor to it.

Spotify has a huge user base and brings in billions of dollars of revenues every year but it has a challenging business model. Let’s say that 70cents of every dollar they bring in goes to labels and artists. That seems fair given that the artists are the ones producing the content we listen to on Spotify. But if they also have to share 30cents of every dollar with Apple, that really does not leave them much money to build and maintain their software, market to new users, pay for servers and bandwidth, and more.

You might say “well that’s what they signed up for” and you would be right except that their number one competitor is Apple. So their number one competitor does not pay the 30% app store fee, meaning that they have a competitive advantage.

But this is about more than money. If you look at the web page Spotify put up to explain how challenging it has been to do business with Apple, you will see numerous instances of Apple not approving app upgrades.

We see this with our portfolio companies a fair bit too. Apple has complete control over what gets into their app stores and what does not. And the process can be arbitrary and frustrating. But that is how it works and our portfolio companies are reluctant to make any noises publicly for fear of making their situation with Apple even worse.

I am not a fan of Warren’s idea of breaking up companies like Apple.

I like my partner Albert’s ideas better which he expressed in a tweet last week:

A better set of policies to restore competition in the digital age would be (1) consumer right to API access (2) consumer right to side load apps (3) restored ability for small companies to go public / sensible regulation of crypto currencies. https://t.co/4bOFTnZ5NK

— Albert Wenger (@albertwenger) March 12, 2019

If it was the law of the land that any company could side load any application onto the iPhone or any iOS device, including third party app stores, we would have a much more competitive market with a lot more innovation, and Spotify would not have to go to the European Commission to deal with this nonsense.