The Spotify music streamer complained about having to pay the so-called Apple tax. This is the 30% reduction that Apple derives from the revenues generated by the apps that use the payment system of the tech giant. This is why Spotify charges $12.99 a month, $3 more than the normal price, for an individual subscription in the App Store. And to make matters worse for the company, compete in Apple’s iOS app store with Apple Music. Due to the Apple tax, a subscription to Apple Music is cheaper than registering on Spotify from the App Store. However, outside the App Store, both music players have the same price structure. Spotify could decide to consume 30%, but this would considerably reduce profitability by reducing profit margins.
Spotify’s complaints led the EU competition commission to begin investigating the matter; If the commission fails, Apple may be forced to change its business practices and pay a fine of up to 10% of its global revenue. This means that Apple could be forced to write a check for $26.6 billion. In a related issue, earlier this year, the U.S. Supreme Court ruled that collective action against Apple could continue. The plaintiffs, in this case, claim that the Apple tax forces them to pay more for apps in the App Store due to Apple’s 30% reduction. But there is a slight difference with the argument of Spotify. The lawsuit says that because iOS users are blocked with the App Store (unlike Android users who can download apps), Apple is violating antitrust laws. However, potential Spotify subscribers can access the Spotify website to sign up for the service.
Apple Says A 15% Cut Is Needed On Only 680,000 Spotify Members
Apple submitted a filing to the EU today in response to Spotify’s claims. According to the German Der Spiegel, Apple claims to reduce 15% to just 680,000 of Spotify’s 100 million premium subscribers worldwide. These are members of Spotify who have converted from a free subscription with advertising to the premium service using the in-app payment system (IAP) of Apple between 2014-2016. The tax of 30% was applied to the first year of their subscriptions but was reduced to 15% per year after the first year. And those who switched from the free to the premium service after 2016 could no longer pay their subscription in the App Store.
According to reports, Apple also used the filing to respond to additional comments made by Spotify CEO Daniel Ek. The executive said that Spotify members who pay through the streamer’s website instead of the App Store do not receive e-mail or other messages sent by the music streamer and, in some cases, cannot update the app. In the filing, Apple allegedly rejected these allegations and stated it was not true. To refute the argument that it is a monopoly, Der Spiegel wrote that Apple pointed out that its smartphone market share in the EU is only 25% and that Apple Music is not dominant among streaming service providers.
Spotify is the most popular music streaming platform in the world with over 200 million members. About half of them listen for free using an ad-supported service level, while the other half pays for a premium subscription. The latter allows users to download music, play any song from the Spotify library and use unlimited jumps to browse previous songs that they don’t want to hear.
Spotify is not the only company that has complained about the Apple tax. At the end of last year, the Netflix video transmitter blocked new recurring iOS subscribers from using the App Store for a subscription. Netflix has told potential new and old members that they can register by accessing their website.
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