Apple responds to the EU and Spotify
Apple’s pissed. The closest thing I can remember to this is Steve Jobs’ open letter “Thoughts on Music” in 2007 – but this, this is something very different. You can feel and hear the tone of Apple and tell how upset they are about not only the 2 billion euro fine but also their continued battle with regulators in the EU.
At the heart of their argument is that Apple provided the hardware, software, and services that helped companies like Spotify become what they are. Yet, Spotify does not pay Apple for the use of most of the services they use to deliver a product on their platform. It’s true and really leans into the larger question of how much Apple or any company can squeeze value from their platform.
I know it’s a different business, but lately, I’ve come to think of the App Store as similar to credit cards. Credit card companies charge a fee, ironically named a discount, to retailers per transaction. Still, to most customers, the privileges of using a card are not only free but sometimes rewarded with discounts, points, or other benefits. Similarly, developers pay Apple to be in the App Store and pay fees on their sales, which Apple uses to provide its customers with a growing set of subsidized services like free operating system upgrades to the latest version of the iPhone. For Apple, what’s at stake is how they monetize the App Store and the iPhone, iPad, and other devices to provide other services we as customers see as free – like points on a credit card.
Of course, what makes this tough is that Apple Music competes with Spotify, and for Spotify to pay its competitor a 30% cut of its subscription payments makes it hard to compete directly on price. I think the question is not just about how Apple makes money from the App Store but also how owning the App Store allows it to prop up its other business interests, like Apple TV+ and Apple Music that can compete in the same stores as its competitors but without the cost burden.
