Apple Inc. (NASDAQ:AAPL) might be playing around the fire of another antitrust lawsuit with its new Apple Music service. The firm has not done anything wrong in its launch of its Apple Music; after all, this is a free economy and competition benefits the consumer. Yet, it appears that Apple might have set the stage to kick rivals in the streaming music business out of the market even before it created its own music-streaming platform.
Spotify Cries Out
The Verge reported yesterday that Spotify has cried out to its consumers to stop paying the 30% surcharge that Apple adds to their bills when they subscribe to Spotify through Apple’s App Store.
Apple takes a 30% slice of all App Store Purchases, and this includes apps, games, and services to which you subscribe. Vendors on the App Store must either increase their selling price by 30% or be ready to lose 30% to Apple when people make purchases. For Spotify, who has been operating at a loss, adding the 30% markup is the smart thing to do. Hence, when people subscribe for Spotify via the App Store, they’ll pay $12.99 instead of the $9.99 per month price.
In an email sent to consumers, Spotify noted clearly that, “in case you didn’t know, the normal Premium price is only $9.99, but Apple charges 30 percent on all payments made through iTunes”. Now, Spotify has created a web portal where users can subscribe to its service at the normal $9.99 price.
Apple Might be Crushing Rivals
Spotify’s plan to deliver its users from Apple’s yoke of a 30% surcharge echoes what Apple’s rivals in the music industry has been facing for quite a while. In May, the Verge reported that rival music services sees thes App Store 30% cut as anticompetitive. For one, Apple’s Music is a music streaming service and the 30% surcharge on rivals makes the Apple Music cheaper by comparison.
Secondly, there has been rumors that Apple has actually placed a target on Spotify’s back for quite a while. The Verge mentioned that industry sources claim that Apple is pushing record labels to force Spotify to drop its free-tier.
Spotify offers a free-tier and a premium version of its service, but Apple is doesn’t usually offer free lunches, in fact, it thrives on premium pricing. Hence, the move to force Spotify to drop its free tier might be a subtle attempt to level the playing ground for Apple Music. It appears that the only reason the plan did not succeed was a probe led by the U.S. Department of Justice.
Apple Doesn’t Need Another Antitrust Lawsuit
Apple has been at the center of many antitrust lawsuits lately. Late last month, a Federal appeals court agreed with an earlier ruling that Apple broke antitrust laws when it entered the e-book market.
Pandora is already hurting from the launch of Apple Music, and those firms that see drops in use may feel the need to go after Apple through the legal system. Benjamin Swinburne, who wrote a report on Pandora for Morgan Stanley, compared the launch to iTunes Radio.
“Although we do believe that Apple Music is a superior product compared to iTunes Radio, the iTR launch in September 2013 had very limited impact on Pandora’s reported listener hours,” he wrote.
That means that Apple may not have that much of an effect on Pandora for the time being, and the firm may not see the need to join Spotify in its complaints about Apple’s entry into the industry.
In another news, a U.S. District Court dropped a $532.9M fine that was earlier awarded against Apple; yet, the firm is likely to pay a new fine at the end of a new damages trial slated for September. Now, Spotify is screaming for help and Apple might do well to tread gently in the music streaming business.
Update 11:28 EST: Added info on Mr. Swinburnes Pandora Media Inc. report.