The conflict between Spotify and Apple might have some serious consequences for Apple in case Spotify wins. Spotify has filed a complaint with the European Commission against Apple for unfair competition saying that its services are taxed too much while Apple can offer lower prices because Apple doesn’t have to pay 30% in taxes. Spotify mentions other services that do not pay similar taxes, services such as Uber.
Spotify must pay 30% of the subscription cost to Apple for the first year of service, after which the fee goes down every year. Spotify thinks this tax is abusive because Spotify has to increase the subscription price on the App Store. While the subscription has a price tag of $10 if you subscribe from the web browser, on the App Store the price of a Spotify subscription costs $13 in order to compensate for the “Apple tax”. The rival service Apple Music costs $10.
According to Spotify, other services that offer the possibility to pay on the App Store, such as Uber, and other services, do not pay 30% of each transaction to Apple. Spotify also benefits from a free version of the service that includes ads, and Apple does not get a share of this revenue.
If the European authorities decide that Apple is violating European laws, Apple might risk getting a $26,6 billion fine, which is a world record after the $5 billion fine Google has received last year. This sum represents 10% of Apple’s world wide income.
While Spotify continues to be the leader on the music streaming market, hitting the 100 million monthly subscribers and 117 million users of the free version milestone, Apple only has 56 million world wide subscribers. In the United States, Apple Music has managed to surpass Spotify: Apple Music has 28 million subscribers while Spotify has 26 million.
The 30% tax Apple requires for transactions that take place through the Apple App Store is an industry standard, all digital content stores require similar fees, such as Google Play Store, Steam, Xbox Live, PlayStation Network and others. Some services, such as Netflix, removed the possibility of subscribing using the App Store in order to avoid paying such a tax, and users are encouraged to subscribe using a PC or a web browser.