Tensions are rising in the music business ahead of the expected launch of Apple’s rumoured music streaming service later this year: Sources in the music streaming business privately think that Apple’s App Store pricing is anti-competitive, according to a report in The Verge.
Apple takes 30% of all App Store sales as standard — whether that’s in-app purchases, games, shopping, or subscriptions. Any streaming service that relies on paid subscriptions therefore has to give up 30% of subscription income to Apple. “Spotify and many others in the music industry believe Apple’s App Store tax gives them an unfair advantage over the competition,” The Verge reports.
Apple is expected to launch a streaming service this summer based on its $US3 billion acquisition of music company Beats — and if it does, this levy will make it extremely difficult for its competitors to compete on price.
The Verge’s Micah Singleton spoke to multiple anonymous industry sources who expressed concerns that this gives Apple an unfair advantage:
- “I get that there’s some administrative burden so they should get some kind of fee, but 30% is f–king bulls–t,” said one.
- “They control iOS to give themselves a price advantage … Thirty per cent doesn’t go to any artist, it doesn’t go to us, it goes to Apple,” said another.
- A third commented: “The biggest distributor in the world is trying to engineer the music industry to their satisfaction… People are going to wake up and not like it.”
We have reached out to Apple and Spotify for comment, and will update if they respond. But this displeasure with Apple could have real legal implications.
Apple’s move into the music streaming business is already coming under scrutiny from the US Federal Trade Commission (FTC). According to a previous report on The Verge, it is “pushing major music labels to force streaming services like Spotify to abandon their free teirs.” Such a move would reduce the competition for Apple’s Beats when it launches — and open the company up to allegations of anti-competitive behaviour in the process.
It’s worth noting though that Apple isn’t the only one fighting free music streaming. The labels themselves have soured on the notion, with Sony Music CEO Doug Morris saying he equates”‘free’ with the decline of the music business.” Singer Taylor Swift has also famously pulled her new music from free streaming service Spotify.
But the fact that Apple may have the sentiments of broader music industry behind it doesn’t mean its App Store pricing isn’t potentially anti-competitive. The newly-launched Tidal premium streaming service has already been forced to up its prices by 30% for users subscribing through the iOS app to offset the fees that Apple charges.