Sun, Jul 03, 2016 - Page 16 News List

Spotify accuses Apple of stymieing competition

Bloomberg

Spotify Inc has accused Apple Inc of blocking an update to the Swedish company’s music streaming app to push customers towards its own competing service, according to a person familiar with the dispute.

Apple rejected the update after Spotify started encouraging customers to subscribe online rather than through the iOS mobile operating system, the person said, citing a letter that Spotify general counsel Horacio Gutierrez sent to counterpart Bruce Sewell on Sunday last week.

By encouraging users to sign up through the Web site, Spotify is seeking to avoid paying the 30 percent cut on the monthly subscriptions that are billed through iOS.

The Swedish company had managed to avoid diluting its income by charging iOS subscribers US$13 per month rather than the US$10 it charges its other customers. However, that made it a more expensive choice when Apple introduced its own US$10-per-month music streaming service in June last year. Apple has since attracted 15 million paying subscribers, compared with the 30 million that Spotify said it had in March.

Bruce Sewell, Apple’s general counsel, on Friday responded with a letter saying Spotify was seeking “preferential treatment,” according to a copy obtained by Bloomberg.

“This is Apple’s store, the rights of developers are at the mercy of the store owner,” Asymco analyst Horace Dediu said. “This is true for any shop in the world.”

An Apple spokeswoman declined to comment.

Spotify’s response to Apple Music was to offer a three-month subscription for US$0.99 to new customers signing up through its Web site. That prompted Apple to threaten to remove the app from its store, according to the letter. Spotify pulled an advertising campaign pushing the promotion, but also stopped allowing customers to pay via the App Store.

The practice of Apple trumping existing products with its own competing services has become known as “Sherlocking” in the app developer community. The name stems from Sherlock, a search tool on Apple’s desktop computer operating systems that in the early 2000s was updated to incorporate the same tools that an external application had started offering just a few months previously.

Global revenue generated by services and apps on mobile devices could total US$800 billion by 2020, from about US$300 billion today, according to Dediu.

Platform owners such as Apple and Google are only likely to capture about 10 percent of that, with the rest generated by direct sales within other apps or Web sites: Amazon.com Inc sales, Airbnb Inc bookings, Uber Technologies Inc rides and so on.

US Senator Elizabeth Warren criticized Apple’s influence this week, calling for more aggressive enforcement of antitrust laws.

Apple, Amazon and Google have used their market power to “snuff out competition,” the Democratic lawmaker said on Wednesday.

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