In a letter addressed to Loretta Lynch and Edith Ramirez (USAG and FTC Chairwoman, respectively) Senator Franken has raised concerns that Apple might be using anticompetitive behavior against the developers it allows on its development platform. Apple sells its own applications and services on the AppStore. Apple also allows competition to do the same. Since Apple hosts, presents, operates and provides the monetary transaction component between developers and the iOS customer, Apple charges a fee for doing so. It comprises 30% of whatever the developer decides the cost for the application or in-app-purchase will be. Some apps cost money. Others, like Spotify are free. Since Spotify doesn’t charge for the application, it has access to Apples entire customer base for free. That means whatever is presented in the Spotify application, has the propensity to be seen by millions of IOS users and Spotify doesn’t have to pay one penny for that to happen. Apple on the other hand does have to absorb the cost for hosting, presenting, maintaining and operating the systems that make it possible to provide the iOS user with a quality AppStore experience. Things like the rating system, iTunes, the record keeping system in the transaction process for a free application and the customer service overhead when the iOS customer has a problem with Spotify.
While Spotify doesn’t charge for the app itself, it has different levels of premium services that the iOS user can purchase inside the application. These are called in-app-purchases, and Apple gets 30% of whatever Spotify decides the cost to the iOS user will be. For the sake of transparency, I am one of those iOS users that pays for a Spotify subscription. So every month, Spotify gets money from my bank account through my iTunes account. That account is operated and maintained by Apple, who gets 30% of that monthly charge and makes sure Spotify gets paid as well. To my knowledge they haven’t missed one opportunity to make sure Spotify got their 70%.
In the letter, Sen. Franken addresses the often puzzling rules and restrictions of the Developer rules to which each Developer must read, understand and agree before publishing their application. It isn’t just about picking and choosing which applications have the propensity to meet the level of quality that Apple and it’s Customer demand from the iOS ecosystem. It is also about making sure the Apple branding effort isn’t affected in a negative way. It’s about making sure the AppStore platform isn’t abused by businesses who give away free apps that present information inside of those apps to purchase things outside of the AppStore, leaving Apple holding the bag for their advertising costs. It is about making sure that the iOS customer isn’t being abused by businesses who create the perception that their product or service is Apple approved.
- The Causality behind Frankens Letter
One of the issues Senator Franken addresses is the in-app-purchase and the boundary of protection that Apple provides the iOS user when using an Apple approved iOS Application purchased from the AppStore:
The Senators concern stems from the decision that Apple recently made to engage its own customers in Music streaming services, to compliment the musing buying experience that Apple has been providing for decades. This has music streaming services like Spotify very concerned. Mr. Franken states that Developers are restricted from creating advertisements, or Target marketing Apples customer with information that can be presented in a free app like Spotify. I called Senator Franken’s office in Washington, to see if he wanted to clarify his position that the Spotify should have the right to advertise its services on competing platforms or technology (like Android) in its application, and that Apple should pay for that since the Spotify application is free.
I haven’t received a call back.
I can certainly understand why a lobby exists to use government as a tool to keep businesses like Spotify from having to compete with Apple Music on Apples own platform. What I don’t understand is how the government can make the charge of anticompetitive behavior. Every developer that Apple approves becomes a possible competitor. Since Apple has approved millions of applications to be sold on the AppStore, they have approved millions of possible competitors.
Apple has approved applications that directly compete with its productivity applications like Keynote, Numbers and Pages. Both Microsoft and Google deploy their productivity applications PowerPoint, Slides, Excel, Sheets, Word and Docs on the AppStore.
Competition is a good thing. Ignorance is not.
Spotify knew that Apple was in the Music business long before they published their application on the AppStore. Through the research phase, through R&D and the coding process, Spotify knew that they were going to compete with Apple for Apple customers dollars when made the decision to publish their application on the Apple AppStore. While they certainly had the right to request that their application be considered for approval, they never had the right to be free from competition. Not from NPR, not from Pandora, not from Beats and most certainly not from Apple. If Spotify doesn’t want to compete with Apple for Apple customers in music, there is one sure fire way to make that happen.
Remove the Spotify application from the AppStore.