What does the EU’s largest fine in history against Apple mean?

The EU is finally here for real.

According to reports from the Financial Times and Bloomberg, the European Commission will fine Apple 500 million euros (approximately RMB 3.88 billion) for the same old-fashioned issue: antitrust.

Apple is suspected of banning music apps from providing cheaper subscription methods to iPhone users, violating EU antitrust competition laws and regulations in the streaming music market.

The specific results are expected to be announced in early March. Once the penalty takes effect, it will be the first fine received in the long-term game between Apple and the EU. EUR 500 million will also become the largest fine against a technology giant in the history of the EU.

At this time, the balance of victory seems to have shifted significantly to the other side of this tug-of-war for streaming music – Spotify.

Pulling out sky-high fines for more than 10 years

Things have to start with Apple’s subscription and charging system for app developers.

The App Store is the epitome of Apple’s ecological features: safe and secure; of course there is another way of saying it: restricted and overbearing. Generally speaking, application software entering the App Store will encounter two major limitations:

  • Software developers can only push subscriptions or purchase services to users through the App Store
  • Apple will take a 30% commission from the

The latter is also nicknamed the "Apple tax". It is an important component of Apple's overall revenue and the source of long-term complaints from many software developers. For Apple, it is a moat for security and revenue, but in the eyes of competitors in the same market Yes, this is a restriction and a monopoly, and global music streaming giant Spotify is one of the companies most dissatisfied with this policy.

In January 2013, Spotify took the lead in speaking out against App Store restrictions and commissions. Two years later, it began to cooperate with the European Commission in an antitrust investigation. In September of the same year, Spotify even sent mass emails to iOS users to encourage them to bypass the App Store and go to the official website. Website paid subscription,

And in March 2019, it formally filed a complaint with the EU antitrust regulator, accusing Apple of being a monopoly in the competition in the streaming music market: Spotify found that they were unable to push cheaper products to iOS users through app notifications other than the App Store. Paid subscription plans.

Spotify has met with the European Commission 65 times over the past 10 years, trying to convince the EU that Apple's rules impose restrictions on streaming music services: both for businesses and for users.

Spotify has had two main demands over the years:

  1. Apple should have an alternative to "in-app purchases" on iOS
  2. Apple should allow developers to communicate directly with consumers.

It was not until this month that the EU’s official announcement at the beginning of the article finally turned years of shouting in the air into real money and black words on paper.

Subscription system, a big cake that everyone says is sweet after tasting it

Spotify's ability to persist in promoting antitrust investigations for many years is deeply related to its company size and profit methods.

First of all, it is the world's largest paid music streaming service, so it is affordable; secondly, the subscription system is the biggest foundation for its profitability, so it must be established.

Different from mainstream music software in China, Spotify is completely two software before and after starting the subscription. Before payment, Spotify is almost inoperable. There are ads, it can only be used when there is an Internet connection, there are only 15 popular playlists, other playlists can only be listened to randomly, and there are only 6 opportunities to switch songs per hour, etc.; after payment, In one sentence, 50 million songs are played at will.

The monthly rental fee is RMB 8-9 per month, and it can play and download 320kbit/s or even lossless audio. It is a cost-effective choice for many users and music lovers.

It is precisely the subscription system and the purchase of copyrights with nearly 70% of the revenue that have created Spotify’s dominance in the streaming music platform. The continuous revenue from the source + the generous investment that can only be gained by giving up = what makes the platform successful. way.

Best of all, this pattern can be replicated:

  • Since the implementation of the subscription system for Adobe series software, the overall market value has increased sixfold;
  • Netflix, which became famous for its subscription system, has always been the world's largest streaming media. Among the global technology companies with the highest per capita income, Netflix ranks first with US$2.49 million (approximately RMB 17.853 million).

These facts have also become the basis for Apple's tough response.

Spotify is currently the world's largest digital music company, with a 56% share of the European market; judging from Apple's official data, Spotify's share on iOS is even higher than on Android.

From the perspective of software design, Spotify uses thousands of APIs (program interfaces, including Bluetooth, notifications, background audio, etc.) in Apple's 60 frameworks, and has tested nearly 500 versions of its App through Apple's beta testing tool TestFlight. Experimentation with new features and functionality.

In terms of user scale, the Spotify App has been downloaded, re-downloaded or updated more than 119 billion times on Apple devices, and is available on the App Store in more than 160 countries or regions around the world.

Therefore, from Apple's perspective, Spotify's success is largely due to the ecological construction of the App Store, the user base of iOS, and all the tools and technologies provided by Apple.

The relevant person in charge of Apple revealed that the staff of Apple's App review team can usually complete the review and approval of 420 versions of the Spotify app within the same day, and often speed up the review at Spotify's request. These are considered small things that Apple has set up separately for Spotify.

For all these green channel hidden benefits, Spotify did not pay any fees to Apple.

Since Spotify chooses not to offer subscriptions in the app, it doesn't pay any commission to Apple. The App Store only charges developers commissions on paid app sales and digital goods and services consumed within the app. Under this model, 88% of active developers on the EU App Store do not need to pay commission to Apple.

Therefore, Apple believes:

  • The European Commission has no evidence that consumers have been harmed. The number of music streaming subscribers in Europe has increased from 25 million to nearly 160 million in eight years. This is a healthy curve with an average annual growth rate of 27%.
  • The European Commission’s nearly decade-long investigation has produced no viable evidence to explain Apple’s efforts to hinder competition in a booming market.

From this point of view, the EU's investigations and penalties will not promote competition, but may intensify Spotify's dominance in the European music streaming market.

Since the DMA (European Union Digital Market Act, designed to prevent monopoly, encourage new entrants, and protect competition) came into effect, Apple has been listed as one of the six "gatekeeper" companies. The App Store closure controversy that has dragged on for more than ten years has finally come to an end. The law can be followed, so there is a fine of 500 million at the beginning.

Some time ago, the App Store just ushered in an "epic" update. Apple announced that the Apple Store in the European market will allow downloading of apps from third parties starting in March and adjust the commission ratio for app developers.

The EU originally wanted to protect the interests of more app developers through antitrust, but with Apple's several measures in the rules, developers' income will not necessarily increase. Instead, some apps with large download volumes will need to pay more fees. , back and forth, the revenue of these companies fell instead.

Spotify's lawsuit is also a continuation after the App Store was forced to open up, but this time, the EU seems to be really taking action.

Indeed, a fine of 500 million euros will not cause substantial harm to this company with a market value of 2.8 trillion US dollars, but it is enough to show the attitude of the European Commission that it will no longer tolerate any business practices that conflict with the interests of the region.

The European Commission said Apple's anti-circumvention rules "are detrimental to users of music streaming services on Apple's mobile devices" and could lead to consumer confusion, leading to higher prices. Another action Spotify hopes the European Commission will take is to "prevent Apple from favoring its own services" because in overseas markets, especially in Europe, Apple Music's market share is closely followed.

If the fines and the bill take effect, local small companies will have more funds and energy to make innovations and breakthroughs in the field of music streaming to attract more iPhone users; if DMA can stop "Apple If tax is levied locally, platforms and software developers will have more ways to make money, not just in-app advertising revenue.

Of course, these are just if, based on Apple’s past experience and reasons for holding, they will definitely not take the path that the EU wants to take, and the antitrust battle between Apple and Spotify may continue for much longer.

# Welcome to follow the official WeChat public account of aifaner: aifaner (WeChat ID: ifanr). More exciting content will be provided to you as soon as possible.

Ai Faner | Original link · View comments · Sina Weibo