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Spotify's appeal against Apple is a major threat to the iPhone manufacturer



Spotify's decision to file a complaint against Apple before the European Commission, alleging that unfair competition should be taken care of by people in Cupertino.

At first glance, the music streaming company seems to have a legitimate complaint. In fact, what Apple claims to do is not so different from what led Microsoft to antitrust problems 20 years ago and what led to a $ 5 billion fine against Google last year alone.

If history is any guide, Spotify's complaint can result in such a big fine against the iPhone maker. This could also lead to restrictions that could hinder Apple's business services, which the giant of electronics advertises as a future. And the complaint can incite a parallel antitrust investigation here in the United States.

But maybe more importantly, Spotify's allegations ̵

1; any investigation that really gets into them – could spoil Apple's reputation with consumers. This could be extremely expensive for a company that has long benefited from public propaganda and hundreds of millions of dollars of free publicity that comes hand in hand with it.

Read This: Spotify to Fight Apple with an Antitrust Appeal for Concerns That Crushes Its Competitors

Spotify Will Fight Apple lucky. Although there are increasing appeals to deal with the dominance of major technology companies, advocates are usually focused on Facebook, Google, and Amazon.

Apple is often not included in the list of potential targets. It is not difficult to understand why. Apple has a huge number of fans and 20 years after it almost goes bankrupt, it is still perceived by many as an outsider. And while the iPhone maker is currently the second most valuable public company in the world, it does not seem to dominate the markets in the same way as other major companies.

Facebook is the dominant social network. Google owns the search market and most of the world's smartphones work with the Android operating system. Companies are expected to occupy more than half of the world's advertising market this year. Meanwhile, about half of all US ecommerce purchases are made through Amazon. Microsoft still dominates the PC operating system market.

In contrast, Apple will not control any remarkable industries. Its Mac computers have long had only a small part of the total PC market. IPhone can be one of the most popular smartphone lines in the world, but Samsung sells more phones in general and Huawei has almost outpaced Apple's market share. Apple Music may have raised Spotify's anger, but it's still a long second from Spotify in terms of subscribers.

But such high-level views underestimate Apple's real market power.

Apple has a monopoly over the iPhone app market

Depending on which research firm you believe, about 35% to 40% of the smartphones sold in recent months in the US were the iPhone. Again, depending on what business you believe, about 45% to 55% of the smartphones currently used in the US are made by Apple. In both cases, the number of Americans with iPhone is huge.

Despite the overall market share of smartphones, Apple's operating system runs 100% of iPhones that are used in the US and around the world. In general, you can not run an operating system other than Apple's iOS on the iPhone, and you can not run iOS on devices other than the iPhone.

Moreover, Apple controls the distribution of iPhone apps. Although there are a few exceptions, iPhone users typically need to get their apps from Apple's App Store.

Apple's control of the iPhone operating system and iPhones app store is similar to a railroad that serves as the only rail link for part of the country, said Matt Stoller, a member of the Open Market Institute, a research and advocacy group. which focuses on the dangers of corporate concentration. This railroad may not dominate the whole national market, but it is a monopoly for the area in which it operates.

Spotify and other app creators "can not reach their customers who use the iPhone except through the Apple App Store," said Stoller, adding that the App Store is a monopoly, at least one important set of customers Spotify. "

Apple seems to be abusing its power

Apple is probably abusing this monopoly. Unlike the Spotify musical application or the Google Chrome browser, Apple's competing apps – Apple Music and Safari – are built into iOS and preinstalled on the iPhone. IPhone users can not choose alternative apps to be their default settings; usually if they click on a web link, it will open in Safari, even if Chrome is installed. According to Spotify, Apple's Siri will still not play songs in its music app, but there are no problems playing songs in Apple Music.

Under Chief Executive Officer Daniel Eck, Spotify has filed a formal complaint against Apple with European regulators.
Getty

and Spotify claim that Apple is doing much worse than that. Apple requires apps listed in the App Store that offer subscriptions to use its payment service, for which Apple charges a 30% commission.

The company forbids developers to direct users to their websites to subscribe to subscriptions there.

So developers are faced with the choice – they can pay Apple's tax to make it easier for consumers to subscribe to subscriptions or save money and offer worse experience. The Apple fee can make competitive services uncompetitive. To compensate for Apple's fee, Spotify is charging its iPhone users $ 12.99 a month – $ 3 more than those who signed up for their website. On the other hand, Apple Music was not supposed to pay these fees, and iPhone users had the opportunity to subscribe to subscriptions in its application for only $ 9.99, Spotify says.

Moreover, Spotify says Apple forbids her to advertise or offer promotional prices for her service in her app. Also, the approval of Spotify's application updates has been delayed many hours ago, music streaming services said. For years, according to Spotify, Apple has blocked it from the Apple Watch app and still blocks it from offering an Apple HomePod smartphone application.

Apple's actions look similar to those of Microsoft and Google

These types of supposed actions are reminiscent of the anticompetitive and illegal actions that Microsoft and Google have discovered. In both cases, it was found that companies used their dominance over an operating system to give unfair advantage to their own applications or services.

In the case of Microsoft, he famously uses Windows to promote Internet Explorer and hinders Netscape's competing Navigator browser. At Google, she uses her control over Android and a Google Play store to get smartphone makers to make their browser and browser Chrome default apps on their devices.

Similarly, Apple has "dominating power over what is a vital commercial artery," Stoller said.

Spotify's complaint is just the beginning of what may be a long-standing investigation by the EU competition regulators. But even the possibility of such an investigation should be worrying for Apple CEO Tim Cook and his crew.

While US antitrust regulators are negligent about their obligations in recent years, the EC is much more aggressive.

The competition authority twice fined Google for unlawful misuse of its market power, last last summer, fining $ 5 billion as part of Google's investigation, forcing smartphone manufacturers to install their Android apps. She also fined Microsoft for more than one billion dollars for abuse of the Windows monopoly.

With more than $ 200 billion in the bank, Apple can easily afford such a fine. What may be more painful for her, however, are the limitations that the EC can place on its business. As part of its decision against Google, the EC ordered it to stop making smartphones install its applications as a condition of using Android and getting access to the Google Play Store. Regulators could also instruct Apple to stop giving preferential treatment to its own applications. Warren's call could be expensive for Apple

And if Senator Elizabeth Warren of Massachusetts had their way and attracted US regulators, they could do much more than that. Warren has called for the practice of companies that own a platform to be discontinued and participate in this platform. She specifically called Apple as a company that violates this principle.

Sen. Elizabeth Warren calls on antitrust regulators to break down tech giants, including Apple.
Scott Olson / Getty

In Apple's case, such a rule would mean that both app stores would not be allowed to work and offer applications that compete with apps listed there. So, the company can choose to run the App Store or Apple Apple, but not both.

While Warren will not become president, it is only part of the rising choir on this side of the Atlantic Ocean, calling on regulators to divide the technology giants. Even if she does not get to the White House, her ideas about what to do with them may influence who they choose next year.

The types of bans that Warren calls could hamper the growth of Apple's business. Much of the revenue from this segment comes from Apple's commissions from App Store sales and Apple Music subscription revenue. Later this month is expected to launch a post-paid video streaming service that will compete with Netflix and bring extra dollars for services.

As Apple's iPhone sales have started to decline, it is based on its services business to stimulate future growth. But regulators could undermine these efforts.

Apple may suffer more than the worst of PR

But the greater danger to Apple from Spotify's complaint could be caused by public relations. In the mid-1990s, before the antitrust process, Microsoft was one of the most respected companies in the US, and Bill Gates was one of the most admired business leaders.

But this case, which brought light to Microsoft's tactics and Gates' seemingly disparaging attitude to government oversight, damaged the reputation of both.

The antitrust trial against Microsoft has damaged his reputation and that of his then CEO, Bill Gates. market space for products from Google, Mozilla and, yes, Apple.

Today, Apple ranks among the most revered companies in the world.

And to a great extent the positive feelings and excitement that he generates among his many fans, brought the company millions, perhaps billions of dollars, of free and largely positive publicity over the years.

Thanks to this, the iPhone's marketing budget was small by the size of other consumer companies.

An antitrust complaint can make Apple's public perception of being a cool, consumer-friendly alternative to just another ruthless, purposeful corporation.

You can bet that Apple really does not want to confront this music.


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