- Spotify’s war on Apple is all about economics.
- Spotify filed an antitrust complaint against Apple in Europe on Wednesday, complaining that the firm’s 15-30% tax on Spotify iOS subscriptions is anti-competitive.
- Numbers from Sensor Tower show that Spotify has handed $156 million in App Store fees to Apple over the past four years, although it’s taken steps to reduce that number.
- That may be small change for Apple, which makes billions in profit, but Spotify is predicting a loss of up to $407 million for 2019 and needs every dollar it can get.
Spotify is both a competitor and a nice little side-earner for Apple, with the Swedish streaming service handing over $156 million in subscription fees to the iPhone maker over the past four years.
According to estimates given to Business Insider by app analytics company Sensor Tower, Spotify made $670 million from subscribers on iOS between 2015 and 2018. Thanks to Apple’s levy on in-app purchases and subscriptions, Spotify was forced to hand over about a fifth of that revenue to Apple.
Spotify has declared war on Apple, announcing on Wednesday that it had filed an antitrust complaint with Europe’s competition watchdog. The crux of its argument is that Apple’s 15-30% levy on in-app purchases and subscriptions is anti-competitive and gives Apple’s own music streaming service, Apple Music, an unfair advantage.
The chart below gives an idea of the economics behind Spotify’s fight with Apple.
It shows an estimate of how much revenue Spotify makes from its iOS subscribers and how much Apple skims off the top, according to Sensor Tower’s data.
Note that Apple took its biggest cut in 2015 and 2016, when Spotify was the top-grossing app globally on the App Store, according to Sensor Tower. It was also before the impact of Spotify circumventing Apple’s 30% levy began to kick in.
After 2016, you can see a substantial dropoff in Spotify’s recorded iOS revenue. That’s because Spotify began driving subscribers to its website to pay for its premium service, rather than the App Store.
It’s hard to calculate how much Apple missed out on as a result of Spotify’s workaround, but back-of-the-envelope maths suggests it could be as much as $98 million over four years.
In total then, Apple could have made $254 million from Spotify over the past four years, rather than $156 million. (We got to that figure by calculating the mean of Apple’s Spotify revenue from 2015 and 2016, when it earned the most, and then multiplying it by four years.)
Although $156 million is small change for Apple, which posted a profit of $60 billion in 2018 financial year, Spotify needs every dollar it can get. The firm has predicted an operating loss of up to €360 million ($407 million) for 2019.