Apple accuses Spotify of paying tax on less than 1% of its paid subscribers

Apple also claimed that Spotify has not paid up for premium subscribers who signed up over the last three years.

Apple and Spotify have been tussling quite a bit over the antitrust case with the European Union that accuses the iPhone-maker of harming consumer choice and stifling innovation via the rules it enforces on its iOS App Store. Spotify filed the case against Apple with the European Commission (EC), a regulatory body responsible for keeping competition fair and non-discriminatory, in March this year.

Spotify stated in its complaint that besides the control Apple enforces on the App Store, the fees it charges for payments made through the App Store was making it difficult for rival streaming services to compete for music subscribers.

Apple competes directly with Spotify with its own music streaming service - Apple Music.

In response to this, Apple disclosed that Spotify pays Apple a “15% fee on about 680,000 of its 100 million premium customers”. At the moment, Spotify has about 217 million customers including those availing its free service.

These premium customers that Apple is talking about are those who are paying a monthly fee for Spotify or are in a free trial of Spotify’s premium service that is ad free.

Apple currently charges a 30% fee on in-app purchases made through the App Store and this fee comes down to a 15% on subscription purchases after the span of a year.

In return for charging this fee, Apple handles billing and payments across more than 100 countries.

One part of Spotify’s problem with Apple was these fee and Apple has responded to this by saying that Spotify does not pay the 30% fee on its premium subscribers currently and those who are actually affected by the fee Apple imposes on Spotify users is only a small fraction.

To explain this Apple said that Spotify used the App Store billing system for two years, between 2014 and 2016, and all the 680,000 premium subscribers Spotify signed on over those two years have been paying for over a year. Thus, Spotify was paying Apple the lower 15% fee on these 680,000 users.

Apple also added that Spotify has not paid the company for any of the premium subscribers who signed up over the last three years since they have not been using Apple’s in-app purchasing system.

Apple filed its response on 31 May and Spotify has, so far, declined to comment on this. While the documents were not public earlier, German newspaper Der Spiegel reported Apple’s figures on 24 June.

Spotify’s problems with Apple also include the issues the Swedish company had with the steps Apple took after Spotify quit using its in-app payment mechanism. Spotify alleged that Apple tightened its App Store rules after 2016 barring app makers from “providing links or buttons to external web pages showing users how to pay for an upgrade to premium subscription outside the App Store”.

Spotify also stated in its complaint that Apple does not allow the app on its HomePod.