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Taxing Apple
Weekly Roundups
April 15, 2024

Taxing Apple

Apple is one of the most powerful forces in the music business, but the company hasn’t been short of controversy in recent years. Alongside its innovative products and services—Apple has received criticism for its business tactics, particularly the Apple Tax. 

In turn, this has brought into question the morals and future of the company in the music industry. It’s also led to conflict between Apple and huge music companies, such as Spotify. 

In this article, we’ll break down the Apple Tax, its impact on the music industry, and how it will affect Apple going forward: 

What is the Apple Tax?

The Apple Tax—a fee levied on developers who sell digital goods through Apple’s App Store—is becoming more problematic over time. 

Apple typically takes a 30% cut of these transactions, a fee that has drawn huge scrutiny for its perceived anti-competitive nature.

 Critics argue this gives Apple an unfair advantage over competing services and stops innovation by limiting developers' ability to set their own pricing and payment methods.

And the critics are becoming more vocal. Most notably, Spotify. 

Spotify's Role in the Lawsuit

Among the many companies that have an issue with the Apple Tax—Spotify is the most vocal opponent. The company has accused Apple of using the App Store to harm competitors and promote its music streaming service: Apple Music. 

In addition, Spotify says the 30% commission gives Apple Music an unfair pricing advantage and forces Spotify to raise its prices for users who subscribe through the App Store. 

Spotify's dissatisfaction led to a formal complaint to the European Commission in 2019, leading to an antitrust investigation into Apple's App Store practices. 

But that’s not the only company that’s unhappy with Apple; Tinder, Epic Games, Basecamp, Netflix, and Amazon are other examples. 

The Possible Sanctions and Financial Implications 

Apple has encountered many potential financial issues from the Apple Tax saga. Of course, Apple is a gigantic company—with a revenue of $383 billion—so the damage is uncertain. 

However, in the last few weeks, the European Union—which has long been chasing Apple over the tax—fined Apple $1.95 billion for thwarting competition among music streaming rivals. This is a significant punishment after a five-year investigation into Apple’s business practices. 

Margrethe Vestager, the European Commission executive vice president who oversees competition policy, said: “For a decade, Apple abused its dominant position in the market for the distribution of music streaming apps through the App Store,”

“Apple will have to allow music streaming developers to communicate freely with their own users.” The size of the fine, she added, “reflects both Apple’s financial power and the harm that Apple’s conduct inflicted on millions of European users.”

In response, Apple said it would appeal the ruling: “While we respect the European Commission, the facts simply don’t support this decision,”

Furthermore, Apple has accused Spotify of being a monopolist. They argued it has a 50% share of the European music business. An Apple spokesman said: “Fundamentally, their complaint is about trying to get limitless access to all of Apple’s tools without paying anything for the value Apple provides,”

Spotify, however, praised the verdict by saying it “sends a powerful message — no company, not even a monopoly like Apple, can wield power abusively to control how other companies interact with their customers.”

Should We Be Surprised by the EU ruling? 

In short—no. The European Union has long held the position of the most aggressive regulator in the tech industry. The bloc has enforced regulations on data privacy, industry competition, content moderation of online content, and artificial intelligence. 

However, the fine is the largest against Apple since 2016 when the EU forced Apple to pay €13 billion for unpaid taxes to Ireland. The appeal process for this fine is still ongoing, showing how long these procedures can take. 

As such, this issue might continue for the foreseeable future without any implications for Apple. That said, Apple is already on bad terms with the European Union—with multiple ongoing lawsuits—which will be telling in years to come. 

Final Thoughts 

The battle over the Apple Tax is a critical moment in the debate over competition in the tech industry. Spotify—along with other companies—has become a symbol of resistance against what many perceive as Apple's anti-competitive practices.

As the lawsuit progresses, the outcome could have far-reaching implications for Apple, the App Store ecosystem, and the broader tech industry. However, the impact on the music industry will also be tremendous. 

Whether Apple will be forced to make concessions or maintain its stronghold on the App Store remains to be seen, but one thing is clear: the fight against the Apple Tax is far from over.

At Reprtoir, we offer tools to grow your music business. Chat with us today to find out more.

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