Ek is worth US$3.7bil (RM17.49bil) while most Spotify artistes earn less than US$1,000 (RM4,729). Is he the right person to talk about greed? — Photo by Sara Kurfeß on Unsplash
Daniel Ek, founder and CEO of music streaming service Spotify took to LinkedIn on Friday to complain long and loud about Apple’s new policies for its app store in Europe.
Ek may have a point that what Apple’s doing is questionable, if not actually illegal. But he is absolutely the wrong person to make that point.
Spotify has been publicly lambasted by musicians ranging from the late David Crosby to Radiohead’s Thom Yorke, who say the company makes it nearly impossible for musicians who aren’t superstars to make a living at their craft.
So when Ek turned around and made almost the same complaint about Apple’s treatment of app developers, the messenger’s reputation may have drowned out the message. It’s a lesson every business leader or entrepreneur should consider before sharing an opinion in a public forum.
What’s Daniel Ek’s problem with Apple?
Apple has long taken a firm stand against “sideloading” – allowing users to install apps on their iPhones and iPads without going through the Apple App Store. Apple’s prohibition on sideloading has come under scrutiny, both in the US and the European Union on antitrust grounds. Recently, the EU passed the Digital Markets Act (DMA). When full enforcement begins on March 1, Apple will be required to allow both sideloading and non-Apple payments on its devices.
In view of the new law, Apple rolled “new business terms” for developers who want to take advantage of their newfound right to have their apps installed and/or receive payment without going through Apple’s app store in the European market. Developers can adopt the new terms, allowing their apps to be sideloaded, or else stick with existing terms and restrict themselves to Apple’s App Store, the company explained.
But, Ek argued, the choice Apple is offering isn’t really a choice at all. At first glance, the new terms might sound pretty good. Commissions are reduced from 30% to 17%, or 10% after the first year. Payments processed outside Apple’s app store would incur no additional fee. But then there’s this: “iOS apps distributed from the App Store and/or an alternative app marketplace will pay €0.50 (RM2.57) for each first annual install per year over a one million threshold.”
That last fee could be the deciding factor for many developers, as many have pointed out. Keep in mind that any popular app will get updated at least once a year, which means developers with more than a million installs will have to pay that fee per user per year in perpetuity. It also means that small developers who choose the new terms could be putting themselves at financial risk, especially if their app is free to download.
Imagine a couple of young app entrepreneurs working away in a garage who think they have a winning concept and decide to release it to see if people like it. Let’s say their app goes viral in Europe, and 10 million iPhone users there download it. If they’ve chosen the new terms, those developers now owe Apple €4.5mil (RM23.15mil).
As Ek says, this calculation may well scare most developers out of choosing the new business terms, thus rendering Europe’s new law irrelevant because virtually everyone will opt out of it. “While Apple has behaved badly for years, what they did yesterday represents a new low, even for them,” he wrote.
Asked for comment, an Apple representative sent this statement to Inc:
“We're happy to support the success of all developers – including Spotify, which has the most successful music streaming app in the world. The changes we're sharing for apps in the European Union give developers choice – with new options to distribute iOS apps and process payments. Every developer can choose to stay on the same terms in place today. And under the new terms, more than 99% of developers would pay the same or less to Apple.”
Why is Spotify’s CEO the wrong person to complain about Apple?
Ek is right that Apple’s new business terms look like they’re intended to circumvent a law that the company doesn't like. But he may be the last person in the world who should make that point.
His LinkedIn post, and a longer statement on Spotify's website, argued that app developers are faced with an impossible choice, because accepting Apple’s new business terms would make it impossible for app-makers – including Spotify – to earn money. “Spotify itself faces an untenable situation,” he wrote. Which is a beautiful irony, because that’s exactly what vast numbers of musicians have said about Spotify.
The company has been a boon to large record companies, allowing them to earn money on their large catalogues of music. But most musicians say it’s been a financial disaster. Since most are paid less than half a cent for each stream of their songs, according to one calculation, it would take around 360,000 streams a month just to earn minimum wage.
Meantime, streaming services in general and Spotify in particular have destroyed the market for album sales – once an important source of income for musicians. (Streaming payment formulas are devilishly complex. Here’s a closer look from music analytics company Soundcharts if you want to dive into the details.)
Inevitably, this has coloured some people's reactions to Ek's LinkedIn tirade. “When you start to pay artists properly we might listen.....” commented PwC strategic advisor Colin Payne, for example.
Ek’s net worth is estimated at US$3.7bil (RM17.49bil), while 97% of artists on Spotify have earned less than US$1,000 (RM4,729) from their music there. They can’t be pleased with this, and yet, just like developers on the Apple App Store, they can’t afford to stay away.
Given these realities, Ek should have known how bad it would look for him to call out another tech company with outsized power for being too greedy. You can learn from his example. Next time you want to comment publicly on what another company does, ask yourself whether it’s the right thing to say – and also whether you're the right person to say it. – Inc./Tribune News Service
