Spotify CEO Daniel Ek Responds to Apple’s Compliance with EU’s New Regulation

Spotify CEO Daniel Ek takes a more optimistic view on Apple’s compliance with the EU’s new Digital Markets Act

Apple’s New Regulation

Last week, Apple announced its compliance with the EU’s new Digital Markets Act, a move that has received criticism from several companies, including Spotify. Spotify CEO Daniel Ek, however, has struck a more optimistic tone, stating that the new law does not have a significant downside for Spotify’s business.

Positive Long-Term Outlook

During Spotify’s Q4 2023 earnings call with investors, Ek highlighted that the company can remain on its current terms with Apple, which presents potential future upsides that could be quite significant for Spotify’s business. While Ek did not provide specific details on these future upsides, he expressed confidence in the company’s ability to leverage the new competitive landscape.

Concerns from Criticizers

Spotify joins a growing chorus of critics, including Epic Games, Mozilla, and Microsoft, who have expressed concerns about Apple’s implementation of the new law. Many believe that Apple’s compliance with the letter of the law does not align with its intended spirit, aimed at fostering greater competition.

Apple’s Complex Terms

Apple’s compliance involves the introduction of a new Core Technology Fee, which mandates developers to pay a fee for each first annual install over the 1 million threshold, irrespective of the app distribution channel. Additionally, Apple will take a commission on digital goods and services occurring via external website purchases within seven days of an in-app link being tapped.

Spotify’s Response

Ek responded to Apple’s terms by publicly criticizing them as a “masterclass in distortion” and asserting that Spotify could not afford such fees to remain a profitable company. However, during the earnings call, Ek downplayed the immediate negative impact of Apple’s rules on Spotify, assuring investors that the company can continue to operate on the previous terms.

Potential Opportunities

Ek mentioned several potential opportunities that the new regulation could unlock for Spotify. These possibilities include the introduction of superfan clubs, alternative app stores, and the ability to communicate directly with customers in the app about new products, promotional campaigns, and events.

An Eye on Profitability

Spotify, which has yet to consistently achieve profitability, aims to retain as much in-app revenue as possible. The company’s recent quarterly earnings report showed a loss of €70 million. Ek believes that the loosened rules introduced by the EU’s regulation would enable Spotify to explore more innovative possibilities, potentially increasing revenue streams.

Hope for European Commission’s Action

Despite the positive outlook, Ek expressed the hope that the European Commission would take further measures to enhance the new regulation’s effectiveness. He believes that such action would be favorable for both consumers and creators, allowing Spotify to explore a broader range of possibilities in the iOS ecosystem.