Apple Stymying Competition by Blocking App Update, Says Spotify

Rejection Came After Spotify Urged Users to Subscribe Online Instead of Through iOs

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Spotify has accused Apple of blocking an update to the Swedish company's music streaming app in order to push customers towards its own competing service, according to a person familiar with the dispute.

Apple rejected the update after Spotify started encouraging customers to subscribe online rather than through the iOS mobile operating system, the person said, citing a letter that Spotify General Counsel Horacio Gutierrez sent to counterpart Bruce Sewell on June 26. By encouraging users to sign up through the website, Spotify is seeking to avoid paying the 30% cut on the monthly subscriptions that are billed through iOS. Recode reported about the letter earlier Thursday.

Spotify had managed to avoid diluting its income by charging iOS subscribers $13 per month rather than the $10 it charges its other customers. But that made it a more expensive choice when Apple introduced its own $10-per-month music streaming service in June 2015. Apple has since attracted 15 million paying subscribers, compared with the 30 million that Spotify said it had in March.

A Spotify spokesman declined to comment and an Apple spokeswoman didn't respond to a telephone call seeking comment.

"The problem is that there is not much that Spotify can do because it does not own the platform and Apple has already threatened to pull the app from the store entirely," said Richard Windsor, an analyst at independent researcher Radio Free Mobile. "Complaints to regulators cost a fortune and take years, neither of which Spotify can afford."

Spotify's response to Apple Music was to offer a three-month subscription for 99 cents to new customers signing up through its website. That prompted Apple to threaten to remove the app from its store, according to the letter. Spotify pulled an advertising campaign pushing the promotion, but also stopped allowing customers to pay via the App Store.

The practice of Apple trumping existing products with its own competing services has become known as "Sherlocking" in the app developer community. The name stems from Sherlock, a search tool on Apple's desktop computer operating systems that in the early 2000s was updated to incorporate the same tools that an external application had started offering just a few months previously.

-- Bloomberg News