Spotify wants to get into audiobooks, but says Apple is in the way

Spotify wants to get into audiobooks, but says Apple is in the way

Daniel Ek, CEO of Spotify, wants his company to be the premier outlet in the audio world. But as he pushed the streaming subscription service beyond music and podcasts to audiobooks, he ran into a familiar obstacle: Apple.

In the past month, Apple, the App Store’s gatekeeper, has rejected Spotify’s app three times, saying its new audiobook offering violated Apple’s rules on how developers can communicate with customers about online purchases.

The rejections are the latest skirmish in a long-running battle between Spotify and Apple. For nearly seven years, the companies have argued over the rules Apple imposes on apps and its practice of charging a 30 percent fee on the services and products the apps sell.

Apple’s role as a make-or-break arbiter of apps has long frustrated app developers, especially companies like Spotify that compete against services like Apple Music.

Spotify sees the conflict over audiobooks as another example of how Apple is stifling competition and stifling rivals. Since filing an antitrust complaint against Apple in Europe in 2019, Spotify has urged regulators and lawmakers to give app developers the freedom to tell customers about ways to buy products and services outside of Apple’s payment system, which many apps are required to use.

The audiobook fracas provides an insight into the challenges developers face when trying to introduce new features. To comply with Apple’s rules, Spotify included its legal team in the product development process and tapped a former startup founder with a law degree, Nir Zicherman, to lead the effort.

Apple initially approved the new feature in Spotify’s existing app, before later reversing course, sending Spotify into what it considered a Kafkaesque world where Apple simultaneously told the audio company that it could send customers emails about online purchases, but could not give a button inside. their app to request these emails. After a series of rejections, Spotify said Apple on Tuesday approved a version of its app with the audiobook experience.

An Apple spokesman said the company had no objection to Spotify adding audiobooks, but he added that Spotify could not do so by circumventing rules against providing URLs and language that encourage customers to make out-of-app purchases.

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Mr. Zicherman and three colleagues said in an interview with The New York Times that they were working hard to add audiobooks to their app in accordance with App Store guidelines.

“These are actually hurdles that we have to work around,” Mr. Zicherman said.

The challenges with Apple, which also sells audiobooks, contrast with Spotify’s experience on Google Play, a store for apps on the company’s Android operating system. Google approved Spotify’s Android app, allowing listeners to click a button and receive an email on how to buy audiobooks online.

Apple has made the App Store a centerpiece of its strategy to evolve from a business driven by device sales to a business driven by the sale of software and services. The store, which is estimated to generate about $24 billion in annual revenue from the 30 percent fees it collects, has little overhead and generates profits of nearly 80 percent, according to testimony and documents discussed as part of an antitrust lawsuit filed by Epic Games.

Apple claims that the distribution it provides across billions of iPhones and iPads has helped Spotify and other apps succeed. It says routing app purchases through the payment system protects users from fraud and keeps the App Store safe for users. A spokesman noted that UK antitrust authorities decided not to investigate competition issues in the music streaming industry earlier this year.

In recent years, Spotify and other developers have brought complaints about Apple’s rules and fees to antitrust authorities and lawmakers in the hope that authorities will intervene. European regulators are more than three years into an antitrust investigation, and Congress is still considering laws that could ban Apple from requiring apps to use the payment system.

“Almost four years. It has been so long since Spotify filed a complaint against Apple with the European Commission, and we are still waiting for a decision, Ek said in a statement.

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Last year, the developers earned their biggest wins against Apple in a US court and in Japan. To settle separate cases, Apple agreed to relax the rules and allow developers to communicate with customers about making purchases outside of the payment system.

Spotify saw the new quotas as an opportunity to fulfill Mr. Ek’s audiobook ambitions. Instead of giving Apple a 30 percent share of audiobook sales, which would make the business too expensive, they devised a plan to direct their customers to buy the titles online and then listen to them in the app.

The company contacted Mr. Zicherman to lead the effort. Mr. Zicherman joined Spotify in 2019 through the acquisition of a podcasting company he co-founded called Anchor. He believed the audiobook format — which saw sales rise 25 percent last year to $1.6 billion, according to Publishers Weekly — was poised for “massive growth.”

Mr. Zicherman said he and his team worked with Apple’s rules in mind. Two lawyers were in the room throughout the development process to help them stay within Apple’s boundaries.

They developed a nine-step process for buying an audiobook. When customers clicked on audiobooks, they were taken to a screen with a lock icon above the audio play button. Pressing the play button took customers to a page where they could request an email to learn more about purchasing a book. The subsequent email included the book price and a link to purchase it.

Mr. Zicherman said the experience resulted in more steps than his development team wanted, but that the design followed Apple’s rules. It did not include any information about pricing, and it did not link users to a website to complete the purchase.

In mid-September, Apple approved the audiobook update, Spotify said. Spotify launched the feature days later, announcing the 300,000 titles it made available.

Mark Mahaney, a Wall Street analyst who tracks Spotify for investment bank Evercore ISI, tested the new audiobook service. He found it cumbersome and required him to provide his payment information even though Spotify already had it. He complained to Paul Vogel, Spotify’s chief financial officer, in an email.

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“Why is it so bad?” Mr. Mahaney wrote. “And can you fix it?”

When Spotify later submitted an app update with features unrelated to audiobooks, Apple rejected it. App Store reviewers told Spotify that the audiobook offering, which had previously been approved, violated rules that require apps to use Apple’s payment system to unlock new features, according to Spotify.

Mr. Zicherman’s team changed the email customers would receive, removing the buy button they had previously included. They replaced it with an email that gave customers a link to browse Spotify’s audiobook titles.

Apple rejected Spotify’s change days later, saying that offering customers a button to receive an email about other purchase options violated App Store rules. An Apple spokesman said Spotify also had a discrepancy in an external link in its app, which sent people to a different URL than the one Apple had approved. Spotify said the link was unrelated to audiobooks and that it has resolved the issue.

Mr. Zicherman said his team consulted with Spotify’s legal staff before deciding to remove the email phase of the audiobook process. Instead, they told listeners to go to Spotify’s website to buy a book.

“What we have now is effectively a dead end,” Mr. Zicherman said.

On Monday, Spotify said Apple had rejected Mr. Zicherman’s latest redesign. He and a team of product designers, engineers and lawyers worked until early Tuesday morning on four other options. They stripped away Spotify’s website and directions for more information about audiobooks, leaving customers to go online and figure out how to complete a purchase. The changes won Apple’s approval, Spotify said.

“You cannot buy audiobooks in the app”, it now says on the landing page. “We know, it’s not ideal.”

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