After Apple announced how it would comply with the European Union's new regulations, the Digital Markets Act (DMA), Spotify, a prominent critic of Apple, unsurprisingly came out, calling Apple's plans a "extortion" and a "complete farce." But in Spotify's fourth quarter 2023 earnings call with investors, Spotify CEO Daniel Ek struck a softer tone. He said that from an investor's perspective, the new law has no real adverse impact on its business because the company can continue to maintain its existing terms with Apple. In fact, "there may be considerable benefits in the future."
Companies such as Epic Games, Mozilla and Microsoft have also previously expressed concerns about Apple's implementation of the new law.
While Apple complied with the letter of the law -- which forced it to open its app ecosystem to new App Stores and other payment mechanisms -- it definitely failed to comply with the spirit of the law, which is to promote greater competition. Instead, Apple's complex new terms involve a new core technology fee that requires developers to pay €0.50 for first-time installs of more than 1 million users per year, regardless of distribution channel. In addition, Apple will take a commission from digital goods and services on the developer's website within seven days of a user making an external purchase through an in-app link.
Immediately after the terms were announced, Ek blasted Apple on social media, calling Apple's solution a "masterclass in distortion of the truth" and warning that Spotify "can't afford these fees" if it wants to "become a profitable company."
He reiterated that stance to investors during a quarterly earnings call, calling Apple's solution a "farce" that "no sane developer" would choose. However, he downplayed the negative impact Apple's rules would have on Spotify's business or revenue.
"I know there was some initial skepticism as to whether this would be detrimental to Spotify. I don't think it would be. So, you know, we still have the ability to continue where we are on the old terms," Ek said. In other words, nothing will change for Spotify anytime soon as the new law comes into effect.
Additionally, the CEO said the new competitive landscape could bring some benefits, adding that the "future advantages" of the new rules could be "pretty significant." The company previously hinted at its plans in a blog post, saying DMA would allow Super Fan Clubs and alternative app stores to exist, and would enable creators to download the Spotify for Artists app and the Spotify for Podcasters app directly from its website (this is the first time Spotify has mentioned Super Fan Club).
Additionally, the company had earlier said that the relaxation of the rules would mean it could communicate to customers on its app "new product sales, promotions, super fan clubs and upcoming events, including sale times for items such as audiobooks."
Ek confirmed this again, telling investors that fan clubs are one of the things Spotify can achieve with the new rules, something it couldn't do before because doing so would make all of Spotify's business unprofitable. In addition to fan clubs, the executive said that if properly regulated, Spotify could also take advantage of its own in-app purchases, such as buying audiobooks or recharging minutes - which would be "significant" for Spotify's revenue, as it currently has to share a 30% cut with Apple.
"Some of the more innovative things we want to do are currently restricted on the iOS ecosystem. Obviously, I'm still very hopeful that the European Commission will take action and allow us to do that," he said, appearing to refer both to the law that was implemented on March 7 and the possibility that the European Commission could force Apple to revise its changes. He pointed out: In this way, "the role of the ecosystem will be much greater, both for consumers and creators."