Spotify’s iPhone app: Apple’s Billion Euro question?

This week, Spotify has shown off it’s iPhone aplication on YouTube, and my reaction was wow. Check it out:

Now, I love Spotify – it’s simple, works well and sounds great.  I’m starting to discover a lot of new music, and it means that I’m listening to music again for the first time in a long time.  Being able to take Spotify around with you is the only problem.  So far, you can’t.  With the iPhone app, this becomes possible.  Looking at the app preview everything looks good.  I don’t own an iPhone or iPod Touch and I wouldn’t normally subscribe to an online service like this, but for me this could be the iPhone / Touch killer app.  I can almost hear the sound of my credit card weeping already.

I have seen a lot of people using iPhones, I have used them too and like them,  but still I have resisted.  I have seen the Touch and have held off because I think that it is a bit too big to carry around along with my phone.  My iPod mini is still going strong so I have no real need for a new one.  Spotify for iPhone / Touch, though, would be a game changer.  All other issues fall to the wayside as suddenly there is a compelling reason to trade up.

The big question the moment is if Apple will actually allow the app onto the App Store.

There have been a number of stories since the launch of the App Store about applications being rejected for spurious reasons (eg Eucalyptus), but this isn’t just another book reader, this is a service with over a million users in the UK alone.  It is due to launch in the US by the end of the year.

There has been some speculation as to why Apple might block this app – some say it’s an iTunes killer; another reason could be that it contrivenes Apple developer guidelines, or features aspects of forthcoming Apple software.

I don’t think that Apple will reject the app.

Why not?  There are a number of reasons – I don’t think it is an iTunes killer (I think it complements iTunes and it could drive sales) and Spotify appear to be confident that they have played by the developer rules.  But most of all, I think it would start to focus official attention on the way Apple chooses what to put on the App Store and the fact that they are the only people who can say what gets on there, especially as the App Store is the only way to get third party apps onto the iPhone / Touch.

What do I mean by official attention?  I mean the EU.  The European Commission doesn’t like technology giants using their dominance to stiffle competitors.  Check this out from the €1bn fine for Intel earlier this year:

By undermining its competitors’ ability to compete on the merits of their products, Intel’s actions undermined competition and innovation.

That kind of money really starts to undermine the balance sheet – not something you need in this economic climate. Just ask Microsoft.

Apple really wouldn’t like the Commission looking any closer at the App Store – its already looked at pricing of songs on iTunes.  When only one company can control access to something, that brings the prospect of anti-trust hearings.  Spotify is a Swedish company, so the Commission might be even more eager to protect the innovation and enterprise of its own member states.

For me there are also another few points:  firstly, Apple doesn’t actually make a lot of money from iTunes music sales – it uses it primarily to sell iPods / iPhones.  Its the hardware sales that give it high profit margins.  Also, Spotify is coming to Android phones fairly soon, and although those phones aren’t so compelling yet, they may be good enough for the majority of people in a years’ time as things improve rapidly in the mobile phone world.  Finally, the EU now has a greater population than the US, and there are a number of countries where the market for mobile phones is not yet saturated, so there is a prospect for growth that you do not find in a lot of developed countries.

If I were Apple, I’d let Spotify through.  At worst, get Spotify to charge £5 for the app and Apple will still get it’s 30% cut.  With the prospect of Spotify breaking through into the mainstream over the next couple of years, why not jump on board?  Apple and Spotify together sounds like a perfect mobile match to me.

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