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Apple's TV streaming and news bundle may see rivals cry foul

Apple's Monday event is expected to be an extravaganza of subscription services: TV! Movies! News! Bundles! But competitors say the company is out of control.

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Apple CEO Tim Cook shows dancer Maddie Ziegler a new iPhone.

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Slick new gadgets are usually the stars of Apple's splashy events. But on Monday, the company will put the spotlight on subscriptions and services.

A star-studded new TV service is expected to headline Apple's event at the Steve Jobs Theater in Cupertino, California. Apple will likely unveil a news subscription service built into a reimagined Apple News, as well as one bundle to rule them all, tying all the services together with Apple Music. Plus it's always possible for the show to wrap up with "one more thing."

In other words, Apple is taking on a new field of rivals -- just as two of Apple's existing competitors are crying foul.

In the last two weeks, Spotify and Kaspersky Lab have filed complaints with regulators alleging Apple stifles services that directly compete with its own. The two companies, a streaming music giant and a cybersecurity mainstay, made similar allegations of Apple abusing the marketplace power of its App Store to strangle rivals' features, promotions or pricing.

(Apple rejected Spotify's claims and hasn't commented on Kaspersky's. Apple declined to comment for this article.)

These kinds of disputes over antitrust concerns seem wonky and obscure, but they could affect apps and services you use every day. They could trigger changes to how easily you can buy services from Apple rivals and how much you pay for them. And with Apple about to widen the kinds of services already offered by companies on its platforms, more of your favorite apps could be sucked into the debate.

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Apple's dominance hasn't gone unnoticed. Sen. Elizabeth Warren, a Democratic presidential nominee, has called for the breakup of tech titans including Google, Facebook and, yes, Apple.

"What we're really facing here is an existential crisis of ... a new economy," said Rivka Gewirtz Little, a payment strategies analyst for IDC. "We are living in a marketplace economy where innovation is unending, but we still haven't answered the questions of monetizing it with fairness."

Another powerful regulator has shown she's also listening to gripes against Apple.

Margrethe Vestager is the EU's competition commissioner. You may know her from the billions of euros in fines the EU has slapped on Google. A day after Spotify filed its complaint against Apple to her office, Vestager tweeted about the "strong message" Spotify's chief was sending.

Vestager has taken on Apple before. In 2016, her office ordered the iPhone maker to pay almost $15 billion in back taxes to Ireland. But prior to Spotify's complaint, Vestager said in November that preliminary investigations by her office found Apple wasn't dominant enough in some areas to warrant regulatory action. 

Even though these complaints are being filed in Europe or Russia, action against Apple could affect customers around the world.

Would Apple "want to have two different systems in different jurisdictions?" asked Barbara Sicalides, an antitrust lawyer at the firm Pepper Hamilton. "That's just not how the internet economy is being set up,"

Team of rivals

Apple and Spotify are the world's two dominant forces in streaming music. With 96 million paying customers, Spotify is the world's biggest. Apple Music, with more than 50 million subscribers, is next.

But Apple's expected services Monday could bring it into more direct competition with a flock of other services you use.

Netflix, Hulu and other subscription video services will be in Apple's competitive crosshairs as it releases its $1 billion-plus slate of original shows from the likes of J.J. Abrams, Brie Larson, Oprah Winfrey and Reese Witherspoon. Offering add-on video subscriptions would bring Apple head-to-head with Amazon Prime Video and its Channels model -- even bumping against traditional partners like wireless company AT&T, which offers a VRV bundle of niche genre streaming services.

The company is expected to announce, among other things, access to premium channels like HBO, Starz and Showtime for $9.99 each, according to The Wall Street Journal. (CBS, parent of CNET, also owns Showtime.)

And Apple's news service, which is expected to offer a single subscription that unlocks access to a range of magazines and newspapers, would mean Apple vies for membership dollars against any subscription-based publisher that doesn't participate in Apple's bundle.

Don't expect to read The New York Times there, for one: The newspaper's CEO said he was "leery" of the concept.

One of his misgivings -- not wanting to give up part of the Times' $15-a-month digital subscription -- feeds into one of Spotify's main accusations of how Apple stacks the deck against competitors: the App Store's 30 percent fee.

Apple's bite

It's something lots of services gripe about. For any digital good or service sold in an iOS app, Apple takes a 30 percent cut. That means anytime Spotify signs up a new $10-a-month Premium member inside its iPhone app, Apple takes $3. That fee drops to 15 percent once a subscription lasts longer than a year.

Spotify says that because Apple Music doesn't face the same tax, Apple has an unfair pricing advantage: Spotify has to choose between charging iPhone customers $3 more or live with earning 30 percent less than its biggest competitor for every iOS member.

There's a reason that Netflix doesn't let you sign up for its service through its app -- it doesn't want to pay the 30 percent fee to Apple. But the streaming media titan also big enough that it can get away with it. 

Google's Android mobile system has a powerful marketplace too, Google Play, and it also extracts similar fees. But services can release apps for Android outside Google's marketplace -- known as sideloading -- more readily than for Apple. Epic Games does that with Fortnite, which is why the insanely popular game is available in the App Store but not Google Play. Tim Sweeney, the CEO of Epic, has called Apple's charges a "parasitic loss."

Sweeney said in statement to CNET that Epic "would love to distribute Fortnite directly to customers on iOS, but current Apple terms prevent developers from doing this. Epic advocates for a change in Apple policy to enable competition among stores and software sources."

But Apple's response to Spotify's complaint underscores an uneasy point if you're a fan of these rival services. "Spotify wouldn't be the business they are today without the App Store ecosystem," Apple said. Spotify wants to "avoid contributing to maintaining that ecosystem for the next generation of app entrepreneurs."

One part of that is indisputable: Spotify wouldn't be a giant without the App Store's gateway to 900 million active iPhones. Spotify's recourse against Apple has been to simply stop selling in-app subscriptions. But for services still aspiring to the scale of Spotify, opting out of the App Store may not be a option.

Update lockdown

The second of Spotify's complaints last week, echoed by Kaspersky's claim Wednesday, may also unsettle fans of Apple's soon-to-be competitors. Both say Apple withholds their app updates as a way of dulling the rival's competitive edge -- using its App Store policies to crimp features or prevent you from knowing about bargains.

Spotify alleges that starting in 2016, as a way to kneecap a rival while Apple Music was ramping up, Apple began rejecting Spotify's app updates. Last year, for example, Apple rejected the app because the word "free" was in Spotify's app screenshots on the App Store, it said.

And according to Kaspersky, after iOS rolled out its own parental controls, Apple prohibited a type of coding that let competitors' apps offer similar features. Kaspersky Safe Kids was hosted in the App Store without incident for nearly three years, the company said, until last year's iOS 12 update meant Apple itself became a rival.

Apple has dismissed Spotify's claim. "The only time we have requested adjustments is when Spotify has tried to sidestep the same rules that every other app follows," it said. Apple hasn't responded to Kaspersky's allegation.

"There's a level of closed-off protectiveness and lockout that Apple has long functioned on," Little said. "You can't get other apps on the damn thing."

That could mean challenges ahead for video and news apps on your iPhone. And maybe others, depending on what Apple has in store with "one more thing."

Originally published March 23 at 5 a.m. PT.
Updated March 24 at 12:07 a.m. PT and 5 a.m. PT: Adds quote from Epic CEO and context about Vestager. 
Updated March 25 at 4:30 a.m. PT: Adds background information.