How to use your market dominance

What do you do if you’re dominant in some markets, but wished you were more dominant in others?

If this isn’t one of the clearest examples of the problems with too much bundling and integration, I don’t know what is.

So, Apple (the phone maker) is artificially nerfing the competition of Apple (the music streaming service), unless they agree to build stronger integration with Apple (the smart speaker maker).

At imaginary HomePod meeting:

Some guy: “Our speaker would benefit from Spotify integration, but they would rather not build it for free. Should we pay them, like how we demand payment for integration with our stuff?”

Another guy: “No, I have a better Idea: What if we called Federighi, and threatened them instead? We could remove a useful feature that Apple Music (their main competitor) has, unless they agree to our demands.”

Some guy: “Oh, yeah – that’s way better!”

Now, I’m not saying it went down just like that. But it is awfully “convenient”, isn’t it?

So, to be clear, this is the situation:

As I’ve mentioned previously, I moved from Spotify to Tidal this year, due to artist payments. (Now, I’m not sure whether I got that right – but that’s another case.) And the main thing I’m missing from Spotify, is the excellent Spotify Connect. This is both a way of streaming music to different speakers and devices, and a way to control the Spotify playback from any device. For instance, let’s say I start the playback on my iPad, connected to a speaker via a mini-jack. If I then open Spotify on my phone, the playback controls are “live”, like if I streamed from my phone. I can also say “Nah, move the playback to my Sonos speaker instead”.

What Apple has done, is removing the ability to use the phone’s physical volume buttons to control the Spotify Connect volume. So if you listen to Spotify on your phone, with AirPods, clicking the buttons adjusts the volume. But if you then move it to your Sonos speakers, it suddenly doesn’t – it only adjusts the phone’s notification volume. I really don’t like this disconnect.¹

Apple is saying that Spotify users can get the feature back if Spotify agrees to integrate with the HomePod – and that’s very problematic.

Imagine me, happy as a clam: I had bought a phone that I liked, and was using a streaming service I liked – party due to how well it worked with my smart speakers, which I also like. And now Apple is jumping in, and making the latter two worse, just because Spotify won’t support a speaker I don’t have.

The use of dominance

Under most antitrust laws, the illegal part isn’t having market dominance – it’s using the market dominance to maintain it, or prop up your position in other markets. Here Apple is using their mobile (hardware and OS) muscles, to better their position in the music streaming and smart speaker markets.

Apple wins either way:

• The way things are now, they’ve made Apple Music’s competitors² worse – and to some extent, the HomePod’s competitors as well.
• And if Spotify (and others) cave, they will have improved the Homepod’s chances in the market, by getting more supported services.

This shows why we need more unbundling and smaller markets.

Now, some people are saying:

“But why should Apple help its competitors, by making APIs and stuff?”

Here’s the thing – the mobile market has this critical combination:

1. It’s extremely large, important, and intertwined with other markets.
2. It has a very low degree of competition.

So some behaviour can be OK in other situations, while not being OK by companies with critical market dominance.

If Apple wants to be a part of numerous markets connected to their main businesses …

They have to choose:

• Either provide sufficient API access to its competitors in these markets,
• or at least allow them to do the work themselves.

Me: “Ugh, why do I have to do the dishes?”

My wife: “OK, I can do them.”

Me: “No, I won’t let you!”

Me: “Ugh, why do I have to do the dishes?”

We can use earbuds as an example, to shine a light on an important differentiation in this case: It’s great that Apple has made AirPods work well with the iPhone – but the problematic part is when they both refuse Jabra access to what they built and don’t allow them to do the work themselves.

But again – I’m only saying this because of the specifics of the mobile market. And that’s why “But what about this market?” doesn’t necessarily make sense.