Spotify announced a significant update to its iPhone app in Europe, set to empower users with the ability to purchase in-app subscriptions and audiobooks directly. This strategic move comes as a direct response to the upcoming Digital Markets Act (DMA) in Europe, challenging Apple's longstanding App Store billing policies.

Historically, Apple's App Store rules have restricted companies like Spotify from conducting direct billing within their apps, mandating the use of Apple's billing service instead. This service claims up to a 30% cut, a policy that has long been a point of contention between Apple and app developers.

The DMA, slated to be effective from March, aims to level the playing field for digital services. It categorizes companies like Apple as "gatekeepers," necessitating them to allow third-party developers to distribute iPhone apps outside of the App Store and enable direct billing to customers.

While Apple has yet to unveil specific compliance measures with the DMA, as acknowledged in their SEC filings, Spotify's recent announcement preempts Apple's response. Spotify has been a vocal advocate in lobbying the European Union's antitrust regulators for such a legislative outcome, making it a front-runner in leveraging the new law.

In a blog post, Spotify criticized Apple's previous restrictions, expressing excitement over the new possibilities the DMA opens up. "The DMA means that we’ll finally be able to share details about deals, promotions, and better-value payment options in the EU," Spotify stated.

Under the new regulations, Spotify intends to offer users the option to subscribe to Spotify Premium and purchase audiobooks, as well as engage in promotional campaigns directly within the app. Additionally, the company plans to facilitate direct downloads of other Spotify applications from its website, including Spotify for Artists.

Despite this development posing a potential challenge to Apple's services business, which generated $85 billion in sales in the fiscal year 2023, the immediate impact might be limited. Europe constitutes a relatively small segment of Apple's market, and the tech giant remains confident in its App Store's competitive edge in terms of security and user convenience.

Spotify, which had already shifted from Apple's billing system for subscriptions years ago, sees the DMA as an opportunity to widen its margins and more efficiently acquire new subscribers in Europe.