Apple's Beats Music deals are now under FTC scrutiny
The Federal Trade Commission (FTC) is examining if Apple is using its position as the top seller of music downloads through its iTunes store to put rival music services like Spotify at a disadvantage, according to Bloomberg.
Apple bought Beats last year hoping to win points with the music industry and turn Beats Music into a strong competitor to Spotify and other streaming services.
Apple and the FTC did not immediately respond to requests seeking comment outside regular business hours.
Here is the key section from the Bloomberg story:
The FTC's inquiry could complicate Apple's planned revamp of Beats Music this summer. Apple has approached more than a dozen artists including Florence and the Machine for limited exclusive rights to music and partnerships to help bolster the service, people familiar with the effort have said.
FTC officials have discussed Apple's practices with more than one record label, according to music-industry executives with knowledge of the matter.
The FTC's investigators, still in the early stages, of their inquiry, are asking whether Apple's efforts will change the way music labels work with other streaming services, for example curtailing ad-supported music and pushing more songs into paid tiers of service at higher rates, according to one of the people.
Apple hasn't made such demands on the labels, according to the music-industry executives.
That last sentence - that Apple has not demanded streaming apps curtail or end their provision of free music - is really interesting because music industry execs are now widely in favor of ending free music. Although apps like Spotify and Pandora pay record labels for their "free" music (and then recoup that by selling ads), record labels believe the practice has the long term effect of teaching consumers that they need not ever pay for music. Vinyl, CD and iTunes-style digital dowbnload sales have all collapsed as consumers have switched listening habits in the last few years to favor free, ad-supported streaming.
It would also be hugely risky for Apple to reach agreements with record labels that restrict them from also placing music on other services. That would look like anti-competitive behavior. Apple already lost a massive price-fixing case in the US over its efforts to reach agreements with book publishers over the prices of online books. That case stemmed from a series of meetings in which Apple persuaded major publishers to all agree to raising prices at the same time, on the same terms, largely to hurt Amazon.
Apple was also accused, unsuccessfully, in a lawsuit of fixing prices on iTunes when the iPod launched. No other music sellers were allowed to offer music that could be downloaded onto the iPod at the time, even if they offered lower prices.
So far, we haven't heard Apple's side of the arguments. People are assuming that Apple would love to gather artists and labels around its new product, and have them launch first or exclusively with Apple in a way that they all make money. That would have a distorting effect on free streaming, leaving Apple open to the accusation that it uses its dominance of the iPhone business to hurt companies in the streaming world. But this may not be Apple's plan - and until we hear what that plan is, much of the speculation here is smoke with very little fire.
(Editing by Gopakumar Warrier)