Apple's Backroom 'Attacks' on Streaming: Antitrust or Just Business? (Analysis)

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Apple CEO Tim Cook greets the crowd with U2 singer Bono (2nd R) as The Edge (2nd L) and Larry Mullen Jr look on during an Apple special event at the Flint Center for the Performing Arts on September 9, 2014 in Cupertino, California. 

What will regulators find when looking at Apple's business tactics ahead of the launch of its subscription service? Some recent press reports have differing opinions.

Here's what we know. The European Commission and the Federal Trade Commission are investigating Apple regarding anti-competitive business practices regarding its music streaming service. Both investigations have been reported in the press, including a story this morning from Bloomberg. One major label source confirmed to Billboard the FTC had contacted the company.

The involvement of the Department of Justice seems less certain. Two industry sources tell Billboard neither company has been contacted by the Department of Justice. The New York Post first reported on April 2nd the DoJ has started a preliminary investigation into Apple's business practices.

Regulators will likely find one of two things. They may hear that Apple is making a case for its business model and strongly suggesting subscription services shouldn't offer free listening. Or regulators will find stronger, more aggressive tactics aimed at eliminating the competition. Both scenarios have been reported in the press.

A March 6th article at Re/code that said "Apple executives have been telling the music industry it can help them roll back the tide of free digital music by re-launching its own subscription streaming service this year." This version of the story portrays a company diligently pushing its business model and its vision for the future of digital music. This is a believable narrative that portrays a for-profit company acting in its own interest.

The Verge portrayed a different Apple. An article published Monday claimed "Apple offered to pay YouTube’s music licensing fee to Universal Music Group if the label stopped allowing its songs on YouTube" and is attempting to kill Spotify's free listening. Put another way, Apple is trying to eliminate two of the three most popular free streaming options to clear a path for its paid service. This is a less believable narrative. One has to imagine Universal Music Group agreeing to eliminate a major source of revenue and promotion while severely harming its artists' chart positions. One must also believe Apple would tender such an offer. 

That regulators would keep an eye on Apple is hardly surprising. Apple was found to have illegally fixed the prices of e-books. It reached a settlement with the EC in 2012 and was found guilty by a U.S. federal judge in 2013. As a result of the U.S. lawsuit, Apple was appointed an independent, antitrust monitor and given such requirements as the drafting of an antitrust and competition law policy and conducting of live training sessions for the top brass as well as some staff in the iTunes store. The EC also launched an investigation in 2005 into Apple's music download prices in the United Kingdom that was dropped in 2008 after Apple agreed to lower prices to match prices standard elsewhere in Europe.


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