eMusic: Apple's bundled-music device would be anticompetitive
Apple is in for a fierce legal fight should it ever release a device that offers all-you-can-eat music, according to David Pakman, CEO of rival digital music service eMusic.
"It smells like classic Sherman Antitrust Act to me," Pakman said. "I only know what I've read but the plan sounds very similar to the tying practices Microsoft used with Windows/Explorer. And Microsoft is still paying the penalties for that one."
The Financial Times reported Tuesday that Apple is in talks with the four largest record labels about offering a device with access to the entire iTunes music library. A source close to the negotiations confirmed the report in an interview with CNET News.com and said the offering would be free initially but device owners would later be charged subscription fees.
The talks are preliminary and no agreements have been reached, the source said. That hasn't stopped some of Apple's competitors and antitrust lawyers from sounding alarms.
Pakman says Apple is following Microsoft's lead. In 1998 the U.S. Department of Justice filed a lawsuit accusing Microsoft of monopolistic practices by bundling Internet Explorer with its Windows operating system. The case was settled in 2001. In that case Microsoft had monopolistic position in operating systems with Windows, the government charged. The company achieved dominance in browsers by forcing Windows buyers to use Microsoft Explorer.
The parallel is that Apple is forcing people who buy this device with preloaded music to buy its music, Pakman argues.
An Apple spokeswoman said the company doesn't comment on rumor or speculation.
Critics say that Apple, which sells 70 percent of all digital music devices, could use its overwhelming market share to wall out competitors. No other music services--download or subscription--could sell songs to such a device. Music listeners wouldn't need to get their music anywhere else. Competition among digital music retailers would suffer, said Pakman.
Such a plan "would produce a long and drawn out fight in both the U.S. and European courts," Pakman said.
What's the difference between a device that bundles music and the relationship between iTunes and iPod? Weren't they tied together?
The answer is yes and they have been challenged in U.S. and European courts. A year ago, two separate lawsuits, which have now been consolidated, accused Apple of unfair competition, maintenance of a monopoly power and "unlawful tying." That case and a similar one, Black vs. Apple, are pending, according to documents Apple filed with the Securities and Exchange Commission.
In France, a consumer group has alleged that Apple has violated that country's consumer laws by failing to mention that the iPod is "allegedly not compatible with music from online music services other than the iTunes store" records show.
Maxwell Blecher, an antitrust expert with the Los Angeles firm of Blecher & Collins, agreed that Apple could face legal challenges for bundling if other music vendors are indeed prevented from distributing songs to such a gadget. "Apple is going to argue that they compete with lots of other similar devices," Blecher said. "You have to look at whether there are exclusionary aspects or conduct. In that debate lays the outcome of any lawsuit."
Universal Music Group has already signed a deal with Nokia to enable buyers of some of its devices to gain access to all of Universal Music's library. The music industry source said that UMG is in talks with several other handheld manufacturers as well. But no handheld maker has struck a deal with all four of the top music companies. Apple could be the first.
But just because smaller players in the market may have similar deals may not be enough to prevent Apple's deal from being challenged, said Blecher.
"When Apple came out with the iPod, only Apple could deliver music to it," Blecher said. "They accused Apple of exclusion. When they did the iPhone, it was impossible to shift to other carriers. They said that was exclusionary...any time you have high market share and restrict competition in any way, you're going to raise antitrust concerns."
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
While I think the pre-loaded model isn't a very sound one, I don't think that in itself would violate anti-trust laws. Consumers can still be old fashioned- buy CDs and load them into iTunes and onto your iPod.
I don't know what eMusic is complaining about though, an iTunes subscription certainly won't keep people from getting an eMusic subscription. Although it will certainly hurt their business, they are exaggerating their case; iPods are not incompatible with the MP3 format, and iTunes having a subscription won't change that.
I'm missing the public interest harm here...unless, of course, you look at he regulators who're licking their chops.
Think that as a positive effect on innovation? Nada, boys. Nada.
This Story (and the quoted individual) doesn't get it right. eMusic is not worried about the iPod(or nameless preloaded music player) itself. eMusic (while they may have some deals with smaller music player companies) is not a player in the player (sorry couldn't resist) game they are a player in the Music provider game. They are also the only download service that is iPod compatible(actually amazon maybe too this all has to do with Mp3s and Digital Rights Management)
if apple does make a preloaded player:
1) there will be less room for songs obtained from eMusic and/or other DL Services.
2) because the player automatically accesses iTunes' library of songs someone is less likely to get the new (example) Beirut from eMusic.
3) eMusic pays the Artist Much More than iTunes does now & iTunes will pay even less via a "All-you-can-eat" b/c they won't be getting the $.99/Track. Currently at my subscription rate (the lowest one) for eMusic I pay $.25/Track and have been assured that artists see monies from it.
4) America (and the rest of the world to a lessor extent) is already told what they should listen to (by radio/TV/Apple) a preloaded player would just exasperate a problem already killing the competitive world of music. How will independent artists (for whom eMusic advocates) get a shot at being heard if four out of the five bigwig companies are piling their $%^%$ on your new device, or Apples is deciding which of the unknown artists you really want to hear (probably through some flawed analytics software.
Sorry this post is tl:dr but I love my eMusic and I will stand by them on this.
behavior is not their first concern.
unannounced non-product. And last time I looked, the whole
iTunes catalog was already available for me to choose from. Selling
an iPod with free music of your choice is no different to selling it
with a free iTunes music card. Hardly something to get too excited
about.
with preloaded music to buy its music, Pakman argues."
First of all you can install hard copy (from tape or CD) songs.
You can buy on OTHER sites and install those songs. Apple does
NOT prevent you from doing this. The writer seems against
Apple for being one of the first in the field to gather the horses
into the same corral and have them agree to sell songs online.
iTunes is a *neutral* program that acts as a song managing
database. It DOES NOT force you to go online and buy songs. I
have NEVER purchased a track online and it doesn't give a darn.
Anti-competitive is not allowing Windows users to use iPods, or
FORCING users into acts they don't care to. Apple made the
physical device (the iPod) why should they allow another
company to make software for it? They have the security on it to
prevent song theft. It would be similar to industrial theft.
Allowing Chevy to have access to the codes and programming
for Ford autos. Why give up the secrets to your opposition?
cNet's headline is poor, the iPod is NOT "bundled". We have to
purchase it.
First up, if someone buys a competing music player (like, oh, a Zune say) and uses eMusic's service, there's no loss of interoperability.
Competing music players can work just fine on a Mac.
The only thing eMusic is scared of is impending doom... and why? Because they are unable to market their product to a horde of non-iPod-using folks who would just as soon pirate their mp3's, or are already using Napster/Symphony/whatever, or... ?
/P
I'm not sure I understand Apple's thoughts on making a self-crippling or limited iPod. If I bought an iPod and was presented with these preloaded songs, that's cool, but I don't want to have to pay any more for it. Some of the subscription plans include plans where those included songs would cripple themselves after X amount of days, forcing customers to buy the songs at that point.
There's too many different stories about the plans to really have any details on what they would do. I think I'll wait until Apple actually releases soemthing before making any decisions there.
bed with the cel phone compainies and made it so that some
iPods, IE the iPod touch would alwaysbe connected to the
Internet. And the user would pay month to month for not only
connectivity but for unlimited music?
Probbly sounded better in my head than on paper....
market.
Suppose that it is a device you buy that includes unlimited trips
to the iTunes Store buffet, but that is the only source of the
music. Well then that would be a "bundled device."
On other hand it could be an iPod model that allows you the
choice of either buffet, iTunes Store purchases, tunes from other
e-sources, ripped from CDs, or any combination thereof? Well
then that is not a bundle.
Time will tell and then the end be known, but until Apple makes
an announcement about it we are just speculating.
exclusive system. I used iTunes before the store opened, then I
used iTunes and the music Store for a year and a half before I got
an iPod. I have music from my vinyl, cassettes, CDs and studio
projects from hard drives on my iPods, along with music from the
iTunes Store and from several other download services. And I know
several people with Zen or iRiver players with music from the
iTunes Store. What is your problem????
each song purchased. If you are an independent artist going
through a service like CDBaby you can make around $0.60/song
(http://cdbaby.net/dd-faq2). How could eMusic pay more than
that if it only costs $9.99/mo for 30 songs and $19.99/mo for
75 songs.
2. Anyone can sell music compatible with the iPod....just don't
sell DRM encumbered music. Music from eMusic and Amazon
are both compatible with the iPod.
"Competition law, known in the United States as "antitrust law",
has three main elements:
*prohibiting agreements or practices that restrict free trading
and competition between business entities. This includes in
particular the repression of cartels."
The one thing apple can't control is free will of distribution
without DRM (except in some cases) but the iPod/iPhone is still
open to playing non-DRM'ed music in industry standard mp3 or
AAC format. What makes their agreement locked is the
requirements of the record companies to have Apple lock down
their copy righted material for distribution. Other companies
can sell music in non DRM formats for the iPod/iTunes. Also
Apple isn't out there to repress other companies, they just
simply make a great product lots of people like to have and use.
"banning abusive behaviour by a firm dominating a market, or
anti-competitive practices that tend to lead to such a dominant
position. Practices controlled in this way may include predatory
pricing, tying, price gouging, refusal to deal and many others."
When was the last time iPods went on a fire sale and under cut
all of the competition? The iPods/iPhone demand a much higher
premium over the competition and it still sells.
"supervising the mergers and acquisitions of large corporations,
including some joint ventures. Transactions that are considered
to threaten the competitive process can be prohibited
altogether, or approved subject to "remedies" such as an
obligation to divest part of the merged business or to offer
licences or access to facilities to enable other businesses to
continue competing."
Can my comcast cable box receive service from timewarner
cable? Or can a direct tv customer, get dish network content?
And vice versa?
to the contrary, the iPod DOES play music from alternative
sources, such as eMusic?
Also, eMusic doesn't sell the same kind of stuff on iTunes. Sure,
there's SOME stuff that crosses over, but lots of it doesn't. They
sell to two different musical tastes.
Everyone needs to calm down, eMusic included. Because I'll tell
you what, if they sue Apple, I and many others will cancel our
eMusic subscriptions. I don't want my money being used for
that.
subscription service that's incompatible with their products.
*YOU* made that mistake, not them.
Why is it a mistake? Try missing a payment or two and see what
happens to "your" music library. Why people won't understand
this is beyond me. Besides, you're locked in ... not by Apple but
by Napster! Remind me again how that's supposedly Apple's
fault?
Is it Ford's fault that your Chevy key won't start your Ford? Why
can't people today learn to live with the decisions they make?
If you really want to know who's to blame for all this, look into
who's insisting on DRM to begin with. Hint: Apple would rather
do away with it altogether.
- Unconvinced
- by Vegaman_Dan March 20, 2008 7:13 PM PDT
- I don't really see the iPod as completely closed as the claims seem to be making it. I don't use the Apple store for my music at all and can easily get the music onto the device. I do have a choice and not use iTunes by using Red Chair's Anaopd Explorer.
- Reply to this comment
-
(25 Comments)But I can see the other side too- none of the other online music stores are allowed to link to your iPod directly. You have to download to your system, then use iTunes to get the content to the iPod. Perhaps if iTunes had the option of just being the interface and you could redirect the included browser to go to these other online music stores, then the complaints could be addressed.
In the end, it won't go anywhere. Apple will likely just pay a few people behind the scenes and everything will get dropped, just like Cisco's iPhone name issues.