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Friday, June 19, 2015

Apple Music under Antitrust Scrutiny

Photo courtesy of Olivier Jules

The attorney generals of Connecticut and New York are conducting investigations into the investigations of the iPhone maker with music companies in order to detect any signs of potential antitrust violations by the company. They are interested in knowing whether the music labels and companies colluded with Apple Inc. or were coerced into favoring the paid music service that was launched by Apple on Monday. Apple Music was finally unveiled by Apple on Monday in San Francisco at its annual Worldwide Developers Conference (WWDC) after months of speculation about it. The service will be offered to consumers at $9.99 a month, same as other popular streaming services like Spotify.

However, it is expected that the dynamics of how people listen to music will be completely altered with the new music service. The music industry is currently grappling with the declining number of music downloads and companies are trying to figure out new ways to convince people to listen to music. Universal Music Group told the New York Attorney General in a letter that it had made no agreements with Apple or other music companies such as Warner Music and Sony Music, which could have an impact on the availability of ad-supported or free music services.

Similarly, Universal said that no deals existed that could stop it from allowing any music streaming service to license the music it has recorded. Furthermore, Universal Music added that it does offer limited and exclusive content to some music streaming services where this exclusivity is not determined through an agreement designed for restricting competing services. Eric Schneiderman is the New York Attorney General and his spokesman, Matt Mittenthal said that the letter by Universal was part of an investigation being conducted in the music streaming business. He said that the investigation was being done because new and different ways have been introduced in the music industry for listening to music because of rising competition.

He said that in order to provide these benefits to customers, it is important to ensure that no anticompetitive practices have been used to gain the upper hand in the market such as collusion. No comment was made by an Apple spokesman into this investigation. Nonetheless, this couldn’t be good news for the Cupertino, California based giant as it is struggling to catch up with others in the music industry. Apple may have pioneered digital downloads and ruled the industry for years, but the rise of streaming and decline of downloading has affected the company.

Last year, it made the decision of acquiring Beats Music service for a total cost of $3 billion and has been working since then to introduce a new and value-for-money streaming service for customers. Before the launch of Apple Music, there had been rumors flying around in the industry that the company had tried to strong arm music labels and publishers into reducing their licensing fee so it could charge a lower subscription as opposed to its competitors. While it didn’t happen, an investigation was opened for eliminating antitrust practices.

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