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US Senator Wants Feds To Investigate Apple Over Music Streaming

CNET
http://www.cnet.com/news/senator-franken-calls-on-ftc-to-investigate-apple-over-music-streaming/

Al Franken is particularly concerned about whether Apple has stymied competition in the music-streaming business by controlling its own application marketplace.

Apple's streaming-music service may have debuted only a few weeks ago, but already one senator is concerned that the iPhone maker could become a dominant, anticompetitive force.

US Senator Al Franken on Wednesday issued a letter to the US Federal Trade Commission requesting that it investigate Apple's dealings in the streaming-music market. The Democrat from Minnesota expressed misgivings that the company's recent launch of its Apple Music streaming service, coupled with its iOS software and its App Store, could pose unnecessary challenges for rivals and potentially limit choices and raise costs for consumers.

"Apple's position as a dominant platform operator may actually undermine many of the potential consumer benefits of its entry into the market," Franken wrote in his letter to the FTC.

His letter to the FTC came just a day after Consumer Watchdog, a company that aims to protect consumers against dominant companies overstepping their bounds, wrote its own letter to the government agency calling for an inquiry into Apple Music.

Franken is particularly concerned that Apple's competitors, including Spotify, Pandora and artist Jay-Z-backed Tidal, all rely on the company's App Store to get their software onto the popular iPhones and iPads. By offering apps in Apple's App Store, those services need to adhere to Apple's policies, which include sharing 30 percent of the revenue generated in-app on an iOS device. Franken also said that consumers could be harmed by an Apple policy that blocks developers from advertising lower rates if they use the service on other platforms, like the Web.

"In the case of music streaming services, Apple's licensing agreements have prevented companies from using their apps to inform users that lower prices are available through their own websites, to advertise the availability of promotional discounts, or to complete a transaction directly with a consumer within their app," Franken wrote in his letter. "These types of restrictions seem to offer no competitive benefit and may actually undermine the competitive process, to the detriment of consumers, who may end up paying substantially more than the current market price point."

Apple did not immediately respond to a request for comment.

A competitive landscape

Apple Music launched on June 30 in over 100 countries, offering full access to Apple's iTunes music library, as well as curated streaming channels, and the Beats 1 radio station. It also includes a feature called Connect that provides a social space where artists and fans to come together and share content. Free for the first three months, Apple Music will cost $10 per month for an individual plan and $15 for a shared family plan.

The launch of Apple Music marked the arrival of an 800-pound gorilla in a streaming industry that was already packed with similar offerings. The major difference between Apple Music and its competitors is how it's bundled with iOS devices and Macs. Unlike Spotify and the others, Apple Music comes preinstalled on the latest version of Apple's operating systems.

During Apple's earnings call this week, CEO Tim Cook said that Apple Music is growing rapidly and that "millions and millions" of people have already tried it out, though he declined to provide actual user numbers. Spotify, by comparison, has 20 million paid subscribers and over 75 million active users.

For years, Apple has made billions offering music downloads through its iTunes music store. And while it still offers that service to those who aren't interested in streaming, a rapidly growing contingent of consumers have decided to move their cash to streaming services, rather than individual downloads.

Increasing scrutiny

By shifting its weight into streaming, however, Apple has invited scrutiny. Months before Franken's letter and the unveiling of Apple Music, the European Union's competition watchdog, the European Commission, issued questionnaires to several record labels and digital music companies to determine whether it should launch a formal investigation into Apple's plans for streaming music. The Commission, which has yet to initiate a formal investigation, was particularly interested in determining whether Apple would use its size and power over developers to hurt competitors.

Observations like those from Franken, however, are not new for Apple. The company's App Store guidelines governing how developers can generate money through their apps on iOS have long been a subject of debate, and the FTC is already looking into the practices. The guidelines essentially require that transactions made through its App Store include a 70-30 split in the developer's favor. Any in-app purchases, including buying a subscription to Spotify through the iOS app, would also technically fall under that 70-30 split. For the vast majority of developers, it's a cost of doing business. But when Apple takes a slice of the revenue generated from its own competitors, Franken argues, it could be cause for concern.

"While I am encouraged to see increased competition in this market, I am concerned about certain business practices that have the potential to limit choices and raise prices for consumers," he said.

Consumer Watchdog, meanwhile, has charged Apple with attempting to drive out competitors and "unfairly dominate" the streaming music business.

"Apple's new streaming music service raises serious antitrust concerns that require the government to put limitations on Apple as it develops its service if consumers are to continue to have access to free streaming music services and so-called 'freemium' music," Consumer Watchdog's president Jamie Court and Privacy Project Director John M. Simpson wrote in the letter. "At issue, in fact, is the proprietary information that Apple possesses about its subscribers' credit cards and musical preferences, which it is leveraging over music labels in an attempt to rub out free (commercial sponsored) music platforms."

The FTC did not immediately respond to a request for comment on whether it will launch an investigation into Apple Music.