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FTC Officials Looking Into Apple's Streaming Business Model, Say Sources 53

Apple may have a bigger business problem than displeasing Taylor Swift with its new Apple Music service; According to Reuters, U.S. regulators are said (by anonymous sources) to be looking into Apple's treatment of music-streaming rivals, now that the company has gone from selling only downloadable music to competing directly with alternatives like Spotify and Pandora. A slice: While $9.99 has emerged as the going monthly rate for music subscriptions, including Apple's, some streaming companies complain that Apple's cut forces them to either charge more in the App Store than they do on other platforms or erode their profit margins. The Federal Trade Commission is looking at the issue but has not begun a formal investigation, said the three industry sources, who requested anonymity. The agency has had meetings with multiple concerned parties, one source said. The agency meets with companies routinely, and a formal investigation may not materialize.
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FTC Officials Looking Into Apple's Streaming Business Model, Say Sources

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  • Computers? (Score:5, Funny)

    by ArcadeMan ( 2766669 ) on Sunday July 12, 2015 @09:45AM (#50092731)

    Remember when Apple used to make computers?

    Pepperidge Farm remembers.

  • by Anonymous Coward on Sunday July 12, 2015 @09:49AM (#50092747)

    This could be a cut-and-dry case. There has already been a lot of history with providers that also distribute. Typically you cannot put your competitors in a position where they cannot compete by controlling distribution. Of course, the details will determine the outcome; but, we've disallowed power companies selling electricity to dip into the profits of their electricity selling competitors by charging exorbant fees to use their power lines.

    Yes, the power line fees are still there, but the companies that maintain the were forced to spin off the distribution network as a separate company, with independent management. I'd love to see the Apple Store do just that. It would separate all of the times when Apple abuses it's store front to put their products first at the expense of what people want.

    • I wouldn't use a modern necessity as a comparison, music is not necessary to live in 2015. Also, the power lines here are the Internet which Apple does not own nor control. And music from artist A isn't the same as music from artist B (although a lot of artists are extremely similar these days).

      What we need is... a car analogy!

      • by irtza ( 893217 )

        how about a car sales analogy instead?

        Its like GM opening up a dealership to compete with a franchisee down the street. This is prohibited by law.

      • Music from artist A and music from artist B are not the same product. But streaming artist A from Apple, Google, Microsoft, Spotify, Rhapsody, Tidal, Deezer, etc. pretty much are the same product. The purchasing process and the provided applications vary but the end result is the same, artist A comes out of your speakers.

    • It isn't a cut-and-dry case because there are other ways for providers to distribute their streaming music products without paying Apple. For example http://www.macnn.com/articles/... [slashdot.org] " > Spotify is encouraging users to bypass the Apple store and sign up directly through their website. Amazon does this too.
      • Sorry about the broken link. Here is the story about Spotify [macnn.com]
      • But there are not other ways to *buy* the product from the label, and the labels contracts with Apple fix the prices for other purchasers with them being a party to the negotiations.

  • Seems reasonable. (Score:5, Informative)

    by fuzzyfuzzyfungus ( 1223518 ) on Sunday July 12, 2015 @09:52AM (#50092757) Journal
    It doesn't seem surprising that the FTC would be nosing around. Apple got caught with their hand in the cookie jar, pretty damn seriously, in their 'negotiations' with book publishers(apparently Steve doesn't know not to commit illegal conspiracy over email...); and now they have an arrangement where they specifically forbid any of their competitors from doing anything in-app that would circumvent Apple's 30% cut(apps that can only be signed up for online are OK; but such apps are forbidden to link to the signup page in-app; either no sign-up information, or Apple-provided payment mechanism only); which more or less assures that they'll be able to undercut their competitors on iOS, unless some miracle has made the labels 30% or more more generous in their dealings with that competitor.

    The barring a successful claim that iOS doesn't actually have market power; which seems unlikely, I'm not sure why this would pass scrutiny now that Apple has a direct competitor in the water.
    • by rsborg ( 111459 )

      Apple's 30% cut(apps that can only be signed up for online are OK; but such apps are forbidden to link to the signup page in-app; either no sign-up information, or Apple-provided payment mechanism only); which more or less assures that they'll be able to undercut their competitors on iOS, unless some miracle has made the labels 30% or more more generous in their dealings with that competitor.

      When I setup my Amazon/Audible account, I did it on a web page (even if it was on iOS), and in fact, that's where I continue to make my purchases (the webpage simply directs back to the app once I've bought a book). It's fairly easy. With Spotify, it's even less of an issue - the user only has to do this transaction once. Arguably, Spotify should simply force users to do what Amazon/Audible do - transact outside of the App for purchases.

      Why should Apple be forced to help Spotify make their App simpler

      • by Dog-Cow ( 21281 )

        If a developer goes through the trouble of creating a native UI within their app to handle purchases, along with the infrastructure to complete the transaction, Apple should not be able to deny such capability. Of course, Apple does have a say because they can reject an app submission for any, or no, reason at all. As an iOS developer, I'd love to see the Courts knock Apple down for this one.

        • If a developer goes through the trouble of creating a native UI within their app to handle purchases, along with the infrastructure to complete the transaction, Apple should not be able to deny such capability. Of course, Apple does have a say because they can reject an app submission for any, or no, reason at all. As an iOS developer, I'd love to see the Courts knock Apple down for this one.

          Why? Their store, their rules. Nothing anti-trust about it. No one is forcing you to make a living writing iOS apps, are they?

      • If a 3rd party wishes to use Apple as a payment processor, then I'd agree that Apple has reason to expect a cut: payment processing costs money from anyone; and Apple's large collection of people with payment information already keyed in and a willingness to click 'buy' is certainly valuable.

        Where I suspect that Apple may run into trouble(and would not mind in the slightest if they did), is the fact that they currently both forbid an app to link to an outside payment page(you can allude in general terms
        • Were Apple to allow people to integrate their own payment mechanisms for subscription(even at the level of just using a webview of the appropriate page in their app), the situation would be of much less concern.

          Yes, but they would lose a very important measure of control over in-App scamming and phishing. Not everything is a money-grab, ya know....

        • Funny how you don't complain about Google's in-app-purchase policies.

          Developers offering products within another category [but Games] of app downloaded from Google Play must use Google Play In-app Billing as the method of payment, except:

          where payment is solely for physical products; or
          where payment is for digital content that may be consumed outside of the app itself (e.g., buying songs that can be played on other music players).

          And yes, Google Play In-app Billing for digital products [google.com] also is to be used for "Subscription services, such as streaming music".

          So even if Google doesn't want a share of the profits (yet), they most certainly require apps on the Play Store to use their In App Purchase processing service. Something which you want to deny Apple.

      • It's quite ironic that Spotify is complaining that they can't compete -they've been the ones benefiting from an unlevel playing field for years.

        Mod Parent Up!

  • Apple charges directly for music as a competitor.

    Apple charges competitors a cut for being on app store.

    Nice. Government can't complain as it does this all the time.

    Sell lottery tickets, keep half off the top. Remaining half goes out as prize money. Tax that at 39%.

    Net haul from lottery: ~70%

    Ironic government would quickly jail a private gambling operation that house-lopsided.

    • by Anonymous Coward

      The lottery isn't gambling. It is a voluntary tax self-imposed by those who failed math in school. Gambling is always a game of chance, but the lottery is a game of stupidity, than which nothing is more sure to lose nor less random.

    • "Nice. Government can't complain as it does this all the time."

      A government is not a business. The two are not analogs and your comparison is crap.
  • Easily solved (Score:5, Insightful)

    by msobkow ( 48369 ) on Sunday July 12, 2015 @10:48AM (#50092933) Homepage Journal

    Apple just needs to have the streaming music division pay the appstore division the same fees as everyone else to level the playing field. The fact that they own both competing divisions then becomes a moot point, legally.

    • Re:Easily solved (Score:4, Interesting)

      by alvinrod ( 889928 ) on Sunday July 12, 2015 @01:11PM (#50093507)
      I don't know if they'd be able to easily do that as the information that has come out has suggested they're already giving something like $.72 of every dollar to the record companies, so the only way to pay another division $.30 of every dollar would be to operate at a loss, which would likely lead to a different investigation for what amounts to dumping.

      The easier approach would be for Apple to have their service follow the same guidelines where it can't have in-app sign-up which would preclude it from paying the other department and place it squarely within the same set of rules as its competitors.

      In reality it's far more legally complicated than that as some non-Apple entity wouldn't have gotten the same deal as any entity that is or is some sub-part of Apple itself.
      • The really, actually simple solution is to change the terms for subscriptions and be done with it.

        Realistically, Apple's not competing on price. I could've signed up for Rdio or Spotify ages ago and I know enough to do it online and save myself the 'convenience' cost of doing it in the application. Apple has already got the power of defaults working for it, really strong industry ties, and the fact that it doesn't bleed money hand over fist by having a free tier that can't pay for itself. Spotify loses mone

      • No, the result would be that the artists would get less money.

        The artist payments from streaming services are calculated based on the actual revenue collected by the company. If Apple did this shell game, the artist share would only be 70% (or whatever their actual percentage is) of $7 rather than 70% of $10. The norm for other services has been that no royalties at all have been paid for listening during trial periods, because 70% of $0 is $0. Apple was forced to cave and pay royalties for their trial peri

  • Eroding profit margins is to be expected when competition enters the market place. That claim by itself should not be good enough to file a complaint. If they mean underpricing in order to bankrupt the competition, they should state that, otherwise there is no formal complaint here.
  • If you don't like Apple's policies, don't do business with them.

  • The root of the complaint is that Apple is giving itself a competitive revenue advantage in this market. If an iOS user buys an Apple Music subscription, Apple gets $10. If that user buys a subscription to another service through an iOS app, Apple gets $3 and the subscription provider gets $7 - EVERY MONTH. The margins in streaming music are small, so giving all that money to somebody else hurts the streaming companies. (It also hurts the artists because of the way streaming payments to artists are calculat

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