FTC looks at Apple rules for streaming music

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By Larry Banks

Government antitrust regulators are looking into claims whether Apple streams rival streaming music apps fairly, according to industry sources. The Cupertino-based company recently launched Apple Music, a new streaming service. It also provides the App Store for competing services such as Spotify and Rhapsody.

The company takes a 30% cut of all in-app purchases for digital products such as music streaming subscriptions and games sold on its platform.

FTC may consider if Apple rules are unfair

$9.99 has become the going monthly rate for music subscriptions including Apple’s, but some streaming providers complain that Apple’s 30% fee forces them to charge more in the App Store than on other platforms, or to erode their profit margins.

The Federal Trade Commission (FTC) is looking at the issue but there is as yet no formal investigation underway, say industry sources. The agency has already had meetings with those concerned. The agency does however meet with companies regularly and a formal investigation may not even come to pass.

Unlimited music subscriptions have become popular with listeners, and a new wave of companies have capitalised on this to satisfy demand. Apple has been a leader in digital music via the iTunes Store for a long time, but was late to the on-demand streaming industry.

The main issue with Apple stems from the company’s 30% cut. But to avoid it customers can sign up for a streaming service via their web browser. However, many say that consumers to not realise that this is an option.

Tyler Goldman, CEO of music streaming company Deezer, said the 30% fee that Apple takes from their $9.99 subscription fee leaves little left for Deezer.

“The margin in music is quite small, and the App Store diminishes the margin”.

“It will be an issue for the industry going forward. You can either raise your prices and not be competitive with Apple’s price, or you can have no margin”, he said, adding that he was unaware of whether Deezer has talked to the FTC.

Google also offers a music subscription services and charges 30%, but its policies for app sales have drawn less ire from streaming companies. Sources say the company places fewer restrictions on those transactions, such as being able to direct users to external websites to sign up.

Apple dominates the digital music business through iTunes, but its share of the smartphone market is quite small. Android accounts for almost 80% of the market with iOS coming in at around 18%, according to Gartner based on sales this year.

Antitrust lawyers are indecisive about Apple’s policies. Apple can charge what it likes for App Store transactions some say, and companies are not forced to sell there. It is legal to have a monopoly but it’s not legal for those monopolies to use their size to hurt competitors, say those familiar with such matters.

SOURCE: Reuters.

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