Consumer Watchdog Alleges Apple Music Plot To Crush Streaming Music Business

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Consumer Watchdog is accusing Apple of doing with Apple Music what it attempted to do with iBooks.  The public interest group is sending a letter Wednesday to the Federal Trade Commission and the Department of Justice asking the agencies to look into the matter and prevent Apple from taking over the streaming music business.

Apple launched Apple Music June 30, 2015, in 100 countries, and is offering every one of its 800 million iTunes customers a free, three-month trial subscription to entice them to sign up for the $9.99 a month service.

The public interest group alleges there is evidence that Apple is threatening to cut deals directly with artists if the music labels don’t give Cupertino exclusive rights to top artists. Apple is supposedly telling labels that its 800 million credit card database, together with is deep knowledge of user preferences will allow the company to dominate the subscription music business at “whatever price it chooses.”

Consumer Watchdog is basing its accusation on what a confidential source told the group is contained in documents under seal in an action before the Copyright Royalty Board, which determines rates for streaming music copyrights.  The CRB is currently reviewing the rate schedules for streaming music and other digital music services.

“The documents allegedly show Apple’s distaste for free streaming music and its attempts to use its significant market power to both eradicate the freemium or free/commercial sponsored music sector and to force consumers to pay more for musical content,” wrote Consumer Watchdog president Jamie Court and John Simpson, privacy policy director. “The FTC and Justice Department can ensure that Apple does not dominate the market and eliminate the free music sector by prohibiting it from entering into agreements with clauses that will give it market dominance.”

The group also points to other “troubling practices.”  Consumer Watchdog claims the Apple is demanding a “most favored nation” clause from the labels to get exclusive rights to early artist releases. It also claims Apple is trying to leverage its market share and platform to keep other services from offering lower prices and drive up prices for consumers.

“While getting artists more money for their songs is an enviable goal, the fact that Apple is using its market position as download and credit card leader to demand higher prices smacks of the very price fixing it was caught doing in the e-book case. To prevent this type of market power abuse, Apple should be precluded from entering into terms that disadvantage the freemium, or free option, market and other streaming services,” concludes the letter.

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