Pando

Apple's possibly illegal plan to kill Spotify's free service is reportedly under investigation by the FTC

By Nathaniel Mott , written on May 6, 2015

From The News Desk

Almost one year after Apple's acquisition of Beats closed, the Federal Trade Commission is reportedly investigating Apple's efforts to get record labels on board with the revamp of its Beats streaming music service.

The antitrust regulators are said to be scrutinizing these efforts because iTunes remains the leading seller of digital music, giving the company increased leverage during negotiations. Bloomberg Business reports:

FTC officials have discussed Apple’s practices with more than one record label, according to music-industry executives with knowledge of the matter.

The FTC's investigators, still in the early stages, of their inquiry, are asking whether Apple’s efforts will change the way music labels work with other streaming services, for example curtailing ad-supported music and pushing more songs into paid tiers of service at higher rates, according to one of the people. News of the investigation came after a report claimed that Apple is pressuring record labels into removing their music from Spotify's free, ad-supported tier. This could level the playing field for a premium-only service like Beats Music or however Apple rebrands its streaming offering.

Apple is also said to be working with Universal Music Group to have the label's catalog pulled from YouTube. It might even have offered to pay the licensing fees the label receives for making music available on the video-streaming service.

Bloomberg Business refutes that report, with unidentified "music industry executives" claiming that Apple "hasn't made such demands on the labels." Yet apparently there's enough smoke billowing to prompt the FTC to look for fire.

Pando's David Holmes previously wrote that Apple is sure to draw attention for its reported efforts -- right on that one! -- but he hopes the company is able to abolish, or at least damage, the free music industry, despite the potential for anticompetitive consequences:

Unless users start paying — which is precisely what Apple’s gambit forces — there is no foreseeable 'sustainability' in the streaming industry. And while the EU and DOJ should scrutinize Apple over these moves, the fact that by making a number of potential antitrust violations Apple would be making streaming music more fair, simply speaks to how completely unjust the status quo is.
The FTC's investigation is said to be just beginning. It's clear that Apple has gotten regulators' attention -- now it has to either prove that this was all a big misunderstanding, or show that eliminating free music will be good for us all.

[illustration by Brad Jonas]