US Investigating Apple Over iTunes
Is Apple pushing record companies around? The US Justice Department thinks it may be, and is starting preliminary inquiries about Apple’s business practices around iTunes, according to a report in the New York Times this morning. Sources, including record company executives interviewed by the Feds, say that the investigation is in response to numerous reports that Apple is throwing its weight around. Allegedly, Apple pressured two top record labels to not participate in Amazon’s “MP3 Daily Deal.”
According to a report in AppleInsider today, a survey has shown that 70% of the digital music downloads in the US are done over iTunes. The survey done by NPD showed that Amazon was far behind Apple in second place with a mere 12% of downloads, a position it shared with Wal-mart, which also accounts for 12%. NPD also found that digital downloads make up 40% of the overall market, 5% more than last year. So Apple and iTunes are utterly dominating a fast-growing market, and reports have increased in recent years that the company is dictating terms to suppliers. Record labels have long wanted different pricing for songs and albums, for example, but Apple has been able to hold firm on its insistence on a fairly rigid price structure, with almost all songs still going for 99 cents.
A music industry executive told BusinessWeek anonymously that Apple threatened top record companies to keep them from participating in Amazon’s MP3 Daily Deal, saying that their music would not be promoted as much on iTunes if they did. Amazon program offers downloads at a lower price but subsidizes the labels who participate, paying them the same as they would have gotten if the tracks sold at the regular price. Cathy Halgas Nevins, a spokeswoman for EMusic.com, confirmed to BusinessWeek that she had been contacted by the DoJ.
Apple became the biggest music retailer in the US two years ago, taking that title away from Wal-Mart. The NPD survey found that 28% of all music purchased in the US in the first quarter of this year was downloaded from iTunes. Two years ago during the same period, the iTunes market share was 19%.