For instant rumor action, combine “Apple” with just about anything, add water, shake, and serve up on the Internet. The power of Apple rumors was on display again this week as word of a listen-till-your-eardrums-burst subscription hit the news. The result was a virtual torrent of commentary, news reporting, punditry, and antitrust accusations; PR on the scale that most companies would kill to have.
The hype
It began with an article in the Financial Times that said Apple was in talks with the major labels over bundling an all-you-can subscription plan with iPods. Customers might pay a premium on the devices for access to major label music, possibly for as long they own the device.
Subscription services to date have faced an uphill battle, since they all require DRM on downloaded files, and none of this DRM is compatible with the iPod. iPods account for around three-quarters of the US player market, meaning that any subscription service has a fairly small number of device owners to sell to.
Apple’s entry into the game could change all that, and could make lower-capacity but wireless devices more attractive as music platforms. It’s easier to sell a 16GB iPhone to music lovers, after all, if it can access any song, anywhere, with one upfront payment. But the moment that pundits began to blue-sky about Apple’s volte-face regarding subscriptions, two problems became quickly apparent: 1) Apple wasn’t doing any such thing, and 2) if it did, competitors would start agitating for some serious antitrust action.
The cold, cold water
No one is talking on the record about the situation, so what we have now are a collection of anonymously-sourced statements and heapings of conjecture. Businessweek did its best to quash the rumors, saying that sources had cast doubt on any potential deal. Apple was simply kicking ideas around, we’re told, not seriously trying to push a plan.
CNet claimed that Universal was actually the company pushing the plan, and that Apple was simply seeing if other labels might be up for something similar. The move would make sense, since Universal’s long-rumored “Total Music” plan would bundle access to its catalog with devices, and Universal has already signed on to a similar initiative with Nokia called “Comes With Music.”
Other reports were similar in tone. Yes, ideas like this had been floated, but nothing serious was being discussed.
The antitrust charges
That’s just fine with eMusic CEO David Pakman. eMusic is the number two download service in the US after iTunes and has built a huge stable of indie artists (it has no major label bands), with songs offered for around a quarter a piece. Pakman spent the second half of this week telling journalists that, if Apple was planning a subscription service, it might well be anticompetitive.
The argument is a simple one. “Apple has a monopoly,” Pakman told me Friday, citing their US market share at 80 percent. Companies in that situation have to play by a “different standard,” especially when it comes to anything that could be construed as “tying” (recall that Microsoft was accused of exactly this sort of tying when it rolled new “features” like Internet Explorer into Windows and then had to deal with years of litigation).
“If every iPod comes with [the hypothetical service], that’s tying,” Pakman said. eMusic and others would certainly bring the matter to regulators’ attention. But what if the new service is optional? Would that still be tying?
Pakman concedes that a court would need to hash this out, and he suspects that any such subscription service would in fact be optional. But he raises the specter of an “optional” service that in some ways isn’t; for instance, if Apple offered the upfront payment as an option when iPods were purchased through the Apple store, but made the payment mandatory for devices sold at Best Buy.
In the end, the whole story is “probably more rumor than anything,” Pakman says, and he professes astonishment that the major labels would bind their own digital destinies to Apple. Major label frustration with Apple has been obvious for years, as the majors were upset that Jobs held the line on a single price for all songs, and that iTunes so quickly became the dominant online retailer, thus giving Jobs more power over the labels than they had over him. Now, with the labels opening their DRM-free catalogs to other stores like Amazon, the balance of power may be shifting slightly, but Pakman believes that iTunes continues to account for 95 percent of the major labels’ digital downloads.
Major labels who made it even easier for Apple to control access to a growing part of their revenue stream would simply “continue the slide to their doom.”
A new hope?
We likely won’t see such an Apple-powered subscription model in the near future, then, but what’s most interesting about the story wasn’t the details of the subscription terms of the hardware it would function on. Instead, it was the very fact that subscriptions were attracting so much positive attention. Derided for years as “renting” music (and what consumer would want to do that?), the sudden rumor of a compelling subscription service that allowed unlimited major label content to be accessed and played from iPods and iPhones set the Internet ablaze.
Part of that could simply be due to the reality-distortion field emanating from Cupertino, which converts anything Apple-related into something cool, even if Apple derided the concept as ridiculous right up until its own announcement. But I think there’s more to it, something that makes the subscription model more palatable now than in years past.
In a word, it’s access. Always-on, constantly available, accessible anywhere access. There’s a reason why the interesting action in subscriptions has been happening in portable phones and not in standalone music players, and now that Apple has the hugely-successful iPhone in its lineup, it certainly could roll out a compelling subscription.
This is the sort of value proposition that competitors haven’t been able to match: the biggest music store combined with the hottest device combined with all the music you want combined with anywhere access. Surely Apple sees the potential here; if it doesn’t, this week’s hubbub should show the company that such a service would be buzz-worthy. Whether we’ll ever see it rolled out is another question.
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Link to Original Article:
http://arstechnica.com/news.ars/post/20080323-reality-antitrust-concerns-dog-apple-subscription-rumors.html
