Apple Music Faces Gov’t Investigation Over Ruthless Negotiation Tactics…

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Apple wants 100 million streaming subscribers, but achieving that number may require some brutal competitive tactics.  Which might just include colluding with major label partners like Universal Music Group into cutting free-access benefits for competitors like Spotify, according to investigations now initiated by state attorneys general in both New York and Connecticut.

“It’s important to ensure that the market continues to develop free from collusion and other anticompetitive practices.”

Statement of New York State Attorney General, Eric Schneiderman.

The investigations, filed by New York State attorney general Eric Schneiderman and Connecticut attorney general George Jepsen, accuse Apple of using subversive, crony dealmaking tactics with the major labels to severely handicap competitors like Spotify.

That includes forcing Spotify to cut its free access tier to three months, instead of the unlimited free-for-all currently enjoyed by users, as originally reported by Digital Music News.

But this investigation is a complicated blessing for Spotify, a company equally guilty of soiling the sheets with the Big Three.  Just recently, Spotify’s sordid negotiations with the major labels surfaced with the leak of its contract with Sony Music Entertainment, one that showed massive upfront payments, special advertising grants, and a general starvation plan for artists big and small.

Which brings this back to the initial accusation that majors are pressuring Spotify to curtail its free access, with Apple gently prodding the process.  And they probably ain’t got shit on anyone: in a formal letter to the Office of the Attorney General of the State of New York, Universal Music Group attorneys penned a bit of well-mannered legal prose that smoothly denied everything.

“UMG does not currently have any agreements with Apple Inc. (i) to impede the availability of third-party free or ad-supported music streaming services, or (ii) that limit, restrict, or prevent UMG from licensing its recorded music repertoire to any third-party streaming service on any terms that UMG may choose.  Nor does UMG intend to enter into any such music agreements.”


13 Responses

  1. Troglite

    Wow, this seems completely backwards. The labels are abusing their monopoly power, not Apple!

    We have 3 major labels that represent a clear monopoly. That’s not illegal in the USA, but using their monopoly powers to thwart competition and collusion certainly are.

    So, these 3 labels have negotiated deals that are nearly identical (thank you favored nation clauses) with a number of new companies/services offering “music streaming” services. These monopolies used their existing catalogs to secure equity in these new companies and secure minimum revenue commitments. The terms of those deals effectively harm each of these label’s customers (aka the artists) but favor the labels themselves. Potentially, more favorable terms are being offered to some of these music streaming services in a manner that effectively allows these 3 labels to pick winners and losers in what is supposed to be a free marketplace.

    Taken one step further, these 3 labels have perpetuated a system that is opaque to the point that it raises legitimate questions about their desire to compensate rights holders. There is literally no single authoritative record of the rights holders associated with every piece of music recorded in this country. Every private company effectively records this information within their own proprietary systems. Every artist effectively has to accept their label’s accounting or exercise audit rights that are often perceived as a nuclear option because these audits are often associated with lawsuits.

    I believe there is an increasingly strong case that the major labels have abused their monopoly powers in their effort to control the impact that streaming music services have on their existing business. I also believe that any serious attempt at reform should include a centralized, standardized accounting of all rights holders. Ideally, consumption information about the number of plays/purchases for each work would also be included so that artist could truly have an independent accounting to determine if they are being paid fairly.

    • Big Swifty

      The entire deal is being investigated.

      Apple + all labels that make the same deal.

      So they are looking at labels too

    • Anonymous

      What kind of moron thinks the 3 major labels have an influence on what is actually happening with music in the real world?

      • Troglite

        I believe that can be attributed to the purple troll-eating morons.

      • heh

        completely and totally, believing otherwise is absolute ignorance. music determines culture. those who control music, control culture. it’s a pretty easy connection to make.

  2. Anonymous

    Finally someone was willing to do what needed to be done. The end result is all that matters. 3 months free and only $2.50 per month thereafter assuming $15 split 6 ways. This is the service everyone has been waiting for. The Netflix of music. Music subscriptions have been ridiculously overpriced all along. Digital music in general has been way overvalued and everyone even Apple knows it.

    It’s too bad Apple couldn’t get the single subscription price down. $5 would have been right on. Maybe in time they will.

    • Anonymous

      “Finally someone was willing to do what needed to be done”

      You’re referring to Eric Schneiderman, of course?

      Couldn’t agree more! Yes, Apple needs to be stopped now.

      Apple Music is the most serious attack on the music industry since Napster. (And yes, this is from a (now former) Apple fanboy.)

  3. Artist-entity

    Evidently, by his statement, New York State Attorney General, Eric Schneiderman, is not quite familiar with the music industry, and should refer to statements made at numerous panel discussions held in Congress, including this one:
    “ Surely the most striking feature of the current system is that there is no free market at work.” Senator Mike Lee, March 10th 2015

  4. Name2

    Sorry I’m late for my Two Minutes Hate, guys!

    Who are we screaming at today?

  5. Anonymous

    Hi! I’m Apple. I will now once again step in and proceed to clown your sorry ass at monetizing music.

    Have an excellent day!

  6. Rickshaw

    Shouldn’t something like this take place for the entire recording industry, also?