The United States' antitrust regulators are investigating claims about Apple's treatment of rival streaming music apps, according to industry sources.
The allegations surround Apple's dominant App Store, which is used to download rival streaming music apps like Spotify, Rdio, Jango, Rhapsody and other rivals.
Because Apple takes a 30 percent share of all in-app purchases for digital goods, such as music streaming subscriptions, $9.99 charged by the industry for monthly music subscriptions means that Apple's 30 percent cut forces them to either charge more in the App Store or be content with lower margins.
The Federal Trade Commission has confirmed they are examining the issue but have not begun a formal investigation according to well placed sources. Yet the agency has held multiple meetings with concerned parties though this is generally considered routine.
While the FTC and Apple refused to comment, rival music services were vocal about the impact of the hefty distribution tax which is unavoidable if you wish to reach Apple users. While customers are able to sign up for rival streaming services through their Web browser and avoid the Apple tax, streaming industry sources argue this is an inefficient distribution channel as Apple users are conditioned to use the App Store for virtually all purchases made on their devices.
Tyler Goldman, North American CEO of rival service Deezer,was sharply critical about the roughly one third Apple takes from his monthly subscription revenues.
"The margin in music is quite small, and the App Store diminishes the margin. It will be an issue for the industry going forward. You can either raise your prices and not be competitive with Apple's price, or you can have no margin," he said.
Two other industry insiders highlight that the antitrust concerns stem from restrictions Apple imposes in the App Store, specifically the banning of advertising in the app that informs users that the company is on other platforms, a ban on linking to a company's own website from within the app and a ban on ads inside the app that show consumers how to buy directly from a company's website. The policies effectively ban any app downloaded through the App Store from informing users about other distribution channels.
Rival platform operators Google, which also has its own streaming music services, places far fewer restrictions on what apps can and cannot do once they have been installed on a user's device.
The investigation is likely to center around whether Apple's music service is actually a monopoly. Its iTunes music business dominates the digital music industry yet its share of the global smartphone market is small, with Google's Android operating system accounting for 78.9 percent. But Apple consumers account for over 70 percent of online download revenue, providing plenty of ammunition for and against the idea that Apple is a monopoly.
As the Justice Department was successful in prosecuting Apple for colluding with publishers to prop up the prices of ebooks, the FTC may feel the need to look especially close at Apple and its aggressive business practices.