After the razzamatazz and careful stage management (except the Eddy Cue karaoke montage bit) of Apple’s announcement on Monday comes the recrimination. The company is now under investigation by the attorneys general of New York and Connecticut over possible breaches of antitrust regulations in its dealings with music companies.
At the heart of the investigation is the accusation of dirty tricks, most specifically that Apple applied pressure to labels (or, more intriguingly, that the labels were collectively complicit in conspiring with Apple) to dramatically withdraw their support for freemium music services, most notably Spotify.
These are hefty allegations and the New York Times says that Universal Music Group has confirmed that it is cooperating in the investigations. Apple, however, is declining to comment. Billboard has done follow-up digging and claims that Warner Music Group is not part of this investigation but that, when contacted about its possible involvement, Sony Music did not respond.
Ever since Lucian Grainge, chairman and CEO of UMG, started to hang a question mark over the freemium business model late last year, rumours have whipped through the industry suggesting there was more to this than met the eye. Apple, according to those rumours, was involved in steering the debate to help clear the way for the launch of what we now know as Apple Music. Of course, the music industry loves nothing more than a juicy rumour and conspiracy theory, but that’s all they were – until now.
However, the attorney general of Connecticut said that it was satisfied with UMG’s first written response, which asserted it had no agreements with either Apple or the other majors that would derail free or ad-supported services. George Jepsen, the attorney general in question, said, “We will continue to monitor that market to ensure that consumers and competition are protected.”
This investigation against Apple is not without precedent. A federal judge in 2013 said that Apple had conspired with literary publishers to raise the price of e-books.
In a classic “It never rains but it pours” dynamic, Digital Music News has leaked royalty documents that claim Apple is paying just 58% of streaming royalties back to independent labels. DMN, never a publication to willingly praise Spotify, contrasted this with the 70% standard the Swedish company pays to rightsholders. Most intriguingly, the leaked document claims that, for free trial and complimentary accounts on Apple Music, rightsholders are paid 0%.