Apple hasn’t even launched its new, Beats-partnered premium audio service yet, but the Department of Justice may be eyeing the company’s behavior. For the past month, Apple has been talking prominently about the need for fewer free-play service tiers from services like Spotify, and the need to convert more listeners to paying subscribers. Universal Music Group CEO Lucian Grainge has been quite direct on this front: “We want to accelerate paid subscription,” Grainge said at the Code/Media conference last month. “Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as the investors.”
Apple’s upcoming Beats service won’t have any form of free-play tier — once your trial is over, you’ll have to pony up a still-unknown subscription fee. For years, Apple was largely willing to tolerate the growth of streaming services alongside iTunes, but that was before those same streaming services were blamed for the first-ever drop in iTunes music revenue in 2013. Suddenly, services like Spotify represented a threat.
The company has reportedly offered to pay Universal Music to drop streaming from YouTube and is pushing strongly for services like Spotify to drop their free tiers and convert entirely to paid models. Spotify reports that an estimated 15 million of its existing 60 million users are paid users — a conversion rate that’s just too low to suit the music industry. The music industry is reportedly considering pulling back from YouTube as well, given that its paid subscription service remains in beta and there’s no word on when it might launch.
The push here is obvious: If Spotify and other free services are allowed to exist, Apple faces a difficult push to launch its own music service. If, on the other hand, these companies were forced to reduce their freemium music offerings or kill such services altogether, Apple’s Beats would launch into a market when customers were searching for alternatives. Launch at the right time, and Apple could be hoping to provide a tailor-made pay service to replace the free content such individuals previously enjoyed. Such transitions would neatly capture the shift from buying online to streaming content that’s been sapping iTunes revenue, and give Apple a feather in its cap and future quarterly announcements. The music industry seems set on this course, even though streaming services have been shown to reduce piracy in other countries.
That is, of course, if the Department of Justice allows it. After slapping Apple hard over anticompetitive behavior with regard to Amazon and its illegal collusion with the major publishing houses, the government may be moving quickly to prevent a similar abusive relationship before it can get off the ground. The EU is also reportedly mulling action to ensure that Apple and other music vendors don’t collude to crush the freemium streaming market.
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DOJ is investigating Apple over attempts to kill free Spotify music streaming: Report
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