Tuesday 17 January 2017

Apple subscription service attracts regulators' attention

Apple’s updated subscription terms for apps will be examined by regulators in the US and Europe, according to reports.

Shane Richmond

Published 18/02/2011 | 13:15

Apple's system will see it take a 30pc cut from subscriptions bought through iPad and iPhone apps. Photo: Getty Images
Apple's system will see it take a 30pc cut from subscriptions bought through iPad and iPhone apps. Photo: Getty Images

The Wall Street Journal said that the US Justice Department and the Federal Trade Commission were both scrutinising the new subscription plan that Apple announced earlier this week.

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However, the paper said the interest was at “a preliminary stage and might not develop into either a formal investigation or any action against the company”.

The new terms for companies selling content within apps for Apple’s iOS devices - iPhone, iPod touch and iPad - require publishers to give Apple 30pc of the revenue from anything they sell through their apps.

Apple’s terms also specify that subscriptions offered through apps must be “the same (or better)” than those offered outside the app.

The European Commission is also “monitoring the situation”, according to the Wall Street Journal.

Earlier this week, Guy Lougher, partner and head of the competition law group at Pinsent Masons, said that Apple’s subscription service was “likely to feature on the radar of the European Commission sooner rather than later”.

Some developers have been strongly critical of the new terms, particularly those in the streaming music business, where profit margins are low.

Richard Jones, one of the founders of Last.fm, posted a message online saying: “Apple just ------ over online music subs for the iPhone.”

On Tuesday, Rhapsody, which runs a streaming music service in the US, said: “We will be collaborating with our market peers in determining an appropriate legal and business response.” Jon Irwin, Rhapsody’s president, later added: “The costs don’t leave any room for a sensible business model.”

Industry observers might be wondering whether pricing streaming music services out of the iOS ecosystem could be an attempt to pave the way for Apple’s own streaming service, perhaps later this year. However, the company has not yet announced anything.

Mr Lougher said that any competition investigation into Apple’s policies would have to determine whether Apple has a dominant position in the market, which would mean deciding what the relevant market is. Apple might successfully argue that the ‘market’ is all digital media and that it does not have a monopoly of that sector.


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