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Apple Pressuring Music Labels to Ditch Spotify's Freemium Model: Report

Apple Pressuring Music Labels to Ditch Spotify's Freemium Model: Report

By Ali Pardiwala | Updated: 8 May 2015 10:17 IST

Apple's much-anticipated Beats music streaming service is said to be only weeks away from launch. However, reports have now surfaced that the Cupertino-based giant has been using its considerable clout in the music industry to make labels force Spotify and other competing streaming services to discontinue their 'freemium' service models. This would dramatically reduce competition for Apple's service, since a vast majority of streaming users are on the freemium tier. It is expected that most of these users would switch over to the Beats service if forced to pay.

According to a report by The Verge, the United States Department of Justice and Federal Trade Commission are investigating these allegations and Apple's business practices ahead of the launch of the service. DoJ officials have already interviewed top music industry executives in relation to this matter, while the FTC is expected to take the lead in the investigations going forward. Apart from the US DoJ and FTC, the European Union Competition Commission is also investigation similar allegations.

The prime targets of Apple's actions are Spotify and YouTube, which both offer users a freemium option to stream music. The user pays nothing for the service, but is instead pushed advertising which generates revenue for the services. Apple has been using its influence to force labels to not renew Spotify's licenses to stream music on its free tier, and has even reportedly offered to pay Universal Music Group an amount equivalent to YouTube's music licensing fee. The Verge report quotes a source in the music industry to say "All the way up to Tim Cook, these guys are cutthroat."

Spotify in January said has a total of 60 million users, of which only 15 million are paying subscribers. If this large chunk is forced away from the free service, it is likely to opt for Apple's Beats service.

Apple must definitely be working on securing a large amount of exclusive content for its streaming service, and the removal of competition may drive a lot of users its way. However, such practices are against the principles of healthy competition, and are monopolistic in nature. Furthermore, the elimination of the freemium model is against the interests of a vast majority of consumers.

This news comes shortly after the closure of Grooveshark, an early pioneer in the streaming industry that was forced to shut shop after running into legal trouble. If corrective measures are not taken, this could indicate the start of a massive shake-up in the rapidly growing streaming industry that could affect users negatively.

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