Posted by: Arik Hesseldahl on January 04
Along with a new year comes another lawsuit against Apple. This one comes from someone named Stacie Somers who is alleging that since Apple’s iTunes and iPods don’t support Microsoft’s Windows Media Format, that Apple has a monopoly on the digital music business. You can read a PDF of the complaint here.
It’s a stretch to argue that, especially now. While it’s probably true that Apple has an 83% share of the online music market and 75% of the online video market, a large market share doesn’t necessarily make someone a monopolist. Essentially, Somers is arguing that by “refusing” to sell music in WMA format as so many other music stores do, and by refusing also to make its Fairplay-protected AAC songs compatible with other players, Apple must be a monopoly in digital music.
There are so many problems with the argument that its hard to know where to begin. First, take the growing interest by Apple and other online music vendors like Amazon, EMusic and others in selling DRM-free music. Sony-BMG is the latest with plans to drop DRM technology, as my colleague Catherine Holahan reported today. DRM-free music sold in either AAC or MP3 format is compatible with the iPod, and more is coming available all the time. Additionally, Apple is selling DRM-free AAC files from EMI as “iTunes Plus” tracks and is fully willing to sell more, provided the labels are willing to sign on to do it.
Buying songs from iTunes, she argues, ties a consumer to Apple forever. Wrong. There’s the old burn-and-re-rip trick. Not ideal, technically not legal, but it works. Meanwhile, there are still CDs, which despite plummeting unit sales still account for most of the music sold around the world.
Moreover, the iPod, she argues, contains a SigmalTel chip that could be enabled, should Apple choose, to allow the device to support WMA files. Not doing this, she says, is crippling, and that causes an illegal “tying” relationship between one product – the iPod – and another – the iTunes Store. Apple could correct the “problem” by licensing WMA from Microsoft for a mere $800,000, but won’t, she says. Great. Let’s use the court to force Apple to line Microsoft’s pockets. That’s healthy for the free market economy.
What she misses is the other side of the coin. Many players on the market don’t support AAC files at all, let alone Fairplay protected AAC files. And AAC is freely available for any vendor to support without having to pay one penny in licensing fees to anyone. Between Apple — who has publicly advocated selling DRM-free songs in AAC format and Microsoft who’s still married to DRM-protected WMA files, who’s more open, and under whose system are consumers more likely to benefit? The choice is pretty clear.
Creative Zen, Microsoft’s Zune, SanDisk’s Sansa, Sony’s Playstation Portable, and the Sony Walkman S all support AAC, as do several wireless phones. Those same devices can all play iTunes Plus songs. Should Apple be forced to offer these manufacturers licenses, and further, should they be forced to pay the associated fees to license Fairplay? Or worse, should Apple be forced to give away Fairplay, its own intellectual property, for free? I have a word for that: Theft.
If Somers is going to get serious about filing an antitrust action regarding digital music, it seems Microsoft, and all the relevant hardware manufacturers should be made defendants too. At least that would make a certain amount of logical sense. Instead, this case seeks to single out one vendor because it’s been successful in out-competing the rest of the industry. There was no digital music industry six years ago. That Apple has flourished in building one doesn’t make it a monopolist. It just means that Apple has been successful in building a business where there was none before. Hopefully the judge assigned to the case will understand that, and dismiss this case for the ill-considered legal stupidity it is.
The judge should also fine her and her lawyers, and have them pay Apple's legal fees for just showing up.
Something really needs to be done in this country about these nuisance lawsuits. It's a complete waste of productivity, and taxes (to pay for more judges and courts).
Microsoft's monopoly has allowed it to raise prices on it's OS to ridiculous levels. We are talking software here. MS ships a single master to manufacturers who then copy it to millions of hard drives, so the laws of supply and demand don't apply here. Look at the margins it is getting selling software, to the point where it can cover losses in half a dozen mulitibillion dollar attempts to enter other businesses. What does a copy of Vista Ultimate cost? How about Office? Now, what do competing operating systems and office packages cost? Is Ms. Somers overlooking the bigger fish for a reason?
This is one of the lamest tech lawsuits I've ever seen! What an anti-Apple, Microsoft-siding, no-good person Somers is. :p
APPLE WILL PREVAIL!!!
Nice hypocrisy there. Were it Microsoft who made the iPod and Apple who made the Zune, you'd be singing a different tune. Your defense of Apple's practices are the same ones Microsoft uses regarding its bundling of Internet Explorer and Windows Media Player.
Microsoft is being forced to give away its intellectual property. If it's theft when it happens to Apple, then it's theft when it happens to Microsoft.
And thus, if Microsoft is a monopoly, then so is Apple.
You don't get to have it both ways.
the case should go no where. all apple support formats are free and open standard that any company can use as you pointed out in the article. Somers is arguing that apple is a monopoly because it doesn't support a closed proprietary format infected with anti-consumer DRM. Its laughable...
Dollar to doughnut says the complaints gets amended to a bundling issue. In the Microsoft decisions, both the trial judge and the appeals court cited bundling as Microsoft's real crime.
Apple will either argue that (1) iTunes and iPod is not a tying arrangement, or (2) rule of reason. Apple must show you can use a different music file management software other than iTunes with your iPod, or you can use a different MP3 player with iTunes.
In rule of reason, Apple's lawyers will argue that Apple has a good reason for what they did. Many organizing bodies such as the NCAA and the Boy Scout argue rule of reason for rules that restrict conduct.
I bet Apple settles by giving every iPod owner $10 credits good only for iTunes.
Good luck, Apple.
I wish we knew the backstory. To know Ms. Somers' motives behind the suit would be most interesting. However, I doubt she concerned about general consumer rights, maintaining a competitive market. Litigation is expensive, slow, and unpredictable (you have a good chance of getting nothing for your money spent on lawyers, or even paying out). Which is why most lawsuits go to settlement. I suspect Ms. Somers and her lawyers are hoping for some payday, wherein Apple decides it's cheaper to settle rather than to litigate the issue. It won't be the first time a rich company with a reasonable legal defense has paid a gnat to go a way instead. Of course Apple may choose to do so because of the broader principles involved which go beyond music (like being forced to buy a license from a competitor).
Let's not forget that the fact that "Plays for sure" and Zune DRM only work under Windows. Both Apple and Real have proven DRM schemes can be multi-platform, yet Microsoft still wants to tie content to their operating system. What's the justification for that, except of course to make sure people stay locked to Windows?
You wanna talk about consumer lock-in... Zune locks the content to the player, the jukebox software, the online store and the operating system.
Somers has to be a mifia$oft stooge. Someone should investigate her background as to where she is getting the $$$ to do this....when you find where the money is coming from, you will find out what she is really all about.
Somers's case should be dismissed.
AND she should be forced to pay Apple's legal expenses for filing a frivolous lawsuit.
Actually, AAC must be licensed from the MPEG-LA group, and it is not free. It is, however, relatively cheap... much cheaper than licensing Windows Media Audio, for example (gasps in shock).
I guess as Craig Birksmith Managing Director of Afresh Solution. Said a Monoploy is hard to break into pieces, when a controlling company has the monoply in the market, customer a stuck of which they will now pay a preium prices.
i luv this country
It seems that everyone wants a piece of the goose that laid the SUCCESSFUL GOLDEN EGG FOR ITS SHAREHOLDERS. Why don't they just buy AAPL shares???? MORONS!!!!!!
Spot on!
Apple are doing what they needed to to build the digital download market and, if anything, have loosened their model by convincing EMI to sell DRM-free on iTunes Plus.
A better example of a monopolistic tie-in would be Universal & Warner trying to ascert market control by supplying DRM-free MP3 tracks to Amazon and only DRM-enabled tracks to iTunes. When the general public finally realise MP3(MPEG-1 audio) is two generations older than AAC (MPEG-4 audio) and they're being sold old technology will there be the same outcry?
McD
I agree with your article and its conclusions but remember, judges are not all that smart and this one may allow her to waste more money and time for everyone involved.
You bloggers demand "free speech" via posting uncensored text blogs yet you censor responses to them or don't post them saying that they are offensive. How do you respond to offensive bloggers that try to demonize people like Steve Jobs. A lot of those bloggers are Microsoft lackies or?? doing guerrilla war-ware on competitors. How about some free speech for us offender shareholders? You are ALL a bunch of manipulating hypocrites.
A blog on the daily doings of Apple and the many companies in its orbit, with insight and analysis by two longtime Apple-watchers BusinessWeek Senior Writer Peter Burrows and BusinessWeek.com Senior Technology Writer Arik Hesseldahl.