Apple Beats relaunch: The company wants record labels to kill Spotify's free streaming service.

Apple Is Reportedly Trying to Convince Record Labels to Kill Spotify’s Free Streaming Service

Apple Is Reportedly Trying to Convince Record Labels to Kill Spotify’s Free Streaming Service

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A blog about business and economics.
May 4 2015 1:39 PM

Apple Is Reportedly Trying to Convince Record Labels to Kill Spotify’s Free Streaming Service

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Tim Cook really wants your money.

Photo by Justin Sullivan/Getty Images

Are you one of the 45 million people in this world who listens to Spotify's free streaming service, tolerating the occasional advertisement in order to save $10 a month on entertainment? Yes? Well, dear music fan, it seems Tim Cook and Apple are out to ruin your fun. The Verge reports today that, as Apple gears up to debut its own music streaming platform, the company is urging record labels to stop its rivals from offering free, ad-supported tiers to users, "which will dramatically reduce the competition for Apple’s upcoming offering." The back-room dealing seems to set off some antitrust concerns among Department of Justice officials, who “have already interviewed high-ranking music industry executives about Apple’s business habits.”

Music sales at Apple's iTunes Store have fallen in recent years as fans have started moving over to streaming services that offer up an unlimited buffet of songs. The company has been slow to respond to the change in listening habits, but is finally preparing to relaunch Beats Music, the streaming platform it acquired last May in a $3 billion deal that also brought it the popular headphone brand founded by Dr. Dre and Jimmy Iovine. Unlike Spotify, however, the new-and-improved Beats is not expected to offer a free tier, which means that winning over listeners is almost certainly going to be an uphill battle. Initially, Apple seemed to think its sheer size and residual clout within the industry would let it negotiate a special deal with the record companies, which it lobbied to let it sell streaming subscriptions for $7.99, rather than the standard $9.99. That would have let it compete against Spotify's premium service on price. But, according to Billboard, the labels quashed the idea.

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It's unclear from the Verge's report whether Apple's attempt to kill off freemium is a last-ditch attempt to even the playing field against Spotify, now that it can't offer its subscriptions at a discount, or if it suggested lowering the price of paid streaming to $7.99 while simultaneously killing off the freemium model. Either way, it seems unlikely to prevail. First, the labels still own a significant financial stake in Spotify, which makes it seem a tad, well, unlikely that they'd try to even the playing field at all for Apple. And while artists like Taylor Swift have made some very noisy stands against free streaming, and some executives are starting to consider ideas like forcing Spotify to cap how much music listeners can enjoy before paying, industry insiders still seem to agree some kind of unpaid service is a necessary counterweight to piracy, not to mention as a way to win new subscribers. To quote a source who talked with Billboard, "People don't think you can just turn it off."  

Still, even if Apple fails to limit the ways consumers can listen to music, the news that it's trying isn't encouraging. Recall that the company was already found guilty once before of conspiring with publishers to raise e-book prices as Steve Jobs attempted to fight Amazon on its home turf. We may be in the Tim Cook era now. But it seems old, anti-competitive habits die hard in Cupertino.  

Jordan Weissmann is Slate’s senior business and economics correspondent.