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The Back Page - French Virgin Mega Whines About iPod/iTunes: Let Them Eat Bits

by - August 5th, 2004

The French arm of Virgin Mega's online store has filed a complaint against Apple relating to its online music store dominance. According to Virgin Mega, Apple's refusal to license its DRM scheme, FairPlay, to other online music stores makes it difficult to compete. At issue is the fact that the iPod will only play downloads from Apple's own music store, and Virgin Mega thinks that other companies should be able to be part of that chain, too. From a ZDNet article:

French online music store Virgin Mega has filed a complaint against Apple Computer, claiming that the company's refusal to license the copy protection technology used in its iPod is harming competition.

The action was filed with the French Competition Council in June and disclosed along with several other legal matters on Thursday as part of Apple's quarterly filing with the U.S. Securities and Exchange Commission.

According to the filing, the online store, part of the Virgin family, is seeking various unspecified "interim measures," pending a decision on the merits of the case. A hearing on that request is expected in either October or November, Apple said in the filing.

You can find the full article at ZDNet, including some background information.

Should Apple attain true monopoly status in the music download business -- or even "monopoly power," as Microsoft has in the OS market -- it could find itself forced to open up FairPlay. It's debatable, however, that Apple is even close to having that much power.

If it did, however, there is a huge difference between market dominance in downloads and market dominance in operating systems.

Or is there?

Microsoft can effectively block out competition, and can ruin any company even making software for its own platform. Microsoft once made exclusionary deals that prohibited its licensees from supporting the competition, regularly leverages its power from one market to gain share in new markets, and regularly uses dumping tactics to undermine the profits of companies offering superior technologies.

Can Apple do the same thing? Can Apple say to a label that it will pay more per track than the competition can afford? Could Apple threaten a label with no access to the iTunes Music Store if it licenses its songs out to another download service? Could Apple threaten to cut off access to the iPod if a retailer carries any other MP3 players?

Does Apple's market dominance, and this is the true test, keep consumers from being able to buy other music players, or from being able to buy music at other services?

Let them eat bits

While it is possible that Apple could be stupid enough to try to force some of the former situations, the answer to the last question is a resounding "no."

That is the difference between the music download business and the operating system market, and again, Apple doesn't have nearly the market share, nor the predatory history, in music downloads as Microsoft does in operating systems.

The last thing I would like to see is for Apple, or any other one company, to have a lock on the music download business, but Virgin Mega's complaint, at least on the surface, seems to be little more than whining. It will be interesting to see if that whining brings about any action.


began using Apple computers in 1983 in a high school BASIC programming class. He started using Macs in 1990 when the Kinko's guy taught him how to use Aldus PageMaker, finally buying a Power Computing Power 100 in 1995. Today, Bryan is the Editor of The Mac Observer, and has contributed to the print versions of MacAddict and MacFormat (UK).

You can send your comments directly to him, or you can also post your comments below.

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Observer Comments

Show: Subjects Only | Full Comments
Close Name:-hh Posts: 52 Joined: 04 Aug 2004
Subject: Ya want a Fairplay licence?

No problem: the licence fee is a $10M payment upfront, a payment of $19 per copy of application distributed, and then 97 cents per song it is used on.

If you don't like the terms...um, sorry


-hh

Close Name:John F. Braun -   TMO Staff Posts: 227 Joined: 11 Jun 2001
Subject: Send in the Waaaahmbulance

Remind me again why Apple, who took the initial risk and funded the development of iTMS and the iPod, is now obligated to let everyone else ride their wave? What stopped Virgin from creating their own online music service and music player? I think this is esepcially amusing given the fact that Virgin already runs both retail and electronic storefronts that sell music, among other things.

Close Name:Tiger Posts: 906 Joined: 17 Jun 2003
Subject: forget eating bits, choke on their whine!

More French whining.

Close the iTMS store in France then if they don't like it. This is a matter of CHOICE, nobody is FORCING people to buy iPods. It's not the only one out there. There are lots of choices of players, songs, services. But because they have the popular one, everybody wants on board.

Tuff tooties.

View Name:Guest
Subject: Entitlement
Close Name:Jeff Kievlan -   TMO Mac Specialist Posts: 98 Joined: 01 Jul 2001
Subject: Apple does let others sell music for the iPod...

With all this talk of Apple "stifling competition on the iPod," I'd like to point out that Apple has provided a perfectly acceptable method for other retailers to sell digital music for the iPod... It supports industry-standard unemcumbered MP3 and AAC files just fine.

Some record labels and stores don't like that? Too damn bad for them.

There are many record labels which see the wisdom in offering unencumbered files, and several online music stores which bring them to market. Emusic.com for instance, I enjoy their services quite a bit and spend at least $20 a month there.

I'd also like to point out that even after Real found a way to shoehorn their protected files onto the iPod, thus far Apple hasn't taken any action against them (except for calling them hackers and meaning it as a dirty word.)

These are hardly the actions of a monopolist. I'd call them the actions of a company willfully changing the business methods of an ailing & litigious industry.

Close Name:spxyu02 Posts: 1213 Joined: 04 Aug 2004
Subject: Re: Entitlement

Quote
Anonymous wrote:
I have been a super loyal Mac user for a long time but if history shows us again that Apple lost a market share race due to their wanting to have all of the marbles (read, not licensing) then I will give up on this company and switch to something else.


So as a super loyal mac fan, you will switch-back due to loss of potential market share? Even if they're just doing what they've always done and hit their targets and made mac customers happy?

Not everything is about growth and being huge. This summer I am working in a regional bank that is at the small end of the "big boys" spectrum (citi, bank of america, chase, etc) but bigger than the other regional banks, and this subject of becoming a trillion dollar bank comes up a lot. Just because we're not BofA doesn't mean we're not an incredible bank meeting our customers needs as well as providing outstanding and forward thinking services and solutions. So basically it's just the frustratingly naive idea that bigger is better that irks so many people here because it's just flat out wrong.

View Name:Guest
Subject: Dominance of what?
View Name:Guest
Subject: Entitlement
Close Name:Kircle Posts: 271 Joined: 06 May 2004
Subject:

One group is saying Apple's current strategy is hurting itself via isolation and is reminencent of Apple's Mac strategy. Another group is saying Apple's current strategy is only helping Apple and is hurting competition.

So which is it?

Close Name:spxyu02 Posts: 1213 Joined: 04 Aug 2004
Subject:

Quote
Kircle wrote:
One group is saying Apple's current strategy is hurting itself via isolation and is reminencent of Apple's Mac strategy. Another group is saying Apple's current strategy is only helping Apple and is hurting competition.

So which is it?


This is helping apple. In the short term, people may somehow look at apple as being the bad guy to people looking for handouts, but screw that, they're just looking out for themselves and protected what they've made great: iPod+iTunes+iTMS, and just wait till this christmas season, Jobs will be whiping his butt with $100 bills

View Name:Guest
Subject: re: Entitlement
View Name:Guest
Subject:
View Name:Guest
Subject:
View Name:Guest
Subject: Dummy
Close Name:spxyu02 Posts: 1213 Joined: 04 Aug 2004
Subject: Re: Dummy

Quote
Anonymous wrote:
This board gets dumber and dumber every day.


If you don't like it, you're free to leave.

View Name:Guest
Subject: Free to Leave
View Name:Guest
Subject:
View Name:Guest
Subject: it's too early to talk about dominance
Close Name:AFCdtLoeb Posts: 2533 Joined: 20 Jul 2004
Subject:

So what if Apple is dominant. They may be a monopoly in the Digital Music world, but they got that way beacuse they produced a superior product, and the consumer agreed. They have NOT used anti-competion tactics. They have not locked in music labels or bought out competitors. I find it bizzare that that everyone wants Apple to open FairPlay (a rather ironic name, ja?) when it was Apple who made the investement and took the risk. BMW doesn't go to GM and DEMAND that they hand over their four-wheel steering technology. Why? Beacuse GM developed it and put the work into it. I feel Apple is making a big mistake by not attacking these people back. If Real and Virgin are the only ones talking, people will start to listen. In the American President, Michael Douglas Charachter is speaking about the political attacks against him and he says: "Look, if the people want to listen to Rumson, fine", to which his adviser responds "They don't have a choice! Bob Rumson is the only one doing the talking! People want leadership, Mr. President, and in the absence of genuine leadership, they'll listen to anyone who steps up to the microphone" Thoughts?

Close Name:Jason Varner -   TMO Mac Specialist Posts: 1125 Joined: 05 Jan 2002
Subject:

Quote
AFCdtLoeb wrote:
In the American President, Michael Douglas Charachter is speaking about the political attacks against him and he says: "Look, if the people want to listen to Rumson, fine", to which his adviser responds "They don't have a choice! Bob Rumson is the only one doing the talking! People want leadership, Mr. President, and in the absence of genuine leadership, they'll listen to anyone who steps up to the microphone" Thoughts?


Well, wildly tangential, but someone seems to like quoting The American President.

At the moment Apple holds a dominant position, yes. That does not however make them a monopoly (yet) nor does it obligate them to enter into any sort of licensing deal -- after all, as it stands right now Global Widgets International could produce the Widget 9000, capable of playing every format under the sun, with a drop-dead gorgeous casing, elegant interface, and an associated music store that is everything to everybody, and pull the rug right out from under Apple, and there's not a thing Apple could really do about it. (Dear Lord, is that all one sentence??? I feel like Faulkner. )

Abuse of monopoly power, so far as I know, is using a monopolistic position in one market as a wedge into a related one. I'm not seeing Apple doing that yet. Now, when Apple tells the record labels to enter into an exclusive contract with the iTMS or risk losing the entire online market, and the labels have to do it, then we can talk abuse of monopoly power. Right now, Apple is only a major player in both the MP3 player market and the online music store market.

Jason

View Name:Guest
Subject: License everything
Close Name:-hh Posts: 52 Joined: 04 Aug 2004
Subject: Re: License everything

[quote="Anonymous"]Why stop at forcing Apple to license Fairplay?

Why not force M$ to either license or open up the .doc and .xls formats?

...

Why should Apple be forced to allow other people to read and write files encrypted with Fairplay, but companies like M$ to keep their formats secret?[/quote]

A very, very good point.

"What's good for the Goose..."


-hh

Close Name:Lanthar Posts: 54 Joined: 07 May 2004
Subject:

I was going to mention the same thing

Quote
Jeff Kievlan wrote:
With all this talk of Apple "stifling competition on the iPod," I'd like to point out that Apple has provided a perfectly acceptable method for other retailers to sell digital music for the iPod... It supports industry-standard unemcumbered MP3 and AAC files just fine.

Some record labels and stores don't like that? Too damn bad for them.

There are many record labels which see the wisdom in offering unencumbered files, and several online music stores which bring them to market. Emusic.com for instance, I enjoy their services quite a bit and spend at least $20 a month there.

Close Name:Lanthar Posts: 54 Joined: 07 May 2004
Subject:

Jason, you are quite correct in your assesment of "abuse" of monopoly power.
Monopolies in an of themselves are not wrong or evil. Often times they are necessary. But when they become evil that is bad... another case would be if they changed the iPod firmware to ONLY play Fair-Play protected AAC files...
As My Econ Professor used to say "Big is not illegal, Bad is not illegal, Big and Bad is VERY illegal"...

Quote
Jason Varner wrote:

Abuse of monopoly power, so far as I know, is using a monopolistic position in one market as a wedge into a related one. I'm not seeing Apple doing that yet. Now, when Apple tells the record labels to enter into an exclusive contract with the iTMS or risk losing the entire online market, and the labels have to do it, then we can talk abuse of monopoly power. Right now, Apple is only a major player in both the MP3 player market and the online music store market.

Jason

Close Name:Jason Varner -   TMO Mac Specialist Posts: 1125 Joined: 05 Jan 2002
Subject:

Lanthar, that's a great way to put it. Thanks for the capsule explanation of 'abuse of monopoly power'.

Jason

Close Name:Mace Posts: 9014 Joined: 07 Aug 2003
Subject:

I agreed with the author of the article. Virgin is only whining. Apple did not exhibit any anti-competitive behaviour.

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