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I Hear No Evil in Beats Music Exclusives

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Someone save me from the nonsense. My BetaNews colleague Brian Fagioli’s “Apple’s rumored iTunes and Beats Music ‘Exclusives’ plan is potentially evil” is top-placed story at the site today. I messaged the day editor (who hasn’t yet replied and may still be off for the holiday): “If it racks up any significant amount of pageviews, I am changing professions. The number of comments is disturbing enough”. Should you want me to stop writing for BN, and some readers do, by all means click, click, click Brian’s commentary.

I have two fundamental problems with the post: Sourcing and its point. Brian refers to New York Post story “Beats Music lining up talent for exclusive releases“. I tell reporters: “Write what you know to be true”, which can’t be when sourcing someone else’s news gathering. For the record: I trust the newspaper’s general reporting accuracy, so Brian stands more solid than if quoting a blog. That said, he and I write for BetaNews not BetaBlog. See my four-and-a-half year-old analysis “The Difference Between Blogging and Journalism” for a primer on why one isn’t the other. 

Defining Consumer Harm
My larger problem is the point about exclusivity being “evil” and “harming consumers”, or the insinuation (corrected in the last paragraph) the practice is new to Apple. It’s not. Four years ago I asked: “Meet the Beatles on iTunes—and nowhere else?” Consumer harm was very much the concern about the exclusive distribution arrangement, which Apple confirmed, after I contacted the company rather than sourcing someone else’s reporting.

I put consumer harm in context of U.S. antitrust law. Going into 2015, The Beatles digital tracks are still exclusive to iTunes. Since the U.S. Justice Department isn’t banging down Apple’s door, we can assume that from the legal perspective there is no consumer harm—or at least not enough to matter.

Excerpting my 2010 BetaNews story:

Exclusive distribution from a market leading—some would call dominating—position is a potential problem for Apple. Three quick reasons viewed from the 1890 Sherman Act and jurisprudence based on precedent-defining antitrust cases:

1. Exclusive distribution discourages—or prevents—competition, causing consumers harm. They don’t receive the many benefits of competition, among them better pricing.

2. The exclusive distributor is in position to set prices at a higher rate. Consumers have no other choice.

3. In the case of Apple, with arguable monopolies in two markets, exclusive distribution is leverage into other markets and could create what antitrust enforcers call a “barrier to entry” for competitors. That position not only harms consumers and competitors but can stifle innovation.

Thing is: Exclusivity wasn’t new to iTunes four years ago, and my story cites examples based on my own reporting (e.g., I compared albums there to Amazon’s music store). Where is the DOJ raising the “consumer harm, antitrust violation” flag? Looks like nowhere. Yet two years ago, trustbusters busted Apple for colluding with five publishers to fix ebook prices.

From my extensive experience reporting about Microsoft’s antitrust trial and others, The Beatles exclusives looked like a stretch four years ago and much less so fast-forwarded, given the government’s lack of response or even serious consumer concern. If there was hint of consumer harm here from existing and future exclusives, prosecution would follow.

Case in Point
BetaNews commenter nascent makes the point I would, but since he or she does it so well responding to Brian’s story:

Your analogy doesn’t really work here. Everybody is able to play an iTunes album—it’s just AAC. If you made this argument when they had DRM I’d possibly understand you, but DRM-free music can be played anywhere…iTunes is accessible by everyone but many choose not to use it (myself included). Also as mentioned by others: studios will only be hurting themselves if they do exclusive MP3s. There is a bay of pirates where all music can be acquired for free.

DRM does lock content to a service, something that in concept could be applied to content available only through a streaming service like Beats Music. Except: Apple doesn’t hold a monopoly in that market, and the pricing metrics are all wrong for existing antitrust law as I the non-lawyer understand it. You don’t buy from Beats, but rent. There also is reasonable argument that content an artist makes available to the streaming service is little different from that which a radio station receives when musicians play live in studio and the tracks are later rebroadcast. The songs are exclusive to that distributor.

I oppose digital rights management, taking my library of digitally-downloaded music DRM-free in October 2007. From my perspective DRM causes consumer harm. But not everyone agrees. Apple’s recent class-action antitrust case is startling example, and the verdict also refutes Brian’s assertion. Two weeks ago, a jury sided with Apple over alleged, aggressive tactics against competitors. by leveraging superior market position and DRM. Some facts coming from the California courtroom portrayed Apple most unfavorably. Yet the jury of eight—themselves consumers—essentially decided that an update purging songs acquired from sources other than iTunes delivered consumer benefits rather than caused harm.

One could argue “evil” behind Apple’s behavior then as Brian asserts now. While the court case started in the last decade, the verdict is current and reflects biases about music purchasing today when choices are abundant. I view the jury’s reaction, given after just three hours deliberation, as microcosm of consumer sentiment. The law, and its interpretation, is a lens that changes with time and perspective, particularly when jurors issue the verdict.

They didn’t see consumer harm during the days of DRM, which exclusively locked content to single stores like iTunes. I see even less from DRM-free tracks Apple makes available now, or will in the future, or even those streamed by Beats Music (e.g., the radio station analogy).

I am confident that Brian did not mean to side with music labels, but that’s how his story reads to me. In her Post story, Claire Atkinson writes: “The idea of artists making their own side deals with streaming services doesn’t go down too well with record label brass, however”. Oh yeah? Artists would make the exclusive deals? That’s argument for consumer benefit, if artists cut profitable, ah, arrangements that allow them to make more and, hopefully better, music and give consumers more of it to choose from. What’s evil or harmful about that?

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