Is Apple trying to block Spotify streaming music in the US?

Is Apple trying to block popular European streaming music service Spotify's US launch? In addition to labels being uncertain as to Spotify's business model, it's ability to monetize, and the future of ad-supported music, CNET is reporting:

In meetings in Los Angeles recently, Apple executives told their music industry counterparts that they had serious doubts about whether Spotify's business model could ever generate significant revenues or profits, according to two sources with knowledge of the discussions.

But Apple executives worried about the effects of a free music service might have on the rest of the market. They noted that it's tough to sell something that someone else is giving away, the sources said. One industry insider said it is only logical that if Spotify were allowed to launch a free-music service here, at a time when Nielsen recently reported that the growth of digital sales has flattened out, it could eat into the businesses of proven revenue-producers like Apple and Amazon.

iTunes is operated at low-margins for Apple as a way to encourage iPod and iPhone hardware purchases, but low-margins at iTunes like sales levels is still a large amount of money and Apple hasn't been this successful so far by leaving anything on the table.

Likewise, labels have been trying to hold Apple at bay by giving competitors like Amazon earlier access to DRM free music at much lower prices, and the entertainment industry in general has been denying them subscription TV, full participation in $0.99 TV show rentals, day-and-date movie availability, and other services consumers would probably enjoy having.

My base position is usually to suspect shenanigans on the part of the labels when these stories break, but should Apple be bearing the full brunt of these headlines this time?

[CNET via MacRumors]

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, Vector, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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Reader comments

Is Apple trying to block Spotify streaming music in the US?

6 Comments

How does this story differ from what rhapsody is currently doing?
I always saw rhapsody as a music service Provider that cuts into the music business profits. I don't buy much albums anymore when I can just get them from rhapsody the same Tuesday the album gets released. Now with rhapsody, you can even download songs directly to your iPhone for offline play.

I can see why Apple is concerned. But unfortunally for them, this is STILL the USA and any company (or person for that matter) can have an idea and see if it is profitable. Let nature take its course. If Spotify cannot make money on their model, then they will pull out of the USA. Who is it for Apple to say that "they are concerned about the business model?" Yeah, they are concerned that iTunes (one of their revenue streams) might just be an app store ONLY. It is tough to compete with FREE!.
Tough luck Apple.

i kinda like how people here are at the same time apple fanboys that love all things apple and apple is part of the corpratacrasy trying to destroy everything.

Low margin for Apple doesn't really affect the copyright holders (music industry).
Whether or not Spotify can make money is really none of Apple's business.
I know nothing about Spotify's business model, but presumably the music industry is getting its cut somewhere along the line.
Given those three facts, one has to wonder just how close to the Illegal Restraint of Trade tripwire Apple is treading here. Back room dealing to prevent competition is a little low, even for Apple, but then fresh from their experience with book publishers they may think they can get away with this again.

Rene: Please reconsider this new comment format. The inability to put in paragraph breaks makes for messy posts. Seriously, another couple of characters in the html costs nothing in terms of bandwidth.