Apple Facing U.S. Scrutiny Over its Beats Music Service: Report

FTC officials are looking at how Apple is negotiating its Beats Music partnerships, while another report says that Apple is having trouble lining up those needed music content partnerships.

Beats music service

As Apple prepares to launch its revamped Beats Music services later this year, U.S. antitrust officials are looking into the company's practices in forming partnerships with music content companies that will provide the content received by customers.

At the same time, Apple is apparently having trouble securing those deals with music content companies just months before a planned June launch of the service, according to a report.

The antitrust probe into Apple by officials from the Federal Trade Commission was announced in a May 5 story by Bloomberg, citing unnamed sources who are familiar with the investigation. The officials are "scrutinizing Apple Inc.'s efforts to line up deals with record labels as it prepares to debut a new version of the Beats Music streaming service," the story reported. "The Federal Trade Commission is looking at whether Apple is using its position as the largest seller of music downloads through its iTunes store to put rival music services like Spotify Ltd. at a disadvantage, one of the people said."

FTC officials have had talks about Apple's practices with executives from multiple record labels, the report continued. The FTC investigators are still in the early stages of their inquiry, the story reported.

Meanwhile, a separate May 5 report from Billboard indicates that Apple has been having a tough time making deals with music companies to provide the music content that the Beats service will require. Apple's rumored June launch for Beats Music "is going down to the wire," the story said, because "industry sources say Apple does not have the necessary licensing deals" in place with just a month to go before the company's Worldwide Developers Conference (WWDC), which will take place in San Francisco from June 8th to 12th.

An earlier eWEEK report back in March said that Apple appeared to be planning the launch of the new Beats Music service plans at the WWDC event.

The Billboard story said that despite the music contract troubles so far, that the June launch of Beats is "still attainable," especially since the company "has been able to quickly secure licensing deals in the past."

At least one other major record label source, however, told Billboard that the launch of Beats will likely have to be delayed because of the deal troubles. "June won't be the release date," the unnamed source said. "The deals aren't done."

The Beats Music service is expected to be launched as part of an upgrade to a future iOS app and will also be offered through a stand-alone Android app, which would be the first such app built internally by Apple, according to the analyst firm Seeking Alpha.

Beats Music's streaming service will reportedly be priced at $7.99 a month, which is less than several competing streaming services, including Spotify and others, according to reports.

Apple bought Beats Electronics in May 2014, which included Beats Music as well as the company’s headphone business, after rumors had been circulating about the transaction for almost a month, according to an earlier eWEEK report. The purchase was made with $2.6 billion in cash and $400 million in Apple stock. Beats Electronics, founded by rapper Dr. Dre and pop music producer Jimmy Iovine, makes high-end headphones and also operates Beats Music, the popular streaming radio service.

In September 2014, Apple denied widely circulating rumors that the company was planning to actually shut down Beats Music just four months after it bought the company for $3 billion, according to an earlier eWEEK story. While the shutdown rumors were flatly shot down by Apple at the time, a company spokesman refused to give details about what might lay in store for the streaming music division. The denial of rumors was in itself interesting and unusual because Apple, like other companies, usually remains stoic about reports and rumors it doesn't want to discuss publicly.

Beats launched Beats Music, a $9.99-a-month streaming music service for iOS, Android and Windows Phone devices, in January 2014, according to a previous eWEEK report.