Apple’s $1 billion antitrust case revisits the era of iPod’s dominance

“After an almost decade-long fight in federal court, consumer lawyers will ask a jury in Oakland, California, today to find Apple violated antitrust laws by locking customers into iTunes and owes more than $1 billion in damages,” Karen Gullo reports for Bloomberg. “Steve Jobs’s role in the company’s strategy will be probed as they show his e-mails and testimony videotaped six months before his death in 2011.”

“The trial promises a trip back in time, when the iPod was still new and dominated in digital music. Gwen Stefani’s ‘Hollaback Girl’ and Green Day’s ‘Boulevard of Broken Dreams’ were hits and Apple sold more 22 million iPods in 2005,” Gullo reports. “A year earlier, Apple had accused RealNetworks Inc. of using ‘the tactics and ethics of a hacker’ with a program allowing consumers to buy music, circumvent Apple’s digital rights software and play it on iPods.”

“Attorneys representing as many as 14 million consumers who purchased iPods from 2006 to 2009 claim Apple modified iTunes software so music downloaded with RealNetworks software couldn’t be played. Locking iPod owners into iTunes stifled competition for downloading services and enabled Apple to charge more for iPods, they claim,” Gullo reports. “Apple called this theory “implausible,” saying in a court filing that RealNetworks, which isn’t a party in the case, was a minor player and there’s no evidence consumers were locked into buying an iPod. The software modifications provided security and anti-hacking fixes, and while they may have disabled programs like Harmony software made by RealNetworks, they were justified and lawful because they enhanced and improved iPods, Apple said in court filings.”

Read more in the full article here.

Related articles:
Star witness in Apple lawsuit is Steve Jobs – December 1, 2014
How to kill the DRM in your old iTunes Store music purchases – March 18, 2014
Apple asks judge to dismiss FairPlay lawsuit following Steve Jobs’ deposition – April 19, 2011
Apple’s iTunes Store goes DRM-free and 3G via iPhone; variable pricing coming soon – January 6, 2009
Major music cartels demand concessions from Apple before inking DRM-free iTunes Store music deals – December 15, 2008
RealNetworks ‘Harmony’ stops working on iPods but nobody notices for a month and a half – December 15, 2004
Real’s online petition for music ‘freedom’ backfires bigtime – August 17, 2004
Real cracks Apple’s Fairplay; to sell iPod-compatible songs without Apple’s authorization – July 25, 2004
Jobs to Glaser: Go pound sand – April 16, 2004

44 Comments

  1. Nope. You could back then buy music at any number of retail stores and then add it to iTunes.
    Oh gee, you can still do that now. You can use iTunes without ever buying a song from Apple’s store.

    1. No, you couldn’t do that. At the time, online music stores were all using DRM. Apple’s hardware was thoroughly dominating the field (as it does today). However, the only DRM that Apple’s hardware (and software) supported was FairPlay. Apple refused to license Play for Sure form Microsoft, which meant that you couldn’t play any music bought from anyone other than iTunes Store. About the only way you could buy music outside of the iTunes and still play it on iTunes and in iPods was if you were to buy a physical audio CD, then put it in your computer and take the time to rip the audio into iTunes. Obviously, that was absurdly complex (compared to 1-click, done!), not to mention largely irrelevant.

      1. What “Think” is saying is that you can use iTunes without buying songs online.
        90% of the music in my library is from my own CDs that I ripped myself.
        DRM was imposed by the record labels. Apple chose to develop their own system and had to thwart several efforts to hack the encryption system.
        Users still had a choice. If they wanted DRM-free then go buy the CD. Ripping a CD is very fast and the song titles are automatically imported.

        1. Ripping music into iTunes is not relevant in this case. The whole of this case is about digital distribution. As we can all see, even though at the time, it was a very small market, clearly it was strategically extremely important for Apple to protect their position. The consequences of Apple’s action are very clear today: they are undisputed dominant player in the digital media distribution market, with half a billion active users. Today, the digital music download market in the US is larger than the physical music CD market.

          And where are the competitors from those times? Microsoft’s “Play for Sure” has been discontinued, and none of the competitors from the time are still in business. Users really had no choice back then, if they wanted to buy their music digitally: if they had an iPod (the dominant device in the market), the could only buy music from Apple and nobody else. This is what the suit is about.

          1. You could still buy digital music in the form of a CD. Your argument is moot.
            This was a nascent industry and it played out as it did. Apple became the dominant music player because of the quality of the device and ease of use. You had choice of how to acquire music: CD or online. That is the key to this argument because in a monopoly no choice exists. In fact I made that choice in those days and chose to buy music in CD form. It mattered nought that I could not buy from other online services because I did not want to use DRM. Again the key here is I had a choice and I exercised that.

            1. That’s where you get it wrong: CD is a different market and not the point here. The argument here hinges on digital download market, where you had iTunes Store as the dominant monopolist, and everyone else. Because of Apple’s dominance in the hardware and distribution, competitors simply couldn’t crack this market space (neither hardware makers, nor digital media distributors). CDs are simply NOT relevant.

            2. @Predrag Also see my comment below. You could take ANY MP3 downloaded at the time from ANY download source (i.e. MP3.com) and load it onto an iPod via iTunes. There was nothing forcing a user from doing just that. What was blocked was doing this import via from another non-iTunes app on a Mac or Windows PC by circumventing the import process with a false signature. The Jobs email is referencing this event that RealNetworks and MusicMatch attempted to do.

            3. But at the time, there was no other store that was selling music which could be put on the iPod. All others were encrypted using Microsoft’s “Play for Sure”, which Apple didn’t want to license for iPods. The one store that you mention (mp3.com) didn’t have DRM, but it didn’t have tracks from ANY of the major labels (it was a tiny little music store for independent artists), so it was largely irrelevant for this market.

      2. Yes you could download your purchased music CDs or whatever format to iTunes, I know I have a demo song from my 1998 F250 Truck called summer days I ripped from CD to iTunes and now that song is in this iPad I have today ….. instrumential about 4:35 seconds long …..

      3. No, Microsoft was not licensing Play for Sure to non-Microsoft operating systems. Nor were the other player manufacturers allowing their proprietary DRM to be installed on other players. It was the way of locking buyers into purchasing the music from their stores. The Music companies were the ones demanding that DRM was on every piece of music sold. It was largely irrelevant, considering the amount of piracy that was rampant.

  2. Well, none of the digital music distribution competitors to iTunes form that time are in business today (or in meaningful competition). We have Microsoft’s Play for Sure, which was supported by more than a dozen digital music distribution companies, virtually ALL of them now defunct.

    Apple has successfully prevented any meaningful competition and established dominance in the market by controlling their proprietary DRM and preventing their hardware from working with a competitor’s DRM. In essence, the argument goes, Apple had (ab)used their monopolistic dominance in the portable medial player hardware market space in order to prevent anyone from entering the digital music distribution market, where Apple was operating iTunes Music Store (at the time). This is like Microsoft abusing Windows to prevent Netscape from competing in the desktop browser market.

    If you wanted to run an independent digital music distribution store at the time, you really had no chance of success; to make it work, your store would need to be supported by the majority of MP3 players at the time, and that was the iPod, which only supported Apple’s proprietary FairPlay DRM, which you could not license. You could either license Play for Sure from Microsoft (which is what all those services, such as Rhapsody did), or develop your own DRM. At the time, if you wanted to sell music online, record labels required you to encrypt it with DRM.

    Apple (and Steve Jobs) had throughout those early years protested publicly against DRM. From today’s perspective, it is easy to argue that such protest was for show; DRM gave Apple massive advantage. It allowed them to protect and fortify their monopoly in portable media player market, as well as build and solidify a monopoly in the digital media distribution market with the iTunes store. Once these two were established, Jobs strong-armed music labels into dropping the DRM requirement, coming out as the greatest hero of the consumer and generously opening up the two markets to the competition at the time when iTunes Store (and the iPod) had already done its job for Apple (generating hundreds of millions of registered users with credit cards). The world was ready to move from the iPod to the iPhone, and Apple has built a ready hungry user base.

    1. Your argument is based on the assumption that all digital music players are equal. iTunes success was simply down to better quality devices and a workable ecosystem.
      DRM incompatibility didn’t shut down the competition music stores, the poor quality of the devices did. No one wanted to buy the units so no one was bothered using the alternate services.
      Apple’s dominance of the music player market was cemented when they released iTunes for the PC. That was when the competition died out and as a result spelled doom for the music services.
      Now that DRM is gone from music, your argument would indicate that competing services could flourish. We really haven’t seen that primarily because ease of use is what matters to most people. Sure there are some who can be bothered to seek out alternative sources but those are in the minority.
      I do agree that Jobs knew what he was doing. The only way to get a music service was to agree to DRM. However he also know at some point that the music providers would agree to remove it because they wanted to have multiple vendors so they could dictate distribution terms. They failed of course because they do not understand the market and wanted to keep to their tried and trusted approach.
      Note that there are plenty of competing smart phones that have able music players. Still Apple dominates the market (in profit share) because they build quality devices and support the customer.

      1. Well, no; they were in no way equal, and that is the point. When Apple released iPod, it became significantly more popular than any of the competition of the time because it was infinitely better (you could put 1,000 songs on it, while others could put two or three albums).

        iTunes Store came out about two years later, by which time tens of millions of iPods were already in existence. When it started, thanks to all those iPod users, it immediately acquired close to 90% of the legal download marketshare. iPod and iTunes were essentially protecting each other’s monopolies in their respective market spaces, prohibiting any viable competitor from entering the space. Because iPod could only play FairPlay-protected files, you could only buy music for it on iTunes. Because iTunes only sold music with FairPlay DRM, you could only play it on iPod. In other words, if you wanted to use the world’s best MP3 player, you had to buy the music for it on iTunes; if you wanted to use the world’s largest online music download service, you had to buy an iPod to listen to your purchases on the go. Competitors had no chance.

        When Apple removed DRM (in 2009), Amazon launched their own music download service, offering unencrypted MP3 files, and Apple’s market share eroded to around 60%. During the DRM, though, Apple had a consistent share of about 90%. Today’s market share clearly reflects the quality and ease of use of the competing offerings, giving Apple a distinct edge, but no longer letting it maintain the monopoly.

    2. Why do people always look at these type of issues backwards first?

      1. Apple didn’t enforce DRM, the music labels did. Steve Jobs has never liked DRM, he even stated a couple of times that those systems NEVER work. That someone will always find a way around them.
      2. Apple was a single player supporting their own DRM system, they in fact had the worst chance of succeeding.
      3. Apple did not strong-arm labels into DRM free music. The labels were already offering DRM-free music on Amazon. This was the labels attempt at coercing Apple into a tiered pricing model; no tiered prices, no DRM-free music. Apple changed to the tiered pricing model and what magically happened? The labels allowed them to remove the DRM.
      4. Apple NEVER changed course even after the iPod and iTunes became the dominant player, i.e. there was no monopoly abuse – to abuse your monopoly position is to set new trends after you become a monopoly.

      For real abuse of a monopoly see Amazon with book sales and Microsoft with desktop operating systems. They both changed their terms AFTER they became the dominant player. Amazon keeps taking more and more money away from publishers. Microsoft kept locking both IT and PC manufacturer’s into draconian and unfair licensing agreements. They both played nice at first, but then when they grabbed the largest slice of the market, they started setting their own terms… please show where Apple has done that?

      1. “1. Apple didn’t enforce DRM, the music labels did”

        This was the official line, but it is quite obvious that DRM worked extremely well for Apple; they build their monopoly around it, by blocking everyone else from selling music playable on the iPod.

        “2. Apple was a single player supporting their own DRM system, they in fact had the worst chance of succeeding.”

        It was very obvious why Apple succeeded with iTunes and DRM, even though logically it wasn’t quite expected. The DRM was transparent to the user, it was liberal enough to allow user to do most of the things ordinary people would do with their music without hitting any walls.

        “3. Apple did not strong-arm labels into DRM free music.”

        It could be argued that it was Steve Jobs’s public insistence on dropping the DRM that convinced labels that DRM may not really be necessary anymore to prevent people from sharing and downloading illegally. After all, he was the only executive out there arguing so vocally against DRM.

        “4. Apple NEVER changed course even after the iPod and iTunes became the dominant player…”

        Apple was never underdog; they had acquired their monopoly position with the iPod very quickly. When iTunes Store was introduced, iPod was already a dominant player. Very quickly after the introduction of iTunes Store, it became the dominant player without any intervention, because it had leveraged the iPod user base.

        Definition of monopoly abuse isn’t as strict as in the Amazon or Microsoft cases. You don’t have to change your practices after obtaining monopoly position. As long as it is clear that you are abusing the monopoly position in order to preserve it (and prevent entry by competitors), you’re violating the anti-trust laws. The arguments in this case could be that by not licensing “Play for Sure” and installing it in the iPod, or not allowing other hardware vendors to license “FairPlay’ for their devices, Apple was artificially excluding all others from the “FairPlay” eco-system (iPod-iTunes).

        1. “When iTunes Store was introduced, iPod was already a dominant player ”

          Wow! Is your memory mangled…

          The iTunes Music Store opened in 2003. At the time, the iPod was out for two years and was still a Mac-only device and had a relatively small percentage of the PMP market. Sales of the iPod didn’t really take off until after Apple released a Windows compatible version in 2004. Those sales weren’t because of FairPlay or even the iTunes Music Store. They were because everyone thought the iPod was a very cool device and extremely easy to use. Plain and simple. People saw the device and wanted it. They didn’t think, “Gee! I really want to buy music from iTunes and the only player that plays the music is the iPod, so I HAVE to get an iPod.”

          Furthermore, when I bought my iPod there wasn’t even a music store that I could buy music from and put it on my iPod – nothing was Mac compatible at the time… All the music I uploaded to it was ripped from my own CDs. (Before I got my iPod, I listened to my music on my iBook.) Apple acknowledging that their users couldn’t buy music – or subscribe to music – decided to create their own store for their users.

          “and prevent entry by competitors”

          What competitors? Sony, Microsoft, Real Networks, etc? These companies didn’t fail because of something Apple did, they failed because of something they did wrong or couldn’t do. They had the exact same opportunities and chances to build their own media platforms. In fact, some of them started long before Apple did. And I’d like to point out that all of them also HAD THEIR OWN DRM.

          Apple built their own device, they built their own software, they built their own platform for digital media. Why should they HAVE to let others into their platform? Apple built up iTunes on THEIR OWN by creating a compelling platform that consisted of highly integrated components; device, software, service.

          It’s obvious that you’re coming at this from an entirely pessimistic point of view, but the fact is, all Apple did and still does to this day, is try to provide THEIR CUSTOMERS (people who buy their devices), with what they consider to be the best possible service. FairPlay was such a service when there weren’t any alternatives for the Mac.

          People seem to want to force vertically integrated models to adopt what is considered to be disparate component ideals. That is, since Company A uses Company B’s tech, why doesn’t Company C allow us to use theirs? Even though Company C does everything in house and is a direct competitor to both A and B. It’s the same argument people like to make when talking about how they can buy Microsoft Windows and install it on any computer, so they should be able to do the same with Apple’s OS X. They can’t grasp that Apple doesn’t sell an operating system – they only sell OS upgrades to existing hardware.

          1. Apple made iPod Windows-compatible in the spring of 2002, about six months after it was first introduced.

            As for market share, it started with about 30% at the end of first quarter of its availability (early 2002) and quickly rose to about 75% by the time iTunes music store was open, in the summer of 2003. It is then that Windows version was released (and not in 2004).

            Look, I understand that you want to be correct, but making up information doesn’t do it.

            In essence, we all agree that Apple revolutionised this business by making an MP3 player that didn’t suck and creating an online music download store that was actually easy to use. By doing this, they were rewarded with the monopolistic market share. There is nothing wrong with monopolies, except when they are abused in order to prevent competition.

            And this is where Apple went wrong. When they became monopoly, thanks to their superior product and service, a new set of rules came into play. What you used to be able to do is no longer acceptable. Refusing to license your technology to competitors is a normal business practice when you are struggling to compete in an open market space; it is abuse of monopoly position if you are the dominant one. Regardless of how you achieved that dominant position.

            Again; Apple became the biggest MP3 player vendor and music download service because their products were the best. When other hardware makers asked them for the license to “FairPlay”, Apple refused; nobody was asking for a free license, but Apple simply didn’t want to open the market up to any one competitor.

    3. Bulls**t.
      Back then, and still now, you can load up any MP3 file from anywhere using iTunes onto your iPod. You DID NOT have to buy the music from iTunes. The iPod only supported a few file formats, MP3, M4P and MP4 being a few of them…If you had .WAV, or other formats, you DID have to convert them using a utility and this is the same condition TODAY. This is strictly a “I want money for my inconvenience” trial.

      1. That is precisely the problem. If you wanted to buy a digital download and put it on your iPod, you could ONLY buy it on iTunes. If you bought it on Rhapsody, Napster or any other download services that existed back then, it would be unplayable on the iPod.

        This case has NOTHING to do with any other ways you could put your music on your computer or iPod (ripping CDs, audio-capturing your vinyl records, downloading illegally from bit-torrent, whatever); this is ONLY about the ability to legally purchase and download music online. And in that market, Apple was blocking competitors from entering their eco-system.

        1. Any song that was bought on iTunes with DRM could be burnt to CD. Therefore you were not limited to iPods because there was an avenue to get the songs in another format.
          You cannot argue that it is less convenient because that does matter. What matters is that music bought in iTunes can be reformatted to be compatible with other devices.

          1. Not really. You simply could NOT put that AAC file on a non-Apple MP3 player and play it back. That file was ONLY playable on Apple’s hardware and nowhere else. In order to make music contained in that file playable on non-Apple hardware, you had to go through a complicated, time- and money-consuming process of buying a blank CD-R disc, burning that file onto that CR-R disc as music audio CD, then ripping that audio CD into your computer, then copying the new resulting file to that non-Apple device. By no definition is this considered the same file; the process is no different than connecting audio cables and capturing real-time audio into another computer.

            By your definition, audio casettes, 8-track tapes and vinyl records were just as compatible with non-Apple hardware as AAC files purchased on iTunes with DRM.

  3. Those were the days. The iPod is what turned me into an Apple fanboy. Sure I had Macs and everything (it was my first computer), but it was after the life altering experience of the iPod that I began to see Steve with a red cape flowing behind him.

  4. Apple’s hands were tied.

    Any competitor could have taken advantage of the Apple ecosystem by offering DRM-free music but…
    1. …the labels couldn’t see past the end of their own noses and were scared silly of that idea.
    2. …the labels and Microsoft were completely enraptured with the idea of lifetime music rentals–which pretty much required DRM.
    3. …everyone still thought they could start their own music store and use DRM to lock in their customers–remember Coke, Walmart (multiple times), Sony, Nokia, Virgin and even McDonald’s all thought they could start an online music store.
    4. …ditto for creating a successful mp3 player device–everybody predicted the “open” mp3 players would win the day and everyone thought they could create a competitive device.

  5. And Realplayer attempted to defeat Apple’s DRM by spoofing the signature of an Apple device when connecting to the iTunes Store. That’s hacking, and Steve said so. Apple was under no obligation to accommodate a hacker, especially a corporate hacker.

      1. WTF? Why the downvote??

        Real ran a music store. They used a hack to get their music onto the iPod.

        Palm sold a competing phone. They used a hack to get iTunes music onto their crappy phone.

        Two sh*tty competitors, both hacking Apple, but in different directions. One wanted their music on Apple’s devices, the other wanted Apple’s music on their devices.

        Okay? Now do I get downvoted again as some kind of hater? Sheesh! This site!

        ——RM

  6. This suit isn’t specifically about the RealNetworks. What Real did was an act of desperation: in order to be able to sell music so that it can be playable on the iPods, they reverse-engineered FairPlay and modified their encoding so that it would mimic FairPlay tracks (and fool iPod into thinking it is a legitimately purchased music from iTunes). They asked Apple for a license for “FairPlay”, but Apple refused.

    So, the argument here is that, because Apple has locked down the market position of iPod by prohibiting other entries into the digital distribution market (by not licensing FairPlay), as well as prohibiting competitors from building hardware that could play media purchased on iTunes (again by not licensing FairPlay), Apple presumably was able to charge more than what iPod would have cost, had there been fair and open competition. Since no hardware vendor could fairly compete in the “FairPlay”-protected market space, Apple could set the prices higher.

    It is just possible that the plaintiffs in this may actually have a case.

    1. If they have a case, it will be only because the plaintiffs have skilled lawyers, and the jury will look at how much Apple is worth and decide they can spare a few hundred million. Not because of the logical merits of the case.

      It’s absolutely ridiculous that Apple is being accused of using DRM to protect their position when Jobs was on record as hating it and never wanting it in the first place. This isn’t a case of Apple using dirty tricks to retain dominance. This is a case of Apple doing what Apple always does: protecting what is theirs. The iPod was theirs, FairPlay was theirs and nobody else was going to have it. Apple doesn’t do licenses, generally speaking.

      ——RM

      1. None of your arguments are wrong, but they are simply insufficient to justify predatory behaviour in the market.

        Yes, it is true, Apple never did licensing; that is legally not a valid argument if you are a monopolist and are refusing to grant a license to an otherwise viable competitor.

        What Jobs was on record with (regarding DRM) is not really material to the case; it is quite clear that, as much as Apple and Jobs had protested publicly against DRM, in reality, it has been a critical contributor towards the solidifying of their monopoly position.

        We are all fans here and I’m sure every one of us would throw this case out on the first day, but if you step back and try to look objectively, you won’t have a hard time understanding why this suit exists, and why it may win on merit.

        1. The suit has ZERO merit, and you’re looking at the situation from where we stand today, not where we started from. Music players were originally designed to play music that people had bought on CDs and loaded onto them. Compared to today the CD ripping process was involved and complicated. Compared to pirating music from illegal sites, it was trivially easy. Within a short time the vast amount of music on music players was stolen music downloaded from illegal sites on the net and from illegally shared CDs. The music industry was dying because of this pirating. Apple’s iPod was already dominant because of its ease of use. Did you ever try to use a typical non-Apple music player? If you did you know that they were frustrating and a very low quality experience (think of the very first Japanese transistor radios).

          Steve Jobs then approached the music companies with his idea that stealing music via illegal downloads was more hassle than it was worth if single tracks could be priced at 99¢, and he was right. But the music companies wouldn’t take the deal if it meant that people could share those 99¢ downloads, so they demanded DRM to keep songs from being copied and shared among users and their friends, and at illegal download sites, of which there were many in those days (think Napster). So Jobs reluctantly agreed to include DRM, but Apple made it loose enough that a user could copy a song to his other devices, but not so loose that it could be readily shared on a “sharing” site, or among a dozen friends. At every turn, Apple argued against DRM.

          Apple did take exception to other device makers using the Apple store to provide music to their customers. Why should Apple erect a store and operate it at a loss, or at most a break even level, so that Real Player could sell more devices? Real Player at one point modified their devices and software so that a Real Player device looked like an Apple device to the iTunes store, by giving it a fake Apple ID. That’s nothing less than hacking the iTunes store. Apple was not obligated to support hacks when it updated its iTunes software and iPod operating systems. This was nothing new for Real Player. The Real Player software operated as a virus. Once installed, it was nearly impossible to remove. The steps for removing it and preventing it from reinstalling itself were identical to those used in dealing with full fledged viruses.

          Yes, starting from now and working backwards, a case can be made for Apple using a monopoly position, and DRM to kill the competition, but that’s not what happened, and it would be a lie. The competition died because it depended heavily on illegal downloading from sites like Napster, made shoddy hardware, and saw nothing wrong with commandeering its customers’ hardware and software with virus-like applications. The whole music player industry, and how it played out reminds me of the current smart phone industry, with Android users being those very same people who thought all music should be downloadable for free and free to share with the rest of the world through hacks and illegal downloading activity.

          If the opposition wins this case it will be because a jury sees Apple as having deep pockets, and the “poor” music pirates as the underdogs. It will be because the opposition attorneys were successful at constructing a lie based on where we are now, and ignoring the true story of how we got here. And frankly, if that’s the case, I wouldn’t blame any company for simply throwing in the towel and saying, “We’re done innovating. We’re done trying to give customers a better experience. We’re done going the extra mile to create great stuff. From now on, “good enough” is all you get from us, since you’re going to pun is us for doing any better than that.”

          1. Again, because somebody else will eventually point it out, you’re mixing up Real with Palm. Palm was the company that hacked iTunes to get music on their phone. Real hacked the iPod to get their music on it.

            Other than that, your points are well made.

            ——RM

          2. The period in this litigation is from 2006 – 2009. During that time, Apple was practically a monopoly in the portable media player market, as well as in downloadable music service market (around 80% on both of these). When you are a monopoly, different rules begin to apply. By law, you MUST allow competitors to compete fairly against you in the very market space you had created, by licensing them whatever proprietary technology exists to support the market space. In this case, it was “FairPlay”, and Apple refused to license it to both MP3 player makers (so that they could play music bought on iTunes), as well as to music stores (so that they could sell DRM-protected music playable on iPods). In the eyes of the American anti-trust law, this is considered abuse of monopoly position in order to prevent competition.

        2. Your argument is ridiculous.

          1. Apple provides a service for THEIR customers – people that buy their devices.
          2. And because a lot of people use that service, Apple should be forced to make that service available to their competitors.

          Sorry, but you cannot be punished for being more popular than the other guys. Having a service or feature that your competitors don’t have is what ALL companies hope for. There’s no reason why a company should be forced to give up that competitive advantage if they don’t want to.

          The fact of the matter is, iTunes became popular because of the iPod, not the other way around. Apple didn’t do anything nefarious to help push the iPod’s popularity.

          The case here is that big bad Apple did something to squelch a little guy. However, what really happened was Apple was trying to protect its OWN product from a parasitic company trying to ride on iTunes’ popularity.

          Again, Apple did absolutely nothing to anything or anyone other than THEIR OWN PRODUCT.

          1. Actually, legally, YES, if they are found to command a monopoly position in the market, they MUST allow others to compete by licensing (under the FRAND conditions — fair, reasonable and non-discriminatory) any essential proprietary technology that would prevent competitors from entering the market space. Such technology at the time was FairPlay.

        3. Yes, it is true, Apple never did licensing; that is legally not a valid argument if you are a monopolist and are refusing to grant a license to an otherwise viable competitor.

          Well, yeah, that’s the issue isn’t it? Was Apple a monopoly? They were certainly the dominant player, but as I remember it, iPod market share usually hovered between 60 and 70 percent. That’s killer, but it ain’t no monopoly.

          Mind you, it’s true that Real’s survival, without their Harmony hack, relied on people buying non-iPod music players. And it’s true that the only method to move DRM’d iTunes tracks to a non-iPod was to strip the DRM by burning to a CD and ripping it back. So there was a barrier to switching, albeit not an insurmountable one.

          But the fact of the matter is that Apple achieved their dominant position at the time, not through any predatory practices, but quite simply because people loved what they were selling. And even then, while their position was dominant, it was not all-consuming. So I don’t see how the situation Real found itself in can be portrayed as being due to the predatory practices of a monopolist.

          I expect the jury will find for the plaintiff (because juries), Apple will appeal, and the award will be greatly reduced or overturned. The idea that a company must willingly turn over the keys to its kingdom, not because it’s a monopoly, but just because it’s successful and popular, is not a position I see being allowed to stand in today’s business-friendly courts.

          ——RM

          1. That is precisely the point. From the angle of the current anti-trust law in America, you can build a successful product and/or service and achieve monopoly on merits (by making the best Mp3 player in the world, and the best music download service), and that is perfectly fine; your reward will be dominant market share. However, once you attain that dominant position, you MUST (upon request) allow competitors to enter that same market that you essentially created, by licensing them whatever proprietary technology exists that supports your market space.

            Between 2006 and 2009 (the period in this litigation), Apple used FairPlay to prevent anyone else from selling music playable on iPods, as well as form selling MP3 players that could play music purchased on iTunes. During that time, their market share was around 80% in both market spaces.

            1. Care to give examples of when other companies were FORCED to do this without citing cases where the company was found guilty of anti-competitive behavior?

              Was Google forced to open their search pages to competing ad networks? Were they forced to license their search algorithm?

              Was Nintendo forced to open up their gaming system to allow NES games playable on other’s systems?

              Apple didn’t prevent anyone from entering the digital media market they also didn’t force iTunes or FairPlay on the market. They, like everyone else, offered their own solution (platform). And at any time someone could’ve come along and built a better platform. All the content available on iTunes was attainable from the original source – Apple didn’t control the production and distribution of content, they only controlled how that content played on their devices.

            2. What’s the legal cutoff for a monopoly though? I thought 80% (and that’s the high side of the estimates, as I recall) was just barely too small. If an entire fifth of the market is not under your control, do you really have a monopoly?

              Now, Windows — THERE was a monopoly. They had over 90% of the market, and for Intel machines, it was 100% for all practical purposes.

              And also, whether Apple was truly using FairPlay as a weapon against competition, or whether that was just a beneficial side effect, is up for debate. Apple has pretty strong counter-arguments, in that iPods could play non-DRM MP3 and AAC files, and that FairPlay was pretty easy to strip, if you had the time.

              ——RM

  7. So they are beating up on Apple for stopping RealNetworks. Well, for those old enough to remember Microsoft did the same thing. As the saying went “DOS ain’t fixed until Lotus won’t work.” So, as you can see there are many companies that follow the same path thus attempting to keep others out of their market.

    Be the right or wrong, that is life in big business. To stop competitionou do your best keeping them out. In Apple’s situation they had to stop Realnetworks or Apple would have been sued by the record labels. Why, they did not do enough to stop thieving of music. Ya-can’t-win-fer-losen.

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