Has Apple's Music Biz Hit a Sour Note?

The U.S. Department of Justice is reportedly in the early stages of an antitrust inquiry into Apple's digital retail music business. The Justice Department's inquiry has "revolved broadly around the dynamics of selling music online," according to The New York Times. Specifically, the Justice Department is looking at Apple's reported ability to influence marketing decisions made by the major recording companies.

In March, Billboard Magazine reported that Apple was pressuring music labels not to participate in Amazon's MP3 Daily Deal promotion. The Daily Deal features new music exclusively for sale on Amazon.com one day before an album's official release date to other retailers. Apple reportedly pressured labels not to participate in the Daily Deal by lowering any marketing support in the iTunes Store for albums featured in Amazon's exclusive promotion.

Apple's iTunes is the number one music retailer for digital and physical sales in the United States, controlling 28 percent of the market, according to market research firm NPD Group.  Amazon and Wal-Mart are tied for second place, with each controlling 12 percent of all U.S. music sales. For digital downloads, Apple controls 70 percent of all U.S. sales, while Amazon lags behind in second place with just 11 percent of the market.

Given Apple's dominance as the top music store in the U.S. it's tempting to think the Justice Department may be thinking about singling Apple out for regulatory oversight. Especially since Apple may find itself the target of another inquiry by the Federal Trade Commission over Apple's restrictive business practices towards application development and Adobe Flash. But the Justice Department's inquiry may be more about the current state of the retail digital music business than Apple specifically. Amazon doesn't appear to be much of an angel either, by getting music labels to agree to exclusive promotions that are clearly meant to give it a special advantage over the iTunes Store.

This isn't the first time the question has been raised about whether Apple holds a monopoly in the retail music business. If, as most people do, you own an iPod it can only sync with your iTunes music library, and iTunes itself won't play nicely with non-iPod devices--although not for wont of trying.

So if the Justice Department really wants to break Apple's influence over the music business, perhaps it should start by forcing Apple to make iTunes and the iPod interoperable with competing software and devices. That way there's a chance, albeit a slim chance, users will consider using other devices to sync with their iTunes library.

Connect with Ian on Twitter (@ianpaul).

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