Apple's app subscription plan gets Feds interested: Time to retreat?

Summary:The Justice Department and Federal Trade Commission are reportedly eyeing Apple's new App Store subscription plan. Will Apple back down?

The Justice Department and Federal Trade Commission are reportedly eyeing Apple's new App Store subscription plan.

According to the Wall Street Journal, regulators are looking into Apple's new subscription plan, which aims to keep customers in iTunes and taking a 30 percent cut of the revenue. Apple launched its plan on Monday. On Tuesday, Google announced its own plan with less stringent terms.

Media execs spent most of the week trying to figure out what Apple's subscription rules would mean for them. A company like music subscription service Rhapsody called Apple's new rules a business model killer. The most controversial element of Apple's subscription plan is the move to ban media companies from linking customers to their own stores. Apple also said media partners couldn't offer better deals outside of the App Store.

The possible outcomes from this preliminary regulatory probe go like this:

  • Apple will backtrack as regulators poke around. In fact, the Feds may have just given Apple a good excuse to back down without looking like it's caving to media companies.
  • Apple sticks to its guns and regulators would have to determine if the company could be anticompetitive with at best a quarter of the smartphone platform market.
  • Media companies and their apps could leave Apple's ecosystem and focus on Android.

Door No. 1 is the most realistic scenario. Apple is likely to revise its terms to keep regulators in Europe and the U.S. at bay.

Related:

Topics: Apple, Government, Government : US

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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