U.S. probes Apple digital music dominance – sources

* US makes preliminary antitrust probe into digital music

* Broad questions involve iTunes and Apple’s dominance

* Music labels and digital music providers contacted

By Yinka Adegoke

NEW YORK, May 26 (BestGrowthStock) – The U.S. Justice Department is
making preliminary inquiries into whether Apple Inc (Read more about Apple stock future.) (AAPL.O: )
unfairly dominates the digital music market, according to three
people whose companies have been contacted by regulators.

They said the Justice Department contacted some music
labels and digital music providers earlier this month.

DoJ staff have mostly asked the companies broad questions
about the nature of the digital music market, according to two
of the three sources, who all spoke on condition of anonymity
as the talks were confidential.

“It was a very preliminary conversation,” said one person.

Given Apple’s leading market share the broad questions
inevitably involved iTunes, these people said.

Billboard magazine reported on March 6 that Apple had used
its market dominance to prevent labels from agreeing to let
Amazon.com (AMZN.O: ) exclusively debut new songs.

Spokespersons for Apple, Amazon and the Justice Department
declined to comment.

In the United States, Apple’s iTunes Music Store is the
largest music retailer and largest digital music store with a
market share of about 70 percent. Amazon is the No. 2 digital
music retailer with a less than 10 percent market share.

Apple and the major music companies — Vivendi’s (VIV.PA: )
Universal Music Group, Sony Music Entertainment (6758.T: )
(SNE.N: ), Warner Music Group (WMG.N: ) and EMI Group — have had a
love-hate relationship in recent years.

On the one hand, Apple and its chief executive Steve Jobs
are widely acknowledged for having given the music industry a
life-line with the launch of iTunes in 2003, when digital music
services were struggling to get traction.

But iTunes’ subsequent dominance, combined with the huge
popularity of its devices like the iPod and iPhone, have led to
clashes between label executives and Jobs over a range of
issues, from copy-protection software to variable pricing.

Resentment towards Apple in the music industry has grown as
their fortunes have diverged in recent years.

The iPod digital music player has helped to drive Apple’s
resurgence this decade, even as global music sales have shrunk
from $26.5 billion in 2000 to $17 billion last year.

Apple ended Wednesday with a market value of about $222
billion, surpassing Microsoft Corp as the world’s largest
technology company, according to Reuters data. [ID:nN26182337]

Evan Stewart of the law firm Zuckerman Spaeder LLP foresees
many antitrust battles in the nascent digital market as
companies establish themselves in a new space.

“They are trying to gain control in parts of the economy
that are growing rapidly and people don’t understand them very
well,” he said.

Dominant companies in one part of the economy trying to
move into another area raises “legitimate areas of inquiry and
concern,” he added.

The Justice Department inquiry was first reported by the
New York Times on Tuesday, citing people briefed on the
conversations.

Stock Market Analysis

(Reporting by Yinka Adegoke; Additional reporting by Diane
Bartz in Washington D.C. and Alexandria Sage in San Francisco;
Editing by Richard Chang)

U.S. probes Apple digital music dominance – sources