updated 07:10 pm EST, Tue February 15, 2011
Rhapsody may exit iPhone or sue due to iTunes subs
Rhapsody today said Apple's new iTunes subscription rules were likely to force it out of the App Store and could lead to more. It called the plan to mandate iTunes in-app purchases "economically untenable" as it couldn't afford giving Apple 30 percent on top of its existing service. The music streaming service said it planned to collaborate with "market peers" and hinted it might sue to force Apple to compete fairly.
The companies will be "determining an appropriate legal and business response to this latest development," Rhapsody said.
Its service would be explicitly banned since it drops out to Safari to handle subscriptions. The ban could have wide-ranging repercussions for virtually every paid Internet radio service that has a subscription option so far, including Rdio and Slacker. Most of the alarm has so far been raised around magazines and newspapers.
Apple hasn't responded to the latest claims. CEO Steve Jobs in justifying the strategy expressed frustration that extra-app subscriptions meant new customers didn't contribute anything to Apple's revenue.
Legal experts, however, have said that the plans might run afoul of antitrust laws. A successful definition of competition along the lines of mobile devices or specifically to digital media could make the argument that Apple is unfairly squeezing out competition to iTunes in music, books and other categories.
If Apple gained a majority of the digital subscription market, "then you might move into territory where an antitrust challenge would seem feasible," University of Iowa antitrust professor Herbert Hovenkamp told the Wall Street Journal.
Apple has been known to loosen rules when it faces serious government intervention. Its loosening of iOS development rules is widely known to have been prompted after the FTC began investigating the fairness of excluding Adobe's Flash CS5 and other non-Apple programming kits. The company has typically been more responsive than Microsoft and has usually avoided fines so far.