Apple now in i-Tunes Trouble

eMusic, the world's second biggest online digital music store after iTunes accused Apple yesterday of being anti-competitive if it goes ahead with its plans of bundling free access to its iTunes catalogue with every iPod music player it sells.

According to a report in The Financial Times, Apple Inc. is said to be in talks with major record labels to offer free access to its iTunes music library to customers who pay extra for an iPod or iPhone.

FT has mentioned unnamed music industry sources in reporting that Apple is negotiating with major record labels over sharing of revenue if it starts offering a monthly music subscription for the iPhone and an unlimited music bundle for both the iPod and iPhone.

According to eMusic, Apple's reported proposals would be a major blow to music retailers and record labels. David Pakman, the chief executive of eMusic has compared the situation to anti-competition cases against the software giant Microsoft, which has been fined hundreds of millions of dollars by the EU for packaging media applications with its Windows operating systems.

Pakman said, "If you have to buy iTunes when you buy iPods that is clearly anti-competitive behaviour by a monopolist. It would absolutely catch the eye of European competition authorities."

Pakman further added that this policy by Apple amounts to "using market power you have in one market to damage competition in another."

The eMusic boss feels that it would be less anti-competitive if Apple were to make the bundled downloads optional, charging a premium on iPods and iPhones that included access rather than always including access.

He however added that the move could still spell disaster for labels and music retailers. He said, "If you could buy all the music you wanted for $20, why would you buy CDs or downloads?"

eMusic has 3.5m tracks in the MP3 format which are free from any sorts of protection. On the other hand, a large number of tracks in iTunes remain protected by DRM (digital rights management).

Apple has declined to comment on the reported deals but music industry sources have confirmed that preliminary talks had taken place with the iPod maker.

The iTunes Store boasts of more than 50 million customers and has a catalog of more than 6 million songs having sold more than 4 billion songs. More importantly for Apple, the online music store has been a critical tool for boosting sales of the highly profitable iPod and iPhone.