Success Can Be Bitter, Apple

[nolookingca]

The worm may have turned for Apple (Nasdaq: AAPL). After years -- decades really -- of instigating, exacerbating, or at least cheering every regulatory swipe at Microsoft (Nasdaq: MSFT), the captains of Cupertino are finally reaping what they've sown: heat from the bureaucrats.

A U.K. consumer protection agency, the Office of Fair Trading (OFT), is reportedly investigating claims that Apple is unfairly charging U.K. customers a substantially higher price for iTunes downloads than it charges customers on the European continent. Brits pay 79p for each song. That comes out to about 1.20 euro, or 20% more than the 0.99-euro price that French and Germans must cough up.

The nonprofit Consumers' Association filed a complaint with the OFT, "urging them to investigate what appears to be anti-competitive and discriminatory behaviour by iTunes against UK consumers."

Wow -- that sounds familiar. Sounds a lot like the same behavior that Apple, along with RealNetworks (Nasdaq: RNWK), assorted other also-rans and, oh, the entire European Union, has been criticizing. But only when it comes from Microsoft, or might possibly come from Microsoft, even though that firm has yet to build any presence, let alone a monopoly, in the music download scene. (In the U.S., its Media Player software actually provides direct links to competing services such as Wal-Mart's (NYSE: WMT), Roxio's (Nasdaq: ROXI) Napster, and Yahoo's (Nasdaq: YHOO) soon-to-be acquired Music Match.)

Getting back to Cupertino's woes, while I'm tempted to sit back, smirk, and ask, "How you like them Apples?" I'm going to have to take the side of reason, and Apple, and tell it like it is: You Brits are way off on this. I've been to London and paid up for a fish and chips. You can't tell me the 100% markup over Caldbeck prices is due to real costs. It's purely a question of demand.

Ever taken economics 101? Here's a refresher. Apple charges the Brits what it thinks they will pay, and a certain number of people -- 5 million in all of Europe, according to some reports -- either shell out or go elsewhere. If consumers don't like the price, they can vote with their pounds, and demand will fall. Unless...

They happen to have purchased an iPod. The iPod, true to Steve Jobs' xenophobic vision, won't play the Microsoft-formatted files available from most of the competition. That means iPod owners are probably stuck downloading from iTunes (or turning to the recent and controversial "hack" from RealNetworks). Now that sounds like a harmful exploitation of a monopoly.

Sure, music lovers could use iTunes to convert the WMA files and clutter up their hard drives with needless dupes. But remember, in the EU, offering consumers a technical remedy as simple as an installation CD is not enough to keep the regulators off your back.

OK, enough playing devil's advocate. Fans of free commerce should be on Apple's side in this dispute. To the Brits on board, I say: If you don't like the price, stop paying it. I guarantee that if you stop buying, Apple will lower the price. To Apple, I say, charge what you think is fair, but watch your back. Now that you're a leader for once, the haters are going to set their sights on you, whether you deserve it or not.

Source: Fool.com

http://www.fool.com/News/mft/2004/mft04091610.htm