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Friday, January 04, 2008, 04:25 pm PT (07:25 pm ET)

Lawsuit demands end to iPod/iTunes monopoly; CD sales plummet

A class action lawsuit filed against Apple Inc. accuses the company of knowingly controlling the handheld market with its FairPlay music standard, forcing rivals out of business and allowing it to overcharge customers for iPods — news that comes just as CD sales are reported to have dropped sharply in 2007.

Class action charges Apple with digital music monopoly

A 24-page class action complaint submitted this week in a Northern District of California court alleges that Apple is unfairly tying the iTunes Store and the iPod together by selling much of its music in the FairPlay AAC format. Customers who own the iPod must buy from iTunes if they want music in a protected format; in just the same measure, iTunes customers must buy an iPod if they want to listen to music on a portable player.

As Apple effectively controls the digital music sales industry, this is a major disincentive to buying a competing player, say chief plaintiff Stacie Somers and her representing lawyer Helen Zeldes. The two point to statements by government officials in France and Norway where Apple was accused of leaving customers without rights.

Moreover, the iPod maker is not only neglecting support for rival standards but is deliberately stripping it out and creating "crippleware," according to the lawsuit. Although the chipset in the iPod shuffle natively recognize Windows Media Audio, no such support exists in the shipping firmware of it or any other iPod.

Apple is also targeted in the complaint for using its secure position atop the market to allegedly overcharge customers for iPods. Although the prices for immediate orders of 1GB and 4GB of memory were only separated by $5.52 at the time Apple produced the first-generation iPod nano, Apple saw fit to charge $100 more for the higher-capacity model, the plaintiff says.

As these combined practices potentially violate the Cartwright and Sherman Antitrust Acts in addition to California competition laws, Somers' suit asks for a permanent injunction against the reported behavior in addition to damages.

CD sales drop nearly 10 percent in 2007 as online sales rise

Sales of albums in the US have dropped a full 9.5 percent in the US between 2006 and 2007, according to new results from Nielsen SoundScan.

Much of this is attributable to a shift away from CDs due to both legal and pirated music downloads, though the research firm cautions that the music business would have fared worse without the help of online music stores, dropping by a steeper 15 percent.

Digital sales ultimately represented the recording industry's shining beacon, according to the report. Sales at all online stores grew by 45 percent to roughly 844.2 million individual songs and were responsible for 10 percent of all music sold. Actual content sold climbed by about 14 percent to 1.35 billion, hinting that customers were buying more items overall but also spending an increasing amount on individual songs and music videos.

"That says consumers are embracing both the track format and the digital album format," says Nielsen Music president Rob Sisco.

Intuit resolves troublesome QuickBooks data loss glitch

After contending with the issue since mid-December, Intuit on Friday has released a QuickBooks patch that it says should fix a potentially very dangerous bug in the 2006 and 2007 Mac versions of the company's finance management software.

Owners of the program found that installing an automatic update last month erased the contents of their Mac's Desktop folder, triggering a class action lawsuit as well as complaints from many users.

The download primarily disables the automatic update feature and suggests that users will instead have to manually apply future patches to QuickBooks to address any flaws discovered in the future.