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Height of Frivolity: Lawyers Suck Millions Out of iTunes Price Change

Yesterday, I received an email about the Johnson iTunes Settlement, a class-action lawsuit against Apple.  There’s so much wrong with this legalized extortion; it’s difficult to know where to begin.

Unlike Hollywood and the big record companies, Apple has always hated DRM (Digital Rights Managament) software.  I don’t know their specific reasons, but I’d bet it boils down to the following: DRM aggravates the consumer, undermines the user experience, and doesn’t stop piracy.  For the most part, annoying paying customers has been DRM’s only accomplishment; Apple wanted it gone.  In 2009, they were finally able to get the studios to agree.  In exchange for providing DRM-free content, the record labels would be granted price-flexibility, something they had wanted since the iTunes store was introduced.  After the change, no songs would have DRM and record labels would be able to set the price for each song at $0.69, $0.99, or $1.29.

It’s this price change the lawsuit exploits.  Prior to the change, all songs on iTunes were available for $0.99.  Although gift cards were sold based on fixed dollar denominations, some cards apparently advertised “songs are $0.99.”  Those cards were discontinued after the price change, but it takes time for those which haven’t been sold yet to clear the system and it’s possible some of the old cards were sold after the price change.  So what’s wrong with this lawsuit?

  • iTunes gift cards are for store credit.  The claim that the gift cards represented anything other than iTunes store credit is laughable.
  • The plaintiffs purchased two of the cards in 2008, before the price change.  The change was announced in January, months before it actually took place.  Between the January announcement and the April change, any song on the iTunes store could be purchased for $0.99 cents.
  • The plaintiffs did purchase one card after the change, but it shouldn’t matter anyway. The “$0.99” language was an advertisement that was entirely accurate at the time it was printed and the card wasn’t purchased from Apple.  Again, the claim that the iTunes gift card represented anything other than store credit is completely ridiculous.
  • An iTunes card marketed as selling a certain number of songs at $0.99 each would not bear a denomination not divisible by $0.99.
  • By the plaintiffs’ logic, claimants owe Apple $0.30 for every $0.69 song purchased after the price change.  If Apple is going to have to refund where it “overcharged,” shouldn’t they be able to recoup where they “undercharged?”
  • The payout to each class member is $3.25; the payout to Mr. and Mrs. Owens (who filed the suit) will be $5000; the attorneys stand to rake in $2,117,500.

This lawsuit is the equivalent of demanding a hamburger for $0.15 because you dug up an old McDonald’s ad from the library’s newspaper archives then demanding $5,000 when the clerk refuses to sell you a hamburger for $0.15.  Apple changed its prices and is now being sued by a couple of opportunists hoping to make a quick buck (or millions) exploiting that business decision.  Apple will pay because it is in a lose-lose situation.  Either they fork over a fixed cost, or they lose money defending against the suit.  Ultimately, the cost of this litigation will be billed to the consumer, most likely in the form of  a delayed price reduction as they recoup the losses from this settlement.

For the record, I have yet to see an image of any iTunes gift card which claims all songs are $0.99.

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