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App Industry Roundup: Apple's iTunes under scrutiny

by Eric Benderoff

The Justice Department is looking into Apple's (AAPL) sales tactics on iTunes, making this the top story in today's App Industry Roundup. Meanwhile, Wired's digital magazine launches and guess what, it includes Adobe (ADBE) software. And perhaps Microsoft (MSFT) CEO Steve Ballmer should change outfits instead of management talent.

Justice Department looking at Apple's iTunes practices

Amidst all the hype and anticipation behind Apple's iThings -- you know, the iPhone, iPad and iPod -- it is easy to overlook the fact that Apple is the largest seller of music (digital and physical) in the United States. Apple has a nearly 27 percent share of all music sales, up from only 12 percent in 2007, according to figures from NPD Group. It's online only share is much bigger, at nearly 70 percent.

So when Apple flexes its muscles when a competitor offers a promotion, the Justice Department may take a look. Apparently in March, Amazon.com (AMZN) -- with 8 percent share of digital music sales -- wanted to offer a deal where customers could buy new songs from select artists the day before the official release. According to people familiar with the situation, as originally reported by Billboard magazine, iTunes executives heard of this promotion and put pressure on the music labels not to participate.

If they were to participate in the Amazon deal, "Apple punished those that did by withdrawing marketing support for those songs on iTunes," the New York Times writes.

The investigation is preliminary, but Justice Department involvement "raises the possibility of potential serious problems down the road for Apple,” Daniel L. Brown, an antitrust lawyer at Sheppard Mullin Richter & Hampton, told the New York Times. Stay tuned.

Wired comes to the iPad, with Adobe

Apparently, Adobe software will work on the iPad after all. Wired Magazine's iPad app arrived at the iTunes store this morning, bringing enhanced features developed especially for Apple's newest touch-screen device. Editions are also being planned for other tablet devices, notes Wired's long-time editor Chris Anderson.

"We can show you exactly how Pixar crafted each frame of its new movie, Toy Story 3," he writes about the cover story for Wired's June issue. Wired is selling each iPad issue for $4.99, and it will include special extras that only a digital environment can provide. In the June issue, those extras include additional Toy Story 3 content and an interactive graphic of Mars.

The digital publication was in the works for a year, and originally used the robust Adobe software that Steve Jobs famously said will not appear on Apple's iThings. Instead, the Wired digital magazine was rebuilt using a reformulated version of Adobe that uses Apple-approved code, according to the Wall Street Journal. It's unclear if the other tablet versions will run the Adobe software as originally intended.

Advertising will also be enhanced, Anderson says, noting that nine advertisers -- including General Electric (GE), Olympus, HBO and Pepsi (PEP) -- created ads to "incorporate interactivity and enhancements including 360º images, slide shows and videos."

Doddering Microsoft shifts management gears

In the chatter regarding hot tech trends, Microsoft is having a difficult time staying in the conversation. (Though, I must admit, the Kin mobile phones are pretty sweet.) The hits have been few, with the exception of the Xbox 360, while promising products like the Zune music player (I've liked the Zune since Day 1) have struggled to gain market share.

Perhaps that's why two of Microsoft's top consumer products executives left the company this week. There's no buzz behind Microsoft, while Google (GOOG) and Apple -- pretty big tech giants in their own rights -- continue to garner all our attention and geek love. The departing executives, J Allard, Chief Experience Officer (can't shorten that to CEO), and Robbie Bach, Entertainment and Devices President, both said they left the company by choice, but reports hint strongly that CEO Steve Ballmer wasn't pleased.

Ballmer will have a more hands-on role in consumer products moving forward. Frankly, the problem weren't so much faulty products as the perception of the company. If you could describe a tech company as doddering, it would be Microsoft. A wardrobe change might be better move; perhaps Ballmer can dump his closet full of ties for drawers of black turtle necks.