In Apple-Google maps war, consumers lose

9/22/2012

Cutthroat competition is supposed to be good for consumers, but the battle between Apple Inc. and Google Inc. over maps shows that’s not always the case.

On the iPhone 5, which went on sale Friday, the popular Google Maps app was replaced with Apple’s own maps software. The change was widely panned by consumers, who complain that Apple AAPL +0.20%   stuck them with something inferior in an effort to hurt one of its biggest competitors. Apple conceded Friday that the new map software is still a work in progress, and said it would get better with time.


Apple Maps on iPhone 5
Retail and tech experts say Apple’s move is aimed at displacing Google GOOG +0.81%  , which has long dominated the maps-app market, which accounts for an estimated $625 million in annual sales, according to Opus Research. While such rivalries often lead to better products, they say the rush by tech companies to register patents on the most basic of smartphones and their features, including map apps, is having the opposite effect. Apple’s goal here is to maintain control of its own suite of products — or “ecosystem” — to increase its share of the mobile-phone market, according to Scott Sutherland, analyst at Wedbush Securities.

By building its own map software from scratch, Apple lost its way, say a slew of tech reviewers, calling the app one of the biggest drawbacks of the iPhone 5. The software is not nearly as robust as Google’s, which was developed and improved upon over nearly a decade, experts say. The early consensus is that the app is buggy, displays distorted images and provides confusing search results. Apple’s version also lacks Google’s popular “Street View” feature and does not provide directions over mass transit.

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Criticism over iPhone 5’s maps
Amid the controversy surrounding Apple dumping Google Maps, Ian Sherr spells out Apple's efforts to match the detail of Google Maps and how iPhone users can still use Google Maps on their smartphones.

Maps are not the only area where consumers may end up in the crossfire between Apple and its competitors. In a $1 billion settlement last month, Samsung was found to have infringed on six Apple patents — some for what appear to be very simple features like the way apps are laid out or how users zoom in on pictures. Such decisions could mean that consumers only have access to a handful of proprietary features, insiders say. “In the short run, consumers are clearly the losers from the current wars over intellectual property,” says David B. Yoffie, Max and Doris Starr Professor of International Business Administration at Harvard University.

Competition tends to be bad for consumers when it creates more high-tech products that are incompatible with each other, experts say. For instance, Apple’s iCloud works exclusively with Apple products, while Google’s Cloud works with any device using Google’s operating system — customers get locked into one or the other, says Ben Bederson, a professor of computer science at the University of Maryland.

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Another problem, say tech pros, is that the rush by tech firms to find a one-size-fits-all approach to wildly different smartphones often results in “worse software,” adds Bederson.

Apple did not respond to requests for comment. Google says the company’s goal is to make Google Maps available to everyone, “regardless of device, browser or operating system.”

Smartphone users may eventually win out, say some experts, with Apple and Google licensing each other’s software to make their best features available across several platforms. “In the history of the technology business, it has been common for intense wars over patents to be followed by broad cross-licensing,” Yoffie says.

Apple will likely fine-tune its maps app over the coming months, says Damien Geradin, a competition law partner at Covington & Brussels, a Washington, D.C.-based law firm. Apple dropping Google Maps may be bad for users in the short term, but it will be beneficial over the longer term. “We don’t want to be left with only one type of way to find directions: Google Maps.”

USD - Dollar Benefits from Risk Aversion

The US dollar was able to take advantage of risk aversion in the marketplace following a series of disappointing indicators out of China and the euro-zone, which led to gains against several of its main currency rivals. The AUD/USD tumbled close to 100 pips during Asian trading, eventually reaching as low as 1.0366. Despite a slight upward correction later in the day, the pair was once again bearish by the evening session. Against the Swiss franc, the greenback gained more than 90 pips during the first half of the day, and by the end of the European session was trading at the 0.9350 level. 

Turning to today, traders will want to pay attention to announcements out of the euro-zone, particularly with regards to the current situation in Spain. It is widely expected that the Spanish government will soon request a bailout from the ECB. Any signs today that the request may come soon could lead to significant volatility before markets close for the weekend. If the situation in Spain turns out to be worse than originally thought, the dollar could extend its upward trend vs. its riskier currency rivals. 

EMI-Universal deal cleared by EU and US regulators

EU and US regulators have approved the takeover of UK music firm EMI by Universal Music, but it must sell some of the firm's most valuable labels.

The European Commission said Universal would have to sell off assets including the Parlophone label, home to artists such as Pink Floyd and Kylie Minogue.

The US Federal Trade Commission later approved the deal in its turn without imposing any conditions.

The ?1.2bn ($1.9bn) takeover of EMI was announced in November.

Although the European Commission said its ruling would allay competition fears, rival music labels have condemned the move.

EMI, with a history dating back to 1897, is home to artists including the Beatles and Pink Floyd. Universal is a unit of French media giant Vivendi.

Continue reading the main story
Analysis

Robert Plummer
Business reporter, BBC News
In EMI's 1960s heyday, it was one of four music companies that dominated the British charts. The others were Decca, Philips and Pye.

One by one, the others fell by the wayside, swallowed up by what is now Universal Music Group (UMG).

Now, with all remaining obstacles to the deal cleared, EMI's recorded music division looks set to follow suit, putting the last big UK record company into French hands.

However, the scale of the sell-off required by the European Commission is impressive.

It includes the catalogue of one of those proud 1960s labels, Pye - now part of Sanctuary, which Universal bought in 2007 and must now hive off again.

With other labels such as Mute also on the list, music by artists from the Kinks to Depeche Mode will now be changing hands.

The Commission's demand for assets sales also includes disposal of EMI's Chrysalis, Mute, and Classics labels, as well as Universal's Sanctuary and Co-op Music labels.

"The very significant commitments proposed by Universal will ensure that competition in the music industry is preserved and that European consumers continue to enjoy all its benefits," EU competition commissioner Joaquin Almunia said in a statement.

'Preserve choice'
He said a combined group would have a market share with the European Union of less than 40%, the threshold which typically prompts regulators worry about market dominance.

Mr Almunia said: "Competition in the music business is crucial to preserve choice, cultural diversity and innovation.

"In this investigation, we have paid close attention to digital innovation, which is changing the way that people listen to music."

Citigroup is selling EMI, having bought it when buyout firm Terra Firma defaulted on loans owed to the US investment bank. Regulators have already allowed a group led by Sony to buy EMI's music publishing arm for $2.2bn.

Universal welcommed the commission's decision, saying: "Today's approval brings to an end an extensive EU regulatory review and the acquisition will benefit the artistic community and music industry."

The company said that after the asset sales, its catalogue would include the Beatles, Beach Boys, Genesis, Katy Perry, Emeli Sande and Robbie Williams. The Beatles, part of Parlophone, was exempted from the sale.

A source close to Universal said the company had already received interest in the assets for sale from well-funded potential buyers.

'Universal's arrogance'
Smaller rival music labels reacted angrily to the commission's decision. Impala, which represents independent label across Europe, claimed that the commission's conclusions acknowledged that "Universal's power is a problem across the whole market".

Helen Smith, executive chair of Impala, said: "This decision has finally put a freeze on Universal's ability to expand further and sets a benchmark for constraining abusive behaviour across the whole market.

"Following the approval of the Sony/EMI merger, however, this decision nonetheless reinforces what is already a powerful duopoly. Contrary to the basic principles of competition in cultural markets, artists and consumers will ultimately pay the price."

Martin Mills, chairman of Beggars Group, said: "It's good to see that the Commission has seen this deal as such a threat to the market that it has demanded and received truly swingeing commitments to divestments.

"However, that should not conceal that fact that Universal's arrogance has paid off for them, that they have destroyed a significant competitor, and that even with these divestments their ability to dominate and control the market has reached even more unacceptable levels.

"Anyone trying to start a new digital service will be realising that very soon, and we will continue to look to the regulators to monitor ongoing behaviour."

Belize wins 60-day reprieve after partial debt payment

Debt-burdened Caribbean nation Belize has won a 60-day reprieve from bondholders after paying a portion of its overdue $23m (?14.2m) debt interest.

It paid $11.7m to creditors, earning it some breathing space and reducing the likelihood of a full-blown default.
Belize had been due to pay the $23m bond interest payment, or coupon, on 20 August, but was given a 30-day grace period in which to do so.
It missed this deadline on Wednesday.
As a result, ratings agency Standard & Poor's categorised Belize as being in "selective" default, one step below a full default.
Bondholders say they are content with the part-payment and have delayed taking legal action.
"The government's decision on the coupon payment was taken in consultation with the [bondholder] committee and we consider it a material and good faith step in the right direction," said AJ Mediratta of Greylock Capital Management, co-chair of the committee.
Struggling economy

Tourism-dependent Belize, famous for its reef-diving and fishing, is trying to renegotiate the terms of a $550m 'superbond' it is now struggling to service.
Prime Minister Dean Barrow had said his country could not afford the coupon payment and promised to renegotiate the terms of the bond when he won a second term of office in March.
The superbond represents about half the country's national debt.
But the government's suggestion that creditors consider writing off 45% of their investment was not received favourably by the bondholders.
Creditors had worried that Belize was trying to bounce them into a Greek-style debt restructuring.
The superbond is due to mature in 2029, but the government wants the term to be extended, with payments spread over 50 years. It also wants the interest rate - currently 8.5% - to be reduced to 2%.
Negotiations are continuing.
English-speaking Belize, which won independence from Britain in 1981 and has a population of just 330,000, depends heavily on tourists from Europe and the US for its income, but the global financial crisis has drastically cut visitor numbers.