With success comes a few headaches. Apple Inc. is not immune.
The company announced Tuesday it has sold 3 billion songs at its iTunes online store, cementing its status as the most popular online music retailer in the world. It has also passed Target and Amazon to become the third-largest music retailer overall in the United States.
But the Cupertino company faces some new problems. There's a lawsuit from rapper Eminem, who claims Apple is distributing his music without his permission. And there's another legal claim from a new iPhone owner unhappy about the device's battery life and replacement policy. To top it off, the company took an almost 7 percent hit in its stock price Tuesday on rumors of a cut in production of either iPods or iPhones.
The lawsuit concerning the iPhone's battery, filed last week in Cook County, Ill., by Jose Trujillo, alleges that Apple and AT&T did not immediately communicate the exact cost of replacing the battery along with the fact that the iPhone battery is not replaceable by users. The suit also argues that the phone can be charged only 300 times before the battery must be replaced, necessitating a new battery each year.
On Monday, the New York Consumer Protection Board issued an open letter to Apple, urging the company to change some of its policies. The board said Apple should make its batteries replaceable by users, extend its return policies to 30 days from 14 days and eliminate its 10 percent restocking fee.
The iPhone's battery is encased in the phone and can be removed only by Apple, which will replace the battery for about $85 including shipping and handling. A phone can be rented from Apple for an additional $30.
Analyst Rob Enderle said Apple has a legitimate problem on its hands because it did not disclose the actual price and trouble associated with replacing the battery until three days after the iPhone was released. He said companies that know of a product defect or fault that will require a significant cost to repair must disclose that to customers at the time of sale or are liable.
"For something like this that costs about $100 to replace, this should have all been disclosed up front," said Enderle. "This is not something you can do in the store. You have to send it back to the factory."
Apple representatives said they would not comment on pending litigation.
Apple's Web page on iPhone battery life says, "A properly maintained iPhone battery is designed to retain up to 80 percent of its original capacity at 400 full charge and discharge cycles." The phone has one of the strongest batteries in the industry with a talk time rated at eight hours. Apple will also replace any battery for free if its capacity drops below 50 percent in the first year.
On another legal front, the suit by Eminem alleges that while Apple has an agreement with his music label Universal Music Group to sell his music, it never obtained consent from him personally to sell his copyrighted material on iTunes. The multimillion-dollar suit does not name Universal and seeks to halt sales of Eminem's music through iTunes.
The issue raises questions about whether the label needs to obtain its artist's consent to distribute his music through online retailers like iTunes. It also addresses whether artists should continue to receive a small royalty for each song sold on an online site or potentially a larger licensing fee. Currently, the music labels, using a similar license employed for traditional retail CD sales, receive about 70 cents on the dollar from each song sold by online retailers. A small portion of that goes back to the publisher and the artist. But the Eminem suit raises the issue of whether the music labels need to strike additional distribution deals with online retailers such as iTunes or if music writers can strike their own deals with the online stores.
"This could be the tip of the iceberg," said Los Angeles music attorney Owen Sloane, who has worked in the industry for 40 years. "The issue is whether (the) CD distribution license the labels have covers the Apple downloads."
Apple had no comment on the Eminem lawsuit.
Eminem sued Apple in 2004 after the company planned to use one of his songs in an ad campaign.
Apple's stock on Tuesday lost $9.67 per share, or 6.8 percent, to close at $131.76 based on a report from New York trading firm Miller Tabak & Co. that production for the iPhone and possibly the iPod is being cut.
The company announced Tuesday it has sold 3 billion songs at its iTunes online store, cementing its status as the most popular online music retailer in the world. It has also passed Target and Amazon to become the third-largest music retailer overall in the United States.
But the Cupertino company faces some new problems. There's a lawsuit from rapper Eminem, who claims Apple is distributing his music without his permission. And there's another legal claim from a new iPhone owner unhappy about the device's battery life and replacement policy. To top it off, the company took an almost 7 percent hit in its stock price Tuesday on rumors of a cut in production of either iPods or iPhones.
The lawsuit concerning the iPhone's battery, filed last week in Cook County, Ill., by Jose Trujillo, alleges that Apple and AT&T did not immediately communicate the exact cost of replacing the battery along with the fact that the iPhone battery is not replaceable by users. The suit also argues that the phone can be charged only 300 times before the battery must be replaced, necessitating a new battery each year.
On Monday, the New York Consumer Protection Board issued an open letter to Apple, urging the company to change some of its policies. The board said Apple should make its batteries replaceable by users, extend its return policies to 30 days from 14 days and eliminate its 10 percent restocking fee.
The iPhone's battery is encased in the phone and can be removed only by Apple, which will replace the battery for about $85 including shipping and handling. A phone can be rented from Apple for an additional $30.
Analyst Rob Enderle said Apple has a legitimate problem on its hands because it did not disclose the actual price and trouble associated with replacing the battery until three days after the iPhone was released. He said companies that know of a product defect or fault that will require a significant cost to repair must disclose that to customers at the time of sale or are liable.
"For something like this that costs about $100 to replace, this should have all been disclosed up front," said Enderle. "This is not something you can do in the store. You have to send it back to the factory."
Apple representatives said they would not comment on pending litigation.
Apple's Web page on iPhone battery life says, "A properly maintained iPhone battery is designed to retain up to 80 percent of its original capacity at 400 full charge and discharge cycles." The phone has one of the strongest batteries in the industry with a talk time rated at eight hours. Apple will also replace any battery for free if its capacity drops below 50 percent in the first year.
On another legal front, the suit by Eminem alleges that while Apple has an agreement with his music label Universal Music Group to sell his music, it never obtained consent from him personally to sell his copyrighted material on iTunes. The multimillion-dollar suit does not name Universal and seeks to halt sales of Eminem's music through iTunes.
The issue raises questions about whether the label needs to obtain its artist's consent to distribute his music through online retailers like iTunes. It also addresses whether artists should continue to receive a small royalty for each song sold on an online site or potentially a larger licensing fee. Currently, the music labels, using a similar license employed for traditional retail CD sales, receive about 70 cents on the dollar from each song sold by online retailers. A small portion of that goes back to the publisher and the artist. But the Eminem suit raises the issue of whether the music labels need to strike additional distribution deals with online retailers such as iTunes or if music writers can strike their own deals with the online stores.
"This could be the tip of the iceberg," said Los Angeles music attorney Owen Sloane, who has worked in the industry for 40 years. "The issue is whether (the) CD distribution license the labels have covers the Apple downloads."
Apple had no comment on the Eminem lawsuit.
Eminem sued Apple in 2004 after the company planned to use one of his songs in an ad campaign.
Apple's stock on Tuesday lost $9.67 per share, or 6.8 percent, to close at $131.76 based on a report from New York trading firm Miller Tabak & Co. that production for the iPhone and possibly the iPod is being cut.
