At a Tuesday hearing, Apple argued that requiring developers to sell their apps through its iTunes App Store and nowhere else is not an antitrust violation, nor is charging devs a 30 percent cut of their proceeds for distibution. Just because there are no third-party storefronts peddling discounted iPhone apps doesn’t mean Apple is abusing a monopoly position over iOS apps. The company doesn’t set the price for paid applications.

The plaintiffs in the case brought their suit against Apple in 2011, claiming that their inability to legally buy iPhone apps from anywhere but the App Store was proof that Apple is a monopolist.

But Apple, which has fended off similar lawsuits in the past — specifically one that accused it of creating a music-download monopoly with iTunes — says the sort of vertical integration it has created between the iTunes App Store and its iOS devices is perfectly legal. As Apple attorney Dan Wall said during yesterday’s hearing, “There’s nothing illegal about creating a system that is closed in a sense.”

This also falsely insinuates that craigslist broadly serves humanity as a “free” service, a grossly misleading characterization given craigslist’s accumulation of enormous and largely undisclosed profits, a pattern and practice of predatory lawsuits (such as this one) aimed at obstructing innovation.

– From a claim filed Monday against Craigslist by data company 3Taps, accusing Craigslist of perpetuating a monopoly. Craigslist filed a copyright complaint against 3Taps this summer.

“We started to see that freemium was coming in, and it took us a long time to move over,” said Nick Earl, who heads up EA’s mobile and social worldwide studios. “In all candor, we are behind.”

In an interview with AllThingsD at E3 in Los Angeles this week, Earl said the dominant model will be “freemium” in mobile. As with other game makers who depend on this model, EA will allow players to download the games for free, but then will charge a fee to buy virtual goods that enhance the game.

“We are all over that,” Earl said. “There will be a few one-time download games in the future, but they are such the exception, and the norm will be freemium games.”

As an example, EA is currently charging $5 for Madden, $5 for Need for Speed, $2.99 for The Sims 3 and 99 cents for Tiger Woods on the iPhone. A short list of free titles includes Monopoly Hotels and The Sims FreePlay.

Earl said to expect a summer launch of The Simpsons on mobile, which will mark the beginning of the transition.

The game starts off with Homer Simpson causing a nuclear explosion that wipes out Springfield (doh!); the player’s job is to rebuild Springfield using different characters, like Lisa, that are unlocked along the way, according to CNET.

Electronic Arts is one of the largest mobile games developers on both Android and iOS, but it also represents one of the biggest holdouts when it comes to shifting to free. Over the past couple of years, companies have found it easier to gain large audiences by making their games free, and then monetizing them through virtual goods. Players who get hooked on a game often end up spending more than they would have if they had paid for the game upfront.

Earl said it has taken EA so long to make the transformation because it requires a different skill set to build a one-time download. Freemium games act like a live service, which have to be able to support thousands of daily active users.

He said that as part of the switch EA will end up spending more time and energy on each title, and will ship far fewer games.

“Over the last three years, we reengineered the console business,” Earl said. “There was a lot of mediocre stuff and we moved to making a lot fewer good titles. Basically, we are taking that approach to fewer, bigger and better from console to mobile and social, and adapting to freemium.”

The company’s new mobile strategy represents just one component of EA’s goal of becoming a more digital company.

EA also used E3 this week to unveil a new digital platform, which it will spend $250 million on over the next four years, to investors at a breakfast. (Slides from the presentation can be found here.) The platform’s goal is to enable game players to access their same identity across mobile, social, console and PCs.

As I wrote earlier, the platform approach is one that many companies are attempting.

Ready, aim, fire — at Google at the Senate Judiciary Committee’s antitrust subcommittee hearing happening right now in Washington, D.C.

It is titled: “The Power of Google: Serving Consumers or Threatening Competition?”

Here we go:

11:04 am: As usual in D.C., the Senators on the committee get to pontificate first.

Oh, joy! (I used to live there and cover Congress stuff for the Washington Post from time to time and I am having bad déjà vu right now.)

A quick cut to Google Executive Chairman Eric Schmidt, who is appearing alone. He looks a little peaked, especially as the pols begin to describe the scary behemoth the search giant is.

And also that it is trying to force users to its other products.

Rut-roh.

11:07 am: Sen. Mike Lee, the Republican from Utah, who is a Google critic, is talking on about the search giant’s power, reading from his testimony in a dullish style.

I thought this dude was a Tea Party firebrand!

“The primary focus should be consumer welfare,” he says, blah, blah, blaaaaaaah.

11:09 am: Now, the subcommittee’s dour chairman, Sen. Herb Kohl from Wisconsin, is introing Schmidt, who is actually being introed by California Sen. Dianne Feinstein.

She is an Eric fan, obvi, praising his accomplishments at Google. But she also gives props to Jeffrey Katz, CEO of Nextag, who is testifying against Google later. Also, let her add, is the fabulous CEO of Yelp, Jeremy Stoppelman, another anti-Google speaker to come.

“I hope they tango rather than tangle,” says Feinstein inexplicably about those called to testify. Hey, white geeks can’t dance, although wrestling would also be hard for them too.

In any case, gotta love these everybody-loving pols!

11:14 am: Finally, Schmidt, who — of course — starts off invoking the last big tech giant who was here getting spanked by Congress.

Schmidt does not name Microsoft — classy, by which I mean not at all — but is referring to the software giant.

“We get it,” he says about the lessons Google has learned from Microsoft’s own antitrust troubles back in the day.

11:18 am: Schmidt is talking about Google and saying he welcomes the competition.

“Today it’s Google turn in the spotlight,” he says, still not uttering the word “Microsoft,” much as Microsoft execs have often not been able to say Google. “One company’s past [should] not be another company’s future.”

Now, the senators can have at him. Kohl is up first.

11:20 am: The first question is if Google is favoring its own products, via search.

Schmidt harkens back to what he calls early Google lore that it is just trying hard to get consumers stuff quicker.

The need for speed!

“Is really trusting Google to do the right thing sufficient?,” asks Kohl, who quotes former President Ronald Reagan’s famous line: “Trust but verify.”

That gives Schmidt the chance to talk about how quickly Google could lose out to competitors and then is onto how hard it is to do what Google does.

It takes extra-smart smartypants. Trust us, he says, as we are smartier!

11:24 am: Kohl comes back with a damning quote from Google’s famous Marissa Mayer, who apparently has said that the company favors its own products and why not?

Schmidt says he was not there when she allegedly said this, but that its own testing and intuition tells Google if consumers want a Google map or whatever tout de suite!

Kohl repeats the Mayer quote again: “We do all the work for the search page, so we put [a Google Maps link] in first.”

“I will let Marissa speak for herself,” says Schmidt, now too deep in the weeds of her verbal faux pas. Get out, Eric!

11:28 am: Sen. Lee is up, not taking any of this speedy, we-know-best business.

And he has a chart! I love a good chart. It shows Google info always ranks first in listings versus other sites it competes with.

Schmidt has not seen this poll, but thinks it is not accurate.

11:31 am: Let me note that Schmidt’s grey suit is fantastic looking. And right behind him, you can see Google’s top lawyer, the always nattily dressed David Drummond.

Back to the chart!

Lee wants to know why, according to his chart, that Google seems to come up first.

“Either way, you’ve cooked it,” claims Lee.

“Senator, I can assure you we have not cooked anything,” counters Schmidt.

(Note: Google does have an excellent cafeteria in Silicon Valley, complete with organic arugula and Kombucha for all.)

11:33 am: Hoo boy! But Lee’s time has expired, so Schmidt gets a break in the form of New York’s Sen. Charles Schumer.

I like the way he says “ee-no-vation” for innovation.

He does an expected plug for New York, of course. Somehow it is No. 1 in tech. Not so much, but brag on, Chuck!

11:38 am: Schumer is still talking about New York and its fab entrepreneurs.

Apparently, he has done a lot of jawboning with start-up dudes (likely over Kombucha) and they think Google is a positive force.

“Google is actually pretty good, we don’t see them as rapacious,” Schumer says the New York nerds tell him.

Is “rapacious” the criteria here?

Schumer is running out of time and has yet to ask a question and now is trying to get Schmidt to test Google’s broadband project in the Hudson Valley.

Now that’s rapacious!

Is there going to be an actual question here?

Yes: Oh please tell us, genius boy, what could Google do better?

Really.

11:42 am: Now, Sen. John Cornyn from Texas is on and asking about the prescription controversy Google was embroiled in recently.

Oops, I missed a bit when someone called me about the CEO mess at Hewlett-Packard I reported on earlier.

Onto Senator Amy Klobuchar from Minnesota. She is cleverly using an article about the Vikings football team to ask about how Google’s super-secret-sauce algorithm works and how it ranks results.

“Do you think companies should have a lot more certainty in how they are ranked?,” she asks.

11:51 am: Schmidt is not really answering, except to say Google is not perfect.

“We don’t know how to do it with more certainty,” he says, which is odd for a company that is perhaps the most irksomely certain group of geeks ever assembled on the planet.

Klobuchar moves to copyright issues. “There’s a real problem here,” agrees Schmidt.

Yes, and some media companies think Google is the problem and has not done enough to fix the problem.

“It’s difficult,” says Schmidt. Well, isn’t Google smartier?

“We’re under great pressure to resolve this,” he says.

11:55 am: Klobuchar is still worried about the small businesses, but she wants Google to come to Duluth.

Good lord, it’s a shakedown in plain sight. Maybe Google isn’t the scary one here! These pols seem pretty frightening.

Now Iowa Sen. Charles Grassley is saying he will attend some Google event in his state.

Of course!

Grassley makes a wishy-wishy statement, and we get to hear from Iowans on both sides.

Some are apparently concerned that Google is a troublemaker and some aren’t.

Iowans, like a lot of folks, are torn.

“We are happy to be judged,” says Schmidt.

12:00 pm: Now it is time for Sen. Al Franken from Minnesota.

“First let me say, I love Google,” he says.

Otay. I wonder if Franken knows that Google is a giant scary computer.

But, as a citizen of San Francisco, I say he should love whoever he wants!

Franken is also concerned about his love’s behavior and is taken aback by one of Schmidt’s previous answers.

It’s that irksome Marissa Mayer quote again.

When asked if the algo was unbiased, Schmidt apparently was not as sure as shootin’!

Now, it is onto Yelp and the fiery quotes from Stoppelman about how Google nefariously blocks the review site’s content.

Eric “generally” disagrees with Jeremy.

At one point Google tried to buy Yelp, so this is a fraught situation.

Does Franken know about the previous Google-Yelp hookup?

Drama!

Schmidt says it is Yelp’s fault for asking to be removed from the algo. Actually, Yelp only asked Google to stop jacking its fare.

12:11 pm: Oh noz, another pol? This time Sen. Richard Blumenthal from Connecticut.

He is super-smiley, while calling Google a “behemoth.” I like that word a lot and use it for the company often, although I always like to use a qualifier like “thuggish” or “freaky.”

Back to the blabby Blumenthal, who cannot seem to get out a question.

Wait! He asks if Google can suggest some fixes to “avoid government regulation.”

I. Kid. You. Not.

12:21 pm: Kohl is back and giving Google a little more slap-a-doo.

I like the whole Kohl thang of looking over his glasses down at Schmidt.

He asks: Should we trust Google? Should we?

In my opinion: If your mother says she loves you, you should check it.

So, no!

Schmidt assures him: “We make mistakes.”

Lee is then back, asking if Google gives preference to its own products in search?

Exactly the point and a question that is still not answered properly.

12:24 pm: Lee remains troubled by Schmidt’s testimony.

He uses terms like “leverage its natural dominance” and “significant market share to disadvantage” competitors.

Sounds like, um, Microsoft. And then it is back to that niggling Marissa Mayer quote. (Memo to the voluble exec, who apparently never met a microphone she didn’t want to talk into: You might want to take a day off today at the Googleplex.)

Google-luvin’ Franken is back and he is asking about mobile search.

Where Google is dominant again! (Jellllllo, Al, we in Silicon Valley know that one already!)

He asks if all Android devices come pre-loaded with Google products. Schmidt thinks two-thirds come with it, but handset makers can choose.

12:31 pm: Back to all-smiles Blumenthal, who says he has come to no conclusion.

But lo! He is not as silly as he seems and goes into an interesting racetrack analogy about how Google owns the track and now has horses and now those horses are winning.

Hmmmm…

Schmidt disagrees, natch!

He thinks the Internet is the platform and Google is the GPS.

Metaphor contest!

I think Google is a big tasty banana cream pie we can’t stop eating, although we know it’s bad for us.

That or an alien wearing an expensive suit who will soon eat us all.

Franken comes in with a doping horses joke. Remember when he was funny on “Saturday Night Live”?

Me neither.

It goes on without a lot of really good discussion. Klobuchar asks something, but I forget it immediately. My bad!

She has a last question about advertisers and privacy. Softball!

Let me write this for Schmidt before he inevitably spits it out: Of course, Google wants to protect privacy.

12:37 pm: Finally, the second panel of critics. Sadly, I must go to an appointment in Silicon Valley to visit one of its rapacious companies.

Oops, I meant ee-no-vative.

But, no worries, John Paczkowski will take over from here once it gets going again after the break.

12:47 pm: The panel’s back in session. The first critic to take a shot at Google, Thomas Barnett, a lawyer for Expedia.

12:51 pm: Riffing on Schmidt’s earlier “We know, we get it” comment, Barnett argues the opposite.

“Google doesn’t get it,” he says, adding that the company’s ever-expanding market power is troubling.

12:54 pm: Google is a monopoly, Barnett continues, and it has a duty not to abuse that position. He concludes by saying antitrust enforcement can and should play a role in maintaining competition in the markets in which it does business.

12:57 pm: Moving on now to Nextag CEO Katz, who has some tough words for the search giant. “Today Google doesn’t play fair,” he says.

He argues that Google rigs its results to drive consumers to Google Product Search when they search for information to inform their purchases.

1:00 pm: Next: Stoppelman of Yelp, who wonders if it’s even possible to create a company like Yelp today because of Google’s massive market power.

1:04 pm: Google’s outside lawyer, Susan Creighton, takes the mic next. Having trouble with the video stream from the Senate, but as best I can tell she talked broadly about the competitive landscape and reiterated Schmidt’s “competition is just a click away” narrative.

1:08 pm: She concludes by saying government oversight of Google’s search results rankings would put the company at a disadvantage and turn its search service into something akin to a “regulated utility.”

1:09 pm: Interesting. Creighton says she doesn’t believe Google has monopoly power.

1:10 pm: “Each of you right now can test whether or not you like Google’s search results and if you don’t like them it’s free and instantaneous to try someone else.”

1:22 pm: Apologies, the Senate video feed has gone from bad to worse.

1:23 pm: Franken asks Yelp’s Stoppelman and Nextag’s Katz if they could start their companies today given Google’s market power.

Both say that’s unlikely.

1:26 pm: Terse exchange between Franken and Creighton about whether Google paid Apple to be the default search engine on its iOS devices. Lots of back and forth, but Creighton finally concedes that there’s some sort of financial deal between the two companies.

1:39 pm: Sen. Lee asks what Google might do to “level the playing field.” Stoppelman suggests separating search from its other properties. Pipe dream.

1:40 pm: Well, it looks like it may be getting near the end of the session, which is a good thing because we get it to by now.

And that is: Nothing significant is going to get said here.

AOL and MySpace were called “gatekeepers” once too…

Excerpt from Google’s viewer’s guide to the Senate Judiciary antitrust subcommittee’s hearing into its dominance of Internet search

As of yesterday, EA became the second-largest social games company on Facebook, trailing behind Zynga, which is seeking $1 billion in an IPO.

EA’s rankings have been propped up by the recent launch of the Sims Social, which over the past week became the fastest-growing game on Facebook, and by its roughly billion-dollar acquisition of PopCap, which has Facebook titles such as Bejeweled Blitz and Zuma Blitz.

Electronic Arts jumped in the rankings yesterday after AppData, which tracks the performance of games on Facebook, started counting the performance of EA and PopCap together.

The company’s acquisition of PopCap closed last month.

Zynga’s lack of brand names might ultimately hurt the company in the long term, but so far it has been able to make its own hit titles, such as FarmVille, CityVille, Mafia Wars and Empires & Allies.

Its IPO appears to be on track, unlike another Wall Street darling, Groupon, which faces increasing scrutiny and potential delays. But ultimately, investors may want to know how the San Francisco company plans to respond to increasing competition from companies with access to big brand names.

Other brand names that have gained recent traction include the Smurfs & Co, which is the second-fastest growing Facebook game after the Sims; and Kabam, which is planning an upcoming game based on “The Godfather.”

EA initially got its footing in social through the purchase of Playfish, and over the past year it has used those resources to focus more on titles, such as the Sims and other recognizable names, like Monopoly, FIFA and Madden NFL.

As of yesterday, EA had 71.5 million monthly active users, a distinct second to Zynga, which has 275.5 million monthly active users, according to AppData. The next-largest social games company is Germany’s Wooga, which has 38.5 million monthly active users.

EA’s biggest title on Facebook is the Sims Social, which has almost 30 million monthly active users, or about 7.8 million players who return daily. At that size, the game compares to Zynga’s fourth-largest title, FarmVille, which has 35 million monthly users and eight million daily users. EA’s second-largest title is Bejeweled, a PopCap game, which gets nearly 10 million monthly users.

Of course, both companies are expecting social games to become a significant business down the road.

SuperData, a New York-based market intelligence firm, estimated in a report released last week that the North American social games market will grow 35 percent this year to reach $1.4 billion.

The videogame maker, which does not break out revenues for Playfish, the social games division it acquired two years ago, said revenues are starting to ramp, but that the number of users playing its games are flat or down.

In a response to a question about Playfish revenue, EA’s CEO John Ricitiello said during the company’s conference call today, “I would say it’s a one-win and one-loss situation, which we are trying to turn into a two-win category in the next six months. We have not seen the growth in DAUs (daily active users) that we would have liked to see with the last couple releases.”

The company said monthly active users from its social games totaled 32 million, which is far lower than the 52 million it registered in the year-ago period.

Some of that churn has to do with a change in Facebook’s policies that turned off the ability to market games to user’s friends, but even still, EA has been aggressive at rolling out new games, leveraging some of its core intellectual property, such as Monopoly and MLB Superstars.

“DAUs are flat,” Ricitiello said. “But we roughly doubled our revenues. We are moving revenue up sharply. That’s a good thing. … We’ve learned the right lessons around monetization.”

EA Sports President Peter Moore also joined the call today to talk about its three sports titles on Facebook, consisting of Madden, FIFA and World Series Superstars games. He said the average revenue among paying users for those titles has hit $56 in accumulated spending, which is higher than revenue the company receives from players on consoles.

However, Moore acknowledged that the percentage of paying users is in the low single digits.

While this information is not exactly earth-shattering, it provides a small look into the company’s business as it tries to evolve from shipping games in cellophane to pushing out titles to multiple digital platforms, spanning PC, social and mobile.

Plus, the company’s investments in social will grow as it integrates the acquisition of PopCap games into its business. Ricitiello said he sees complementary aspects of the two company’s businesses. While PopCap games has been better at gaining users on Facebook, EA has been better at monetizing them.

“We think there will be strong synergies with their IP,” he said.

Going forward, it will also be important to compare EA’s performance to Zynga, which has registered for an initial public offering.

But there’s not a lot of overlap in the way the two are reporting results. While Zynga discloses its revenues, it does not report how individual titles are performing or the average revenue per paying user. It also admits that a very small percentage of its users pay for items inside its games, but doesn’t provide an exact figure.

Here are two slides from EA’s financial presentation today that break down its digital revenue by platform and by type.

On the first slide, social games revenues are part of PC revenues (in red), which shows it was the fastest-growing segment during the first quarter compared to the same period a year earlier.

On the second slide, social revenues are part of the Free-to-Play category (in purple), which shows that it was also the fastest growing segment in the first quarter, jumping 32 percent over the same period a year earlier.

“We are back in baseball,” said Peter Moore, president of EA Sports. “It’s been six years since we’ve had the licenses.”

For a while now, MLB has had a third-party exclusivity with EA’s competitor, Take-Two Interactive. While Take-Two still holds a grip on most games, MLB has turned to EA to make its Facebook game.

This may be an early indication that EA’s decision to fork out $275 million to acquire Playfish, one of the early entrants into the social-gaming space, was a step in the right direction.

Still, there are a whole lot of home runs EA must now hit.

World Series Superstars, which launched today in advance of Opening Day tomorrow, challenges players to build teams, manage clubs and compete in games against friends. The game follows three other branded sports titles: FIFA Superstars, Madden NFL Superstars and Sports PGA Golf Challenge. Like the other titles, World Series Superstars is free to play with the option of paying for virtual goods to advance the game further.

Beyond EA’s licensing deal with MLB, the roll-out of the game also hints at the increasing importance of branded games on Facebook.

To date, much of the industry has been focused on what is called original IP, which doesn’t rely on well-known names to spur adoption. Zynga, for instance, has been wildly successful with its own content, ranging from FarmVille to CityVille and Mafia Wars.

A lot of debate recently, however, has centered about whether brands will dominate as the industry matures.

It’s debatable as to whether Zynga or others have become brands themselves, much like Rovio’s Angry Birds on mobile, but EA’s approach has been to leverage the licenses it has and bring games to market on Facebook, such as Monopoly and other titles.

Before EA purchased the social game maker, Playfish had no branded titles.

“We are very focused on extending some of our key brands onto social platforms. We’ve invested a lot since the acquisition, and we are starting to see the fruits of the labors,” said C.J. Prober, Playfish’s VP of publishing and product management. “Playfish is still really new to EA and we have lots of access to great new brands. The mix of brands vs. original IP will be higher in the near term, but will even out over time.”

Prober argues brands are increasingly more important since Facebook started cracking down on how often a developer can post messages to a player’s wall to attract new users among their friend groups.

Facebook said there’s still a mix of both branded and original titles, but that it is starting to see a shift.

“We are seeing some acceleration on the growth of brands coming to the platform…We are moving from the younger, newer category of games to the branded players that have been established on other platforms,” said Katie Mitic, Facebook’s director of platform and mobile marketing.

In particular, she says branded sports games are among the most engaging and best monetizing games on the platform.

“As Facebook Platform matures, we’re seeing high quality games, such as FIFA Superstars and Madden NFL Superstars, emerge and reach a new audience of social game players who may not have typically played online games before,” she added.

For anyone, it’s a large audience to target.

Mitic said more than 200 million people play games on Facebook each month–translated into sports terms, that’s nearly twice the size of the entire audience of the last Super Bowl.

A new feature called “Price Predictor” auto-suggests flights and prices right from the search box, according to a Bing blog post today.

As soon as you start typing “Seattle to JFK,” a menu drops down, telling you the best price, and if you should buy now because prices are going up, or if you can hold off for a better fare.

The menu drops down before you ever hit the enter key. The results are for the best flight price over the next 90 days.

Other key words that will trigger the menu include: “Fly to Chicago,” or even “Chicago Flights.” Bing will immediately recognize where you are and instantaneously display the “Price Predictor” based on your location.

To cull this price information, Bing uses ITA Software’s data.

Google is currently in the process of trying to acquire ITA for $700 million, a process that is now being reviewed by the Justice Department for its antitrust ramifications.

ITA Software maintains a database of flight information, including fare comparisons and flight schedules for many major U.S. airlines, including American and United Airlines. Companies such as Microsoft and Kayak.com, which use the data, are opposing the merger because they claim it will stifle competition.

Others, such as Expedia.com, are also opposed to the deal even though they do not rely on data from ITA. The American Antitrust Institute also recently spoke out against it, calling it a “unregulatable monopoly.”

There are two main issues. First, the companies that do rely on the data are concerned Google will not honor its contracts over the long-term, and second, they are afraid Google might become a competitor, even though it promises not to get into the business of selling tickets.

For now, Google is not even licensing data from ITA.

When conducting a similar search of “Seattle to JFK” on Google, there’s no helpful information in the drop down menu. When you hit enter, there’s a widget that lets you choose dates for your travel and where you want results from, such as Expedia, Travelocity, Priceline, Kayak and others.

But unlike Bing, there are no instant results on the best prices anywhere.

In a FAQ on Google’s site about the merger, it writes: “By combining ITA Software’s expertise with Google’s technology, we will be able to build new flight search tools for users that will make it easier for them to search for flights, compare flight options and prices, and get them quickly to sites where they can buy their tickets.”

The videogame maker posted a GAAP loss of $322 million, or 97 cents a share, on revenues of $1.1 billion. However, when stock-based compensation and revenue deferrals are excluded, the company recorded a 59-cent profit, jumping 33 cents from the year earlier.

Those modified numbers beat expectations of analyst who forecast the company’s earnings to surge 76 percent to 58 cents a share from the year-ago period, according to Thomson Reuters.

It is now the fourth quarter in a row that EA has beat consensus.

Meanwhile, the company continues to try to call attention to its digital results as it transitions its business model–from one where gamers pay $60 for an Xbox title to one where consumers pay a few bucks for an iPhone game or play Facebook games that may be free and monetized through other mechanisms, such as virtual goods.

But it’s hard to convince anyone of the prospects when its packaged-goods business generated $1.1 billion in revenues and its digital games generated a paltry $211 million.

Still, its digital business is up, jumping 39 percent compared with the same period a year earlier. “We are on track to hit three-quarters of a billion in revenues this year as planned, and we were No. 1 on key platforms like iPhone and iPad,” said CFO Eric Brown in an interview.

Digital revenues mainly consist of mobile games, digital downloads and social games built by its Playfish subsidiary.

Mobile revenues totaled $59 million in the third quarter, up from $56 million last year. EA does not break out revenues of its Playfish subsidiary, but said it had 39 million monthly active unique visitors (MAUs) in social games, falling from 58 million in the year-ago period.

Brown explained that its monthly uniques are down, much like those of others in the industry that were hurt when Facebook changed its policies about a year ago on how much games could be promoted on the social network.

“That business is performing well. We are No. 2 in the social games space. MAUs are down for the entire segment, although we are monetizing better, and our strategy is to bring more EA-branded properties to the social network space,” he said.

Yesterday, Monopoly launched on Facebook, joining FIFA soccer and Madden.

The company also announced that it will repurchase up to $600 million in stock over the next 18 month, which demonstrates the company’s confidence in its digital strategy, said EA’s Chief Executive Officer John Riccitiello in the release.

Brown: “We have excess cash and there’s characteristics evolving for our digital strategy, as we build our digital revenue, and it becomes more profitable and predictable.”

Does that mean we won’t see any more big acquisitions–like the $400 million Playfish purchase– by the game maker?

“We still would have the opportunity to do small acquisitions. For instance, we recently purchased Chillingo, so we still have capital to do small scale, but we don’t intend to do large acquisitions in the short term.”

The event is set to kick off shortly and Mobilized will have live coverage here.

1:05 pm: Well, despite timely warnings to get in our seats beginning at 12:45, it’s now five minutes after and the techno is still pumping.

1:11 pm: Okay. Getting started. Loud music gets louder. Cue video.

Tony Melone and Marni Walden take the stage and CEO Daniel Mead (at least I think it is Mead) is doing an intro.

1:15 pm: Another video now playing with partners. Since HTC CEO Peter Chou is in there, I think it is probably safe to say their oft-rumored LTE smartphone will make an appearance.

1:16 pm: Samsung and Ericsson execs also in the video.

1:17 pm: Verizon exec now touting the advantages of its 4G network including its spectrum, which it says will give it the best in-building coverage.

Also talking about how it is sharing its spectrum with rural service providers.

1:18 pm: Mead: “We’re very pleased to be part of bringing broadband to rural America.”

1:21 pm: Mead hands off to CTO Tony Melone to talk 4G and LTE.

Melone says that the company knows there is a lot of skepticism of the company’s move to go straight to LTE but that the bet is paying off with more networks and running faster than planned.

“The customer feedback we are getting is everything we had hoped for and then some,” Melone says.

Melone talks about 4G LTE plans.

Thirty-six months from now we will have the nation covered with LTE, Melone says. Two-thirds of the population will be covered in 2012. This year alone, he says, Verizon will add 140 new markets, including places like Little Rock, Detroit and Sioux Falls.

1:26 pm: On to devices.

Ten devices coming by mid-year being shown on stage: Four smartphones, two tablets, two notebooks and two mobile hotspots.

1:33 pm: LG CEO shows off the LG Revolution, what appears to be a slimmish smartphone.

Next up, Skype’s CEO talks about a new partnership that will allow for Skype to be always on and integrated into the address book of all of Verizon’s LTE smartphones,

1:34 pm: He’s followed by HTC CEO Peter Chou, who introduces the HTC Thunderbolt.

Chou says he’s been personally testing and using the Thunderbolt, which features the new Skype video chatting along with HTC’s Sense user interface.

“Let me tell you, it’s blazing fast,” Chou says.

Other features include a built-in 4G hotspot and a 4.3-inch Super LCD screen.

1:37 pm: He thanks Qualcomm and Google engineers that worked together to create the device, so guessing this one isn’t using Nvidia’s Tegra chip.

Next up is Electronic Arts VP Travis Boatman. EA’s mobile games lineup ranges from Monopoly and Tetris to Need for Speed and the FIFA 11 soccer game.

The new mobile version of Rock Band for Verizon’s LTE network lets people form a band and remotely jam over the network.

Samsung executive goes onstage to show off three devices for the LTE network, One is a mobile hotspot, one is a smartphone and the other is a 4G version of the Galaxy Tab.

Phone packs 4.3-inch Super Amoled Plus display, which is said to boost colors and offer improved display. It’s got an 8-megapixel rear-facing camera with HD video and a 1.3-megapixel front-facing camera for video chat.

The tablet has a 1.2GHz processor developed by Samsung, while the hotspots provide connections to up to five users at a time.

Most impressive is the fact that the Samsung executive pulled all three devices out of various pockets.

Marni Walden shows off the remaining devices–a Novatel MiFi hotpot that works with both 3G and 4G networks.

There is also a Compaq Netbook, an HP notebook, as well as the previously announced Motorola Xoom and Motorola Droid Bionic.

1:47 pm: On to Q&A (hoping laptop No. 2 holds out through the end of question time.)

First question has to do with LTE speeds, which often exceed the 5- to 12-megabit speeds promised. Mead says that the company’s goal is to meet the promised speed range once the network is fully loaded, something that is not the case today.

Next question is on battery life. Melone says the company believes it will be able to meet customer expectations in that regard.

The company says it won’t announce pricing or rate plans for the 4G products, beyond noting its current prices for 4G laptop cards and service.

As for simultaneous voice and data, Walden says the company intends that at least some of its 4G launch devices will support talking and accessing data at the same time.

“It could be on some devices and not all,” Walden says.

Walden also confirms all the phones it showed Thursday are running Android.

1:55 pm: Asked about net neutrality, Mead says that what the industry needs is “unfettered development.”

“We think the free market system works very well, and we don’t need a lot of heavy intervention.”

Although he later clarified, “I wasn’t making a value judgment,” maintaining multiple identities, whether it’s as simple as publishing some photos to Picasa and others to Facebook, is becoming a big trend in online life.

Even as Zuckerberg’s Facebook extended its dominance in 2010 to the point where it seems to have a social Web monopoly, it was still a landmark year for social network competition.

Where in the past, tech industry watchers derided new start-ups for launching “yet another social network,” ever more users seem to be constructing multiple online presences that utilize the strengths of various platforms and networks.

And this splintered approach is only going to increase.

Internet users now have plenty of outlets for self-expression. They can prioritize individuality and choose to post on the highly customizable Tumblr, or instead value the comprehensiveness of a network and post on the blander Facebook.

A big part of this shift toward understanding the private online self versus the public online self has been the rise of Twitter. On Twitter, regular users make the sort of decisions celebrities do: What to share about their private lives with their public audience of followers.

Another shift has been the rise of smartphones, along with their quality broadband connections, good cameras and mobile apps.

As an early adopter of various social apps, I’ve recently been confronted with the choice of whether to post a picture taken with my Apple iPhone on-the-go to Facebook, Twitter, Instagram, Path or Picplz.

Each of them has different audiences, different associations with my personal or professional identities, and different expectations for how people will view and interact with my snapshot. (And I suppose there’s also the option of keeping the pictures to myself on my phone storage.)

Although the people noisiest about privacy on Facebook have at times been the media, publicity of the company’s highly confusing privacy settings seems to have led to many more people being aware of them and perhaps even changing them.

Perhaps that’s why I see an increasing–but still quite small–portion of my Facebook friends using pseudonyms on the service. And when I asked them why, I heard a variety of reasons.

One is a teacher, another prefers to go by the moniker he uses artistically. Yet another is a college student who is applying for jobs and who wants to be more anonymous for a while. Like many of today’s young people, she has become highly conscious of balancing the freedom to be herself online with the way she is perceived by professional contacts.

(A representative for Facebook declined to comment on whether the company has recently been more permissive about allowing pseudonyms, something it has traditionally frowned on.)

Of course, very little of what’s posted online can be trusted to never get out or never be linked to its originator. If you really want to keep your thoughts private and impermanent, of course, keep them in your head.

But there are now many more options for more private communication, many of them having first come out in 2010. They include small-group coordination tools like GroupMe, Fast Society and Beluga. There’s also Path, a start-up from a former Facebooker that is perhaps too limited by design, but is exploring the world of more intimate and personal communications.

For many people, their Facebook network is far from a direct match with their real-world friends, so it will be increasingly important to use these tools to dice circles up and make them more accessible. (Facebook is also trying to address that need with its own Groups tool.)

To be sure, that Facebook map of connections is a highly valuable asset, one the company has fiercely protected, as Google reformulates its approach to the social Web.

Splitting your users into an entirely new social graph will certainly hamper growth. For instance, another early Facebooker launched Jumo, a social network for people connecting with nonprofits that seems to risk being redundant with, and isolated from, similar efforts on other platforms.

And Foursquare, despite its zeitgeisty innovation for sharing real-time location updates, has accumulated only about five million users in the last two years.

However, the speedy growth of new social networks like the addictive Instagram–which is like Twitter for pictures and got one million users in its first two months–shows that there’s still an opportunity to take an independent path.

What seems particularly notable about the current moment is that many people are evolving their approach to expressing themselves online, and they now have many tools and contexts to do so. And it’s up to them if these multiple identities will be unified anywhere except in their heads.

(Image collage at top of post courtesy Flickr user shannonkringen.)

Please see the disclosure about Facebook in my ethics statement.

Or, as one exec told me, “enough.”

Obviously, that’s tough to quantify. That said, the list of apps announced today is a good start, even if it does seem pretty short. On the mobile A/V front, there are Netflix (NFLX), IMDB, Slacker, I Heart Radio and MusixMatch. T-Mobile users will get T-Mobile TV, while AT&T (T) users will get U-verse. For the moment, WP7′s big social media app will be Twitter, though I imagine there’s a Facebook app on the way. For e-commerce, there’s eBay (EBAY), Fandango and Travelocity. And finally, there’s a growing list of games (60+ at last count) that includes Monopoly, Need for Speed Undercover, Tetris, The Sims 3, Star Wars, Bejeweled, Assassin’s Creed, Fast & Furious 7, Guitar Hero 5 and Halo Waypoint.

Add to that Microsoft’s (MSFT) Bing search engine and an Office Hub that provides mobile versions of Microsoft Word, Excel and PowerPoint, as well as SharePoint integration, and you’ve got the beginnings of a decent ecosystem. Remember, when Apple’s (AAPL) iTunes App Store first launched it had about 500 third-party applications. Today it boasts more than 250,000.

Which is not to say that the development of the WP7 app ecosystem will be as quick or tremendous. Clearly, there’s much ramping-up yet to be done. But there will be enough marquee apps available at launch that the device certainly won’t seem lacking, as some other mobile operating systems did when they debuted. Netflix, Twitter, eBay, a groaning board of games and a mobile office productivity suite is enough to get anyone started, particularly if they’ve only just decided to trade up from a feature phone to a smartphone.

FURTHER COVERAGE:

• “Delightful” Windows Phone 7 Coming November 8
• Windows Phone 7: It’s Now or Never

If at first you don’t succeed, at least according to Google…try Japan.

In what amounts to an even more aggressive move than it made in trying–and failing due to regulatory objection–to strike a search partnership deal with Yahoo in the U.S. in 2008, Google and Yahoo Japan announced yesterday that the search giant will take over both the algorithmic and paid search businesses from, well, Yahoo.

If that sound confusing, it is because the Silicon Valley-based Yahoo owns only 35 percent of Yahoo Japan, which is an independent and separately traded company.

In fact, early Yahoo investor and Japanese telecommunications giant SoftBank Corp. has a larger stake and essentially controls Yahoo Japan.

Which is now free to leave Yahoo (YHOO) and to do a deal with Google (GOOG), it seems, after Yahoo struck a wide-ranging search technology and online deal of its own with Microsoft (MSFT) last year.

Under the terms of the deal, Yahoo outsourced its search technology to Microsoft’s Bing service.

Both Yahoo and Microsoft had hoped to keep Yahoo Japan in the fold, using Bing too, but it’s clear Google decided to get very competitive in a market where it has been the No. 2 player since it debuted its Japanese-language service in 2000.

Interestingly, Google was Yahoo Japan’s search technology provider for several years soon after it arrived, but that job then went to Yahoo.

In order to compete better with Yahoo Japan, which has a 53 percent market share compared to Google’s 38 percent, Google has tried a range of efforts unusual to its standard modus operandi

Those include PR stunts, brand advertising and even mucking up its pristine white main page with text and other noisy visual elements.

Because of that, Google has made market inroads, to be sure, cutting Yahoo Japan’s share slowly.

It’s an accomplishment that might have prompted Yahoo Japan to make a lucrative deal with the search giant, while the getting was good and before it lost more share.

As for Google, it stopped playing around and went for the actual business itself by effectively hip-checking Yahoo out of its spot.

And, at least in Japan, Google said regulators have already decided that its ambitious reach was not too much, even given the overwhelming share that will result with the Google-Yahoo Japan union.

Said a Google spokesman: “The companies have consulted with the Japan Fair Trade Commission, and confirmed that the JFTC has no objection to the proposed transaction.”

Incredible. And not in a good way.

That’s because a monopoly is a monopoly is a monopoly, no matter which language you say it in.

Even with apparent Japanese government approval, Microsoft is sure to try to scotch the deal, making hay with the fact that practically all the paid and algorithmic search in Japan would be under the control of one entity, especially so if it also includes mobile elements.

A lot is at stake for Microsoft, which is now in much bigger trouble in its quest to increase global market share for Bing.

That’s because Japan has close to 100 million active and wired consumers, many of whom are on the cutting edge of digital innovation. Japan is also a huge advertising market, second only to the U.S.

Given how important global growth is, it’s a market too juicy for growth-craving Google to pass up.

It is striking then that regulators will let the company enmesh its search service as deeply as it will with the Yahoo Japan move.

As with its scotched deal with Yahoo here–which Google abandoned after it was clear the U.S. government was not going to tolerate such market power in the hands of one player. At the time, Google said there would be plenty of competition, which it is now saying again.

In an email to me, Google PR dude Adam Kovacevich made the following salient points that I render here in their entirety:

It’s actually a different situation from the 2008 deal. To wit:

* Google will only be licensing its advertising platform services to YJC, and will not be providing its ads to appear on YJC. YJC will continue to manage their own advertising system and advertiser relationships, and both companies’ advertisers and advertising data will remain entirely separate.

* YJC will continue to compete as an independent online search and advertising company, and will be able to customize Google’s search service for their users–including how they see and experience search on YJC. Users should continue to expect to have very different experiences on YJC–whose portal approach to search is very popular in Japan–versus when they are on Google.

* This kind of arrangement is commonplace in the business world, and it doesn’t foreclose robust competition. Toyota sells its hybrid technology to Ford, even though they compete against one another in selling cars. Canon provides laser printer engines for HP, despite also competing in the broader laser printer market. And this is not the first time we’ve licensed our search technology to another portal site.

* The companies have consulted with the Japan Fair Trade Commission, and confirmed that the JFTC has no objection to the proposed transaction. We believe this is the correct outcome for a number of reasons, including the fact that the license will be non-exclusive, and both parties will be free to explore better products and services and work with third parties as they see fit. Competition between Google and YJC, as well as others in the online advertising market, will remain vigorous because their advertising operations will stay independent of one another, and there is competition with other online advertising service providers. In addition, from an advertiser perspective, online advertising is just one of many options available to them—including placing advertisements in traditional media.

Yes, the thriving newspaper business is a option! Wait a minute…

In any case, you might imagine the Japanese government would be a little more concerned.

It should be.

Regarding the Yahoogle attempt, as I also noted then:

“It is bad for advertisers, it is bad for consumers, it is bad for innovation, no matter how well-intentioned Google is.”

But Japanese regulators don’t have to take my word for it–they can listen to a 2008 quote by SoftBank head Masayoshi Son, who plays a critical role on the board of Yahoo Japan and presumably blessed this new deal:

“Google is a worthy competitor. The common threat is Google. I say that with respect.”

And, with respect, perhaps Japanese regulators need to take a little bit more time in waving any such deal on through so quickly and without public comment.

As BoomTown reported earlier today, Yahoo Japan confirmed it would switch its search technology and paid search provider to Google from Yahoo.

The move is a definite blow to Yahoo’s new search and advertising alliance with Microsoft (MSFT), although Yahoo (YHOO) sought to minimize the damage in a statement (which you can read below in its entirety).

But make no mistake, given the huge Japanese market: It’s Googzilla totally wiping the floor with MicroHooSoftra.

While it might seem unusual that Yahoo Japan will be using Google’s search, the company is not actually owned by Yahoo, which holds a 35 percent stake.

SoftBank Corp., the giant Japan-based Internet service provider and cell phone provider, has a stake of around 40 percent in Yahoo Japan.

Both SoftBank Founder Masayoshi Son–one of the first key investors in Yahoo–and Yahoo co-founder Jerry Yang sit on the board of Yahoo Japan, which is operated independently as a separate publicly traded company run by President and CEO Masahiro Inoue.

Now that Yahoo Japan and Google (GOOG) have announced their engagement–in a statement at the time of Yahoo Japan’s first-quarter earnings announcement–it is certain that Microsoft will move to stop deal from gaining regulatory approval in Japan, even though a Google spokesman told BoomTown it had already consulted the proper authorities in Japan and had gotten no objections.

Still, I would not expect Microsoft to settle for that, and it is likely to do some lobbying
much as it did successfully when Google tried to enter into a similar deal with Yahoo itself in the U.S. in 2008.

That deal failed after government opposition to the creation of a near-monopoly in search in the U.S. became clear.

In Japan the combination is even worse, with the pair controlling almost the entire market share of search there, both paid and algorithmic.

In search query volume, according to one recent report, Yahoo Japan currently has just over a 53 percent share of the search market and Google has just over 38 percent.

Other polls differ, but it all spells an overwhelming and definite monopoly when combined.

Coincidentally, Bing just entered the Japan market with its branded search, but it has only a small share there of almost three percent.

The same market share among the big players holds in paid search too, with Yahoo Japan and Google controlling almost the whole thing between them.

Maintaining a modicum of competition in Japan was Yahoo’s to lose. And lose it did.

After Yahoo and Microsoft struck their wide-ranging search and online advertising partnership last year, Yahoo Japan–which now uses Yahoo technology for algorithmic and paid search–was then free to pick whatever search service it wanted.

Most expected it to use Microsoft’s Bing technology, which will be powering Yahoo in the U.S. by the end of the year, as well as in many other countries where Yahoo operates.

But, because Yahoo Japan is its own entity, any such deal needed to be negotiated among the parties, putting Yahoo Japan in play, much as if it were AOL (AOL) or News Corp. (NWS) unit MySpace in the U.S.

Investors are sure to ask what Yahoo management was doing as the Google effort took shape.

Those efforts obviously paid off, despite a declaration by Yahoo Japan’s Inoue in an January interview with a Japanese news organization that he was not impressed with some other Google services, such as its Street View mapping service.

Thus, the fallout from this is likely to be tough on Yahoo and also its nascent search relationship with Microsoft.

Yahoo Japan said the date of the switch was yet to be determined.

Here’s the statement from Yahoo on the changeover:

Yahoo! Japan announced that it has chosen to implement Google as its backend algorithmic search engine and paid search infrastructure. Yahoo! Japan made this decision as an independent and separate publicly traded company, in which Yahoo! holds a 35% equity interest. We amended our agreement with Yahoo! Japan as a result of this decision, and we do not anticipate that this amendment will have a material financial impact on our revenues. We will provide support, as required by our agreement, for the search experience Yahoo! Japan has chosen for its business, and we will continue to partner closely with Yahoo! Japan in other areas including mail, messenger, mobile, our content properties and more.

This decision by Yahoo! Japan does not impact the global rollout and implementation of the Yahoo! search alliance with Microsoft, except in the Japanese market. We remain confident in our transition plans for the search alliance, are driving innovation in the user experience around search on the Yahoo! network, and continue to be committed to our alliance with Microsoft.

In what would be a stunning blow to the massive search alliance between Microsoft and Yahoo, Google is apparently zeroing in on a deal to grab the algorithmic search business for Yahoo Japan, said several sources.

The agreement between Yahoo Japan and the U.S. search giant could be announced as early as today in Japan, sources said, and could be part of a larger deal between the two companies around mobile or other products.

Financial terms of such a deal were unclear.

News of the deal could come when Yahoo Japan announces its financial results at 3:10 pm Japan time on July 27, which is 11:10 pm PT today.

If Google (GOOG) and Yahoo Japan join together, the pair will control almost the entire market share of search in the Japanese market. It is not clear whether or not paid search is part of this deal at this time.

But in search query volume, Yahoo Japan currently has just over a 53 percent share of the search market and Google has just over 38 percent.

It is a monopoly in comparison to Microsoft, which has almost a three percent share.

Yahoo Japan is not actually owned by Yahoo, which holds a 35 percent stake. SoftBank Corp. has a stake of around 40 percent.

Both SoftBank Founder Masayoshi Son–one of the first key investors in Yahoo–and Yahoo co-founder Jerry Yang sit on the board of Yahoo Japan, which is operated independently and run by President and CEO Masahiro Inoue.

When Yahoo (YHOO) and Microsoft (MSFT) struck their wide-ranging search and online advertising partnership last year, Yahoo Japan–which now uses Yahoo technology for algorithmic search–was free to pick whatever search service it wanted.

That meant it was not obligated to use Microsoft’s Bing technology, which will be powering Yahoo in the U.S. by the end of the year, as well as in many other countries where Yahoo operates.

But, because Yahoo Japan is its own entity, any such deal was to be negotiated among the parties, putting Yahoo Japan in play, much as if it were AOL (AOL) or News Corp. (NWS) unit MySpace in the U.S.

Both those companies signed search deals with Google–and both are also now up for renewal.

Coincidentally, Bing just entered the Japan market with its branded search, but it has only a small share there.

And, ironically, Yahoo Japan’s Inoue said in an interview in January with a Japanese news organization that he was not impressed with some other Google services, such as its Street View mapping service.

In any case, if Yahoo Japan and Google do buddy up, it’s clear that Microsoft will likely try to block the deal from gaining regulatory approval in Japan, much in the same way it did successfully when Google tried to enter into a deal with Yahoo in the U.S. in 2008.

That deal crashed and burned after government opposition became evident.

It will also be interesting to see which search technology the Alibaba Group, which owns Yahoo’s name in China and of which Yahoo itself owns 40 percent, will select or if it will do search on its own.

Like Yahoo Japan, Alibaba–which is using Yahoo’s search and email technology now–is also not obligated to switch to Bing when Yahoo does. Such a deal is also subject to negotiation.

That said, Google’s relations with China remain tense, which could play a role in any talks with Alibaba.

Emails and calls to spokespeople at Yahoo, Yahoo Japan and SoftBank seeking confirmation were not returned as yet. Microsoft declined to comment.

And so, between now and July 22, the case will be on hold, as Intel (INTC) and the FTC review and discuss a proposed consent order, the terms of which are currently confidential.

An interesting change of tack for Intel, which has vehemently denied FTC allegations that it used threats and rebate schemes to encourage exclusive deals and unfairly manipulate the chip market. If the company manages to reach an agreement with the agency, it will avoid the September trial toward which it seemed inevitably to be heading.

Amazon’s MP3 store now has 12 percent of the digital download market in the U.S., according to NPD Group. That’s up from eight percent a year ago. But those sales don’t seem to have come at Apple’s expense: NPD puts the iTunes market share at 70 percent, compared with 69 percent a year ago.

So who’s losing market share? NPD hasn’t explained (yet). But based on previous surveys from the data company, I assume it’s some combination of Rhapsody, Microsoft’s (MSFT) Zune marketplace and Napster. And if I had to guess, I’d point to Napster, which has really struggled since Best Buy (BBY) purchased it in 2008.

UPDATE: I was wrong! Looks like Amazon’s gain stems primarily from Rhapsody’s loss. The music subscription service, which also sells downloads, saw its share drop from four percent to 1.3 percent within the last year (see table below; click to enlarge).

In any case, the new data show Amazon making steady, grinding progress. Which makes reports of Apple strong-arming music labels that gave exclusives to Amazon a little more interesting.

Meanwhile, Apple (AAPL) remains the biggest player in music retail, period. NPD says it now owns 28 percent of the U.S. market, up from 24 percent a year ago. Amazon (AMZN) is also up, from nine percent to 12 percent, which ties Wal-Mart (WMT) for second place.

[Image credit: Paolo Camera]

The New York Times, which first reported the inquiries, thinks they’re aimed at Apple’s muscle-flexing this spring, when it reportedly convinced the big music labels to stop giving Amazon exclusives for big releases. People I’ve talked to in the industry aren’t convinced that’s the case, and tell me the chats they’re aware of have been wide-ranging talks about digital music sales in general.

But regardless of what the Feds are looking for, it won’t take much digging for them to figure out that Apple (AAPL) runs the digital music market. If you want to sell songs on the Web and you’re not on iTunes, you’re going to have a very difficult time.

So that answers the first part of the “Does Apple have a problem?” test that antitrust expert Harry First set up for my colleague, John Paczkowski this month: Yes, Apple has a monopoly, or close to it. And the company has had it since 2003, when iTunes started selling music.

Next question: Does Apple maintain its power by stifling competitors?

Tricky. Because the people most responsible for Apple’s market power are the ones who gripe about it most often: The big music labels.

They’re the ones who insisted on locking their songs up with digital rights management technology. Which meant that anyone who bought digital music was forced to choose between Apple’s iTunes/iPod platform or the lousy one promoted by Microsoft (MSFT) and others, which you can’t even recall anymore. Not really a choice at all.

The labels eventually wised up and started selling their stuff as unencrypted MP3s, meaning anyone could sell music that plays on Apple’s devices. But that was years too late. Even Amazon (AMZN), with all of its marketing savvy and clout, has managed to claw out only eight percent of the market in the last three years. Apple still commands 69 percent. UPDATE: New data show Amazon’s share moving up, though not at Apple’s expense.

But here’s the thing: If the labels really want to break Apple’s grip on their business, they could.

All they need to do is license their stuff at dirt-cheap rates to all-you-can-eat subscription services like Spotify and MOG. Sell that stuff at the right price–a buck a month? two bucks?–and everyone buys in, and no one ever thinks about buying songs from iTunes again. Poof!

The labels won’t do that. At least not now. We’re a decade past Napster, but they still prefer to sell compact discs, and failing that, individual songs. And they prefer to put up with Apple’s dominance than risk those sales.

But sales continue to shrink anyway. Even digital downloads seem to have petered out, at least in the U.S. And there’s nothing an antitrust regulator can do about that.

That’s what Harry First, the Charles L. Denison Professor of Law at New York University School of Law, told me when I asked him if Adobe’s (ADBE) rumored antitrust complaint against Apple had any legs.

Today, we have the answer to First’s question: No.

According to a comScore (SCOR) survey of 234 million American mobile subscribers age 13 and older, Apple controls just five percent of the mobile phone market in the United States–hardly enough to be considered a monopoly, let alone an abusive one. In fact, Apple (AAPL) doesn’t even rank among the top mobile OEMs, and with a five percent share, it is more than three percent away from Nokia (NOK), its nearest rival. (See tables below; click to enlarge.)

Now, in the smartphone market, the iPhone maker’s market share is more significant. As of February, Apple claimed a 25.4 percent share.

While that was enough to give the company second place in comScore’s smartphone OEM rankings, it pales in comparison with Research in Motion’s (RIMM) 42.1 percent share. It’s also well below the threshold for a monopolization claim, which would seem to suggest that the chances of a possible antitrust investigation against Apple are pretty slim indeed.

As Kenneth Glazer, a partner at K&L Gates and the former deputy director of the Bureau of Competition at the Federal Trade Commission, told The Wall Street Journal last week:

If…Apple has only a 25% share, they’re well below the threshold for a monopolization claim and also below the threshold for an attempted monopolization claim. You’ve got to be at least 40% to be within shouting distance of an attempted monopolization claim. I don’t see how they’re going to be able to prove a monopolization case against Apple if smart phones are the relevant market, unless you can carve out a narrower antitrust market in which Apple has a larger share.

This week: We walked down University Avenue to the Silicon Valley headquarters of Booyah Games to talk with co-founder and CEO Keith Lee. Booyah is the maker of MyTown, an Apple (AAPL) iPhone app that combines Foursquare and Monopoly into a novel kind of augmented-reality game. The start-up has added about 100,000 news users a week over the last two months.

Who: Keith Lee

What: CEO and co-founder

Why: Keith was a lead producer on Diablo III at Activision Blizzard (ATVI), but left with some colleagues to start Booyah and dip his feet into the social-gaming space. He wanted to explore ways to connect the real world to the game world. After some trial and error, he decided to build an experience around the iPhone GPS platform.

Where: Booyah.com (Web site); Search “MyTown” (iTunes); Palo Alto, Calif. (analog place)

Who else: Booyah’s MyTown competes directly with Foursquare and Gowalla as a location-based game for the iPhone.

Five Stats You Won’t Find in His Facebook Profile

Game of the Moment: I’ve just started playing Demon Soul, and it’s probably the hardest game I’ve played in the last five years. It’s very stats-based, so stuff like the weight of your sword or knowing how a halberd (a type of battle ax) works matters. It’s full of some real innovations for player interactions as well.

Has a Geek Crush On: Rob Pardo. He’s the creator of Starcraft, Warcraft and World of Warcraft. His philosophies have really influenced how I build games.

Gadget of the Moment: I was really disappointed in the Kindle. I got one for Christmas. I had to subscribe and pay to read TechCrunch or Kotaku. It didn’t make sense.

Best Gamer High: It is about doing the hardest thing in the game, reaching the extra goals and doing it faster than everyone. So, when people are talking about that goal or feature I can be like, “Yeah, I already got that.” I played Mass Effect twice, just to get the highest score in our group. It’s all about the bragging rights.

Fails At: I’m a total fail at a lot of things–basically everything that involves real life. I have, like, zero common sense. A perfect example is this one time I was supposed to take care of my girlfriend’s little dog. Without thinking, I set the dog down on the top of this high speaker, and I went off to do something else. Well, the dog decided to jump down and she broke her leg. When I called my girlfriend, she knew what I’d done. She just picked up the phone and said, “What did you do to the dog?” It’s all the normal-living stuff I can’t do.

Bio in 140 Characters

Globetrotted growing up. Educated at Exeter and Stanford. He went into finance at parent’s request, but his internal gamer won out.

The Five Questions

You seem like a pretty hardcore gamer. Where does that come from?

We moved around a lot when I was growing up. I was born in Hong Kong, then we moved to the Netherlands, lots of other places. My parents were very strict. I was forced to play piano and violin two hours a day. We never had any videogames; I could only play them over at friend’s houses. I wasn’t allowed to read sci-fi or fantasy books either. I was only allowed to read biographies and classics….I think because I was never allowed to read that stuff, that’s all I ended up reading when I went to Exeter and college, and why I needed to be a part of making games.

So, what makes MyTown worth playing?

From the very beginning, we wanted to get into this to forge a new category of social games. We don’t really see ourselves as being in competition with Farmville or any of the others because the games are so different, but maybe just in terms of mindshare. We want to be the leader in location-based gaming, or real-world gaming. With MyTown, we’ve created a way, by partnering with Citysearch, to let people have virtual ownership of real places. Our strategy moving forward is about widening the gap between us and our competitors in certain metrics and trying to be very agile. It’s sort of like in World of Warcraft. You can work methodically on something until someone comes and scouts you and sees what you are doing. Then, you have to build like mad so you can rush them.

What are you making that hasn’t been scouted yet?

As for future stuff, I’m pretty sure we’re going to be doing something music-related. We have a few products that are already in the works for Facebook that are a totally new type of social game. They have real-world tie-ins like MyTown. We could leverage GPS from a smartphone, but also focus on tie-ins with music, celebrities and businesses.

We’re actually 70 percent done with that, and we are pretty close to announcing. Probably early Q2. I really feel like [in this arena] there are a lot of Atari-style games, in that everyone is just cloning each other. I think we have the opportunity to be a Nintendo and bring that killer Super Mario Brothers game that changes everything.

How heavily are the personalities of the developers here affecting the products?

Yeah, I mentioned the music thing before. I don’t know it you saw when you came in, but that was my DJ equipment in the corner. I’m really into the house and electronic music scene–I fly down to Los Angeles to DJ pretty frequently. That’s a pretty direct link.

There are a lot of interesting people here. We have a developer who used to be a Buddhist monk and then became a sort of Indiana Jones figure. He has this amazing skill to think not just deeply but laterally and connect things in games that wouldn’t normally be thought of as associated with each other. That alternative way of thinking lends itself to our strength.

What was your “Living in the Future” moment in gaming, when you knew the arena had come of age?

Its hard to say. I think it was probably the first time I played an MMO [massive multiplayer online] game. It wasn’t anything like crazy “Minority Report” technology stuff. It was when I played Dark Age of Camelot and everything afterward. I actually felt like I was completely in the a community environment, like a virtual world. Before, when I went in and came back out of the game, it went with me. But now, even if I’m not there, it keeps moving. Like it was something that would evolve without me. I felt like I had to get back in there, because I wouldn’t even know what it would be like 20 days later.

The In Living Color Interview