Apple under Scrutiny of European Regulators
The iPhone maker’s negotiations and dealings with record labels have come under the scrutiny of European regulators amidst an intensifying battle regarding the future of ad-supported and free music streaming services like Spotify. The European Commission has contacted several digital music companies and labels, according to individuals who are familiar with the matter. Questionnaires have been sent to the groups, which request information about agreements between Apple Inc. and the labels before the planned summer launch of the firm’s own music streaming service, which would pit the company against other rivals such as Deezer, Spotify and Google.
These questionnaires are usually sent when a formal complaint is filed with the commission, which is the top competition authority in EU. The first step of a probe is gathering information doesn’t necessarily indicate that a formal antitrust investigation will be launched by Brussels. If the conclusion derived by the commission indicates wrongdoing, it has the authority to impose substantial fines and order the companies to alter their business practices. Apple’s music service is based on the acquisition of $3 billion acquisition it made of Beats Electronics. This service will offer users access to unlimited music streaming at an expected price of $10. However, unlike Spotify, Apple’s service will not use an ad-supported free tier for luring in customers.
Instead, the Cupertino-California based company intends to bundle its existing iTunes music download application with the new streaming service when it is eventually launched in the latter half of this year, as per individuals familiar with the plans. The music streaming service rivals of Apple have also been contacted by the commission and it is concerned that the American technology giant will use its relationship, size and influence for persuading labels and digital music companies to abandon ad-supported and free services like Spotify, which create their catalogues due to the licensing they have obtained from music companies.
The case is highly similar to the US antitrust case of Apple Inc. over e-book pricing in the course of which the company had been ordered to pay about $450 million in damages. An appeal has been filed by Apple over this ruling. No comment was made by Apple or the EU Commission regarding the inquiry. Beats was co-founded by Dr. Dre, the hip-hop star along with Jimmy Iovine. The latter has criticized free music services openly as he believes that music is undervalued by them. He is heading the launch of the iPhone and iPad maker’s streaming service and its negotiations with the labels.
Launched in 2014, Beats Music offered a one-month free trial for a month, but it wasn’t an ongoing service like Deezer and Spotify. Finger-pointing has begun in the music industry with the probe of the commission regarding the source of the complaint. Some suspect that it was one of the companies that offer free music streaming service. However, this is a very critical time for the music industry as there has been a shift away from digital downloading to free music streaming, thanks to services like Spotify.