European Commission Probing Premium Music Services

Associated Press

Do Apple's fee-only Beats Music and Jay Z's Tidal unfairly compete with ad-backed streamers like Spotify?

European regulators are looking into Apple's dealings with record labels ahead of the company's relaunch of its Beats Music streaming service.

The European Commission has sent out questionnaires to several European labels and digital music companies requesting information about Apple deals. Such questionnaires are typically the first step in a fact-finding probe by the commission, a move often triggered by a formal complaint. The fact finding, first reported by the New York Post, can be, but is not always, followed by a formal antitrust investigation. If the European Commission finds wrongdoing, it can impose hefty fines or require companies to change their business practices.

Apple is setting to launch Beats Music, a premium, fee-based online streaming service, this summer. Jay Z's Tidal, another premium, fee-only music streaming service, is already available in much of Europe and is rolling out in several other EU territories, including Germany.

Beats Music and Tidal are both premium services, meaning they do not offer a free ad-supported tier to lure in customers, unlike established music streaming services such as Spotify and Deezer.

The battle between freemium and premium streamers is one of the most contentious in the music business. Freemium services like Spotify claim they offer a legal alternative to music piracy. Vocal opponents, including Taylor Swift and Jimmy Iovine, the co-founder, along with hip-hop star Dr. Dre, of Beats, say ad-supported streaming services do not properly compensate recording artists. 

Swedish-based Spotify has grown quickly, with some 60 million freemium users and 15 million premium subscribers paying $10 a month. But Universal Music Group, the world’s largest music company, is reportedly pressuring Spotify to modify its free service to encourage more users to convert to paid subscriptions.

Sources near the European Commission said EU regulators are concerned Apple may use its size and influence to push labels to abandon freemium streamers entirely. It is thought Apple will bundle Beats with its iTunes music download service, which is the dominant player in the European market. Apple paid $3 billion for Beats Electronics last year.

The shift away from digital downloads towards online streaming is a major threat to established players in the music business, particularly Apple and iTunes. Kobalt Music Publishing, a group that represents and collects royalties on behalf of acts like Maroon 5, Bob Dylan and Paul McCartney said last year, for the first time, its customers collected more royalty revenue from Spotify than iTunes in Europe. 

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