Online, recorded music
It has been a busy several months for antitrust regulators and the technology giants whose alleged conduct has recently come to their attention. Just a few weeks ago, Google formally became the subject of a European investigation into its alleged manipulation of Google search results to favour other Google products and the tying of its apps to developers’ use of the Android OS. Now, Apple is reportedly under scrutiny, this time by U.S. and European officials, over its soon-to-be-launched streaming music platform.
The U.S. Department of Justice and Federal Trade Commission are reported to be probing allegations that Apple has pressured major music labels to force other streaming music sites, such as Spotify and Pandora, to abandon their platforms offering free streaming music to customers willing to listen to the occasional ad and enjoy a lower-quality stream. It is alleged that Apple encouraged major music labels to refuse to renew their deals with such “freemium” music services (interestingly, the very music labels Apple is alleged to have pressured own a significant financial stake in Spotify). Apple’s alleged goal in exerting such pressure is to eliminate competition from freemium music services to pave the way for its streaming music platform, which it is reported will cost between $8 and $10 each month. Spotify – which boasts about 60 million users – attracts three-quarters of that listener base to its free offering. It is not expected that Apple will make a free option available when it launches its competing streaming music service. The perceived move by Apple to give its Beats service an ‘leg up’ has resulted in the US Department of Justice interviewing high-level executives at the major labels about Apple’s business practices. According to The Verge, the Federal Trade Commission (FTC) is now taking the lead. The New York Post had already claimed that the European Union’s Competition Commission is probing the tech firm regards its alleged meddlings in the streaming music space – and it will be interesting to see how the Google owned YouTube, which pays comparatively low royalties, will be considered. The Verge now cites one label source as remarking regards Apple’s negotiating tactics: “All the way up to Tim Cook, these guys are cutthroat”. Apple’s attempt to control ebook prices was successfully challenged and The Verge reports that the DoJ has had a resident monitor based in Apple’s corporate HQ since the company was found guilty in the ebook anti-trust case that had alleged that the company had conspired with publishers to raise the price of ebooks to consumers. Apple was fined $450m and is appealing.
Apple was also reported to have offered to pay to Universal Music Group the fees it currently receives as license payments from YouTube to play Universal’s content. The catch: Apple purportedly would have required Universal to halt YouTube’s free distribution of that content. It seems that European regulators have ,also been investigating these same allegations for the last month, concerned that Apple could abuse its position in the downloadable music industry, where Apple’s iTunes store is the major player.
This case, the latest antitrust case spurred by European regulators focused on U.S.-based tech giants, promises to have implications across the globe and that will be felt by the millions of people who listen to streaming music every day. Previously in Europe, the European Commission successfully prosecuted Microsoft for monopolistic abuses, and has now started to call Google to account – the European Court of Justice stunned everybody with its decision that Europeans had a legal right to request that objectionable material about them published online should be expunged from Google’s search indexes within the 28 countries of the European Union. In the Observer (Discover: 10.05.15) John Naughton had this to say: “Are we surprised by this? Not really. Or at any rate, not as much as we would have been 15 years ago, when tech companies were really cool. We are now almost prepared to accept that the Apples, Googles, Facebooks and Microsofts of this world are really just behaving like the huge industrial conglomerates of the past. Of course they employ smarter people, pay them better, exude coolness, provide chic/funky work environments (free massage and sushi bars, anyone?). And they are led by executives who have good bedside manners. But at base they are just huge capitalist enterprises that exist to provide wealth for their leaders and shareholders. So the next time you see Jeff Bezos or Mark Zuckerberg, just remember that what you are looking at is John D Rockefeller v2.0.”
Spotify saw both revenues and losses rise in 2014. Revenues were up 45% to 1.08 billion euros. As a result payouts to the music industry rose proportionally to 882 million euros. Spotify itself remains a loss-making business, with net losses up 190% year-on-year to 162 million euros. Spotify has reportedly secured another $350 million in its new round of fundraising, new investment that gives the streaming firm an $8 billion valuation.
The Networker: Apple’s Beats deal finally starts to make some sense