US, Europe’s regulators making inquiries on Apple’s streaming plans

Apple’s plans to launch a music streaming service in the northern summer has led regulators in both the United States and Europe to make inquiries.

The concern is that Apple, whose streaming service has no free-tiers, is in a position to use its size and muscle to force record labels to abandon rivals as Spotify and Deezer who do, and give it exclusives to compensate for not offering “freemiums”.

Apple is yet to sign any deals with labels for the new service. But it has close to 1 billion iTunes accounts. Any proof of corporate bullying would lead to massive fines and a forced change of business practices.

The Federal Trade Commission and the Department of Justice were involved in the talks in the US. According to The New York Post, New York state Attorney General Eric Schneiderman has sent a subpoena to music labels wanting details of their agreements with Apple.

The European Commission’s Competition directorate, too, has also asked European-based digital music companies and labels for similar information.

This does not mean a formal inquiry has begun in Washington or Brussels. But it is obvious that some of Apple’s rivals have made a formal complaint.

Streaming is the new battlefront as customers switch from downloads. A study by research firm GlobalWebIndex of 16-19-year-olds in 32 countries found that 80% stream and only 21% buy downloads. IFPI’s latest available figures indicate that digital accounts for 39% of total industry global revenues. In three of the world’s top 10 markets, digital channels account for most revenues.

In the US, 2014 figures from the Recording Industry Association of America showed that streaming revenue grew by a third to US$1.87 billion and now accounts for a third of all digital music revenue. Downloads revenue plateaued in 2012. But iTunes revenue is still significant: $4.6 billion in one quarter alone.

In Europe, an indication was that in the last quarter in Europe, Kobalt revealed that its revenues from Spotify streams were 13% higher on average than revenues fromiTunes for its customers.

ARIA’s annual wholesale figures for 2014 showed that subscription service income doubled to $23 million in Australia, up 111% from 2013. It makes up over 10% of total market value, with digital music revenues overtaking physical for the first time (54.7%) last year and is now worth $187.7 million.