Europe regulators scrutinise Apple over music streaming plans

European regulators are scrutinising Apple's dealings with record labels, amid an intensifying battle over the future of free, ad-supported music streaming services such as Spotify.

Several labels and digital music companies have been contacted by the European Commission, according to people familiar with the matter.

The groups have been sent questionnaires requesting information about agreements between the labels and Apple ahead of the planned summer launch of Apple's own music streaming service, putting it into competition with the likes of Spotify, Deezer and Google.

Such questionnaires are often triggered by a formal complaint to the Commission, the EU's top competition authority. The information gathering is the first step in a probe and does not necessarily mean Brussels will launch a formal antitrust investigation.

If the Commission concludes there is wrongdoing it is empowered to require changes to business practices and can impose hefty fines.

Apple's service, which is built on its $3bn acquisition of Beats Electronics, will offer unlimited music streaming for an anticipated price of around $10 per month but unlike Spotify will not use a free, ad-supported tier to lure in new customers.

Instead, Apple intends to bundle its streaming service with its existing iTunes music download app when it launches later this year, people familiar with its plans said.

The Commission, which also has contacted Apple's music-streaming rivals, is said to be concerned that Apple will use its size, relationships and influence to persuade labels to abandon free, ad-supported services such as Spotify, which depend on licenses with music companies for their catalogues.

The case in some ways echoes Apple's US antitrust case over ebook pricing, over which the iPhone and iPad maker was ordered to pay $450m in damages. Apple is still appealing that case.

Apple declined to comment on the Commission's inquiry.

The European Commission could not immediately be reached for comment

Jimmy Iovine, who alongside hip-hop star Dr Dre co-founded Beats, is an outspoken critic of free music services, arguing that they do not properly value recorded music. He is leading the launch of Apple's new streaming service and its ongoing negotiations with labels. Beats Music, which launched in early 2014, offered a one-month free trial but no ongoing free service such as Spotify's or Deezer's.

The Commission's probe has prompted finger-pointing within the music industry about the source of the complaint, with some suspecting one of the companies that currently offers free streaming services. But it comes at a critical moment for the music business, as its income has shifted away from digital downloads towards a new generation of streaming services, led by Spotify.

Spotify has 15m subscribers who pay $10 a month for unlimited listening, with 60m people using its free, ad-supported service. But its growth has come at a cost, with tensions starting to appear in its relationships with top stars and music labels.

Taylor Swift recently pulled her catalogue from Spotify, complaining that she did not receive enough income music played by the service's users.

Universal Music Group, the world's largest music company, is also in dispute with Spotify and is pressing the Swedish company to modify its free service - perhaps by capping the amount of time it can be used, to accelerate the conversion to higher-margin, paid subscriptions.

Some of music's biggest stars have also launched their own music streaming service this week, called Tidal. Led by Jay-Z, the hip-hop star who recently acquired Aspiro, a Swedish music and technology group, the stars, including Madonna, Kanye West and Alicia Keys, have been given equity in Tidal, which offers streaming music on a subscription basis. Like Apple's successor to Beats, Tidal will not have a free, ad-supported component.

Google's YouTube is another Spotify competitor bringing a streaming service to the market this year. The site, which has 1bn visitors each month, has an enormous library of music videos and tracks that can be watched at any time but is launching a paid, subscription service.

Additional reporting by Alex Barker

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