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EU iTunes pricing probe may change the digital music industry

Licencing and prices must be brought into line

Apple Computer may not be the only target of the pending European Commission pricing investigation, instigated by Which? (formerly the Consumer's Association). The territorial business model employed by the music industry itself could be in regulator's crosshairs.

The UK Office of Fair Trading last week sent a Which? complaint forward to the European Commission for investigation. The complaint concerned the differing cost of iTunes Music Store downloads in different EU countries

Which? principal policy advisor Phil Evans cited "music licensing issues in the single market" as one of the important reasons behind the complaint,.

He stressed that his organisation's choice to complain about Apple's pricing was no witch hunt, and that Which?’s concern was Apple dominant position among digital music distribution operators.

This means Apple is, "covered by legal rules the smaller players are not". Evans would like to see European price parity across all member states. "If we can get Apple sorted then the rest of the sector is likely to fall into place," he said.

In theory, Europe offers a single market, and European law requires price parity between member states.

In a statement released to Which? earlier this year, Apple said: "The underlying economic model in each country has an impact on how we price our track downloads. That's not unusual, look at the price of CDs in the US versus the UK. We believe the real comparison to be made is with the price of other track downloads in the UK."

Apple's price policy does seem to reflect local financial realities – while UK customers pay approximately 20 percent more per track than European partners, the UK also chooses to use its own currency, rather than the Euro. Apple must evidently set prices with Euro/Sterling currency fluctuations in mind.

However, another factor likely to affect iTunes prices is the territorial licensing system used by the music industry.

While this system enables artists to secure the best available deal on a market-by-market basis, it also enables labels to charge differently in each territory. In other words, a label may charge less for a particular track download license in France than it does in the UK.

Evans accepts this, telling Macworld: "In our complaint we specifically said to the OFT that we were concerned about all territorial practices – particularly in licensing – which the OFT acknowledged in their statement."

In passing forward the complaint, the OFT said the EU was in a better position to "determine in what manner and to what degree music licensing conditions in the UK differ from those in other EU member states".

Evans continued, "Apple in a sense is the gateway to a review of the whole way that intellectual property is licensed. As to the claims the collecting societies make – they will be tested. If we are to have a single market, then let's have a single market – let's not try and claim we have one then suspend it when a vested interest reckons it can earn more money from a different system."

The Which? representative continued, "as the world moves to an increasingly digital model we need to ensure that regulatory structures are still fit for the purpose.

"Licensing and copyright are increasingly out of touch with the digital environment and the problem is that the labels claim to be representing the artists interests in restricting consumer rights," he explained.

Apple declined to comment.


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