The world’s largest record labels are being questioned by European Union regulators as part of a probe into their deals with music-streaming services from Apple Inc. and Spotify Ltd., according to three people familiar with the case.
The EU sent questionnaires seeking information on record labels’ deals with streaming services, the people said on condition of anonymity because the EU’s early-stage probe isn’t public yet. Regulators weren’t specifically targeting one company, such as Apple which is working on a Beats Music streaming platform, two of the people said.
Record labels and artists haven’t managed to replace falling revenues from CDs and vinyl with a boom in music streaming services such as Spotify that offer free music online. Only a quarter of Spotify’s users pay for the premium version of the service. Singer Taylor Swift pulled her albums from Spotify last year. Neither Apple nor rapper Jay Z, who is planning an artist-owned streaming service, will offer free music.
“The record labels have a monopoly supply of content” with three labels accounting for around three-quarters of the music market, Mark Mulligan, a music industry analyst at Midia Research, said in a phone interview. “Just one of those record labels saying you can’t have their content on a service effectively kills the service dead in the water.”
The EU questionnaires build on a wider investigation into online sales announced last week where the EU said it would probe restrictions that might prevent customers getting a wide choice of products and services on the Internet, from so-called geo-blocked video content to limits on buying goods.
Record labels could counter any EU concerns by arguing that they license music “to virtually any service that comes to them” and face no rules that prevent different commercial treatment of premium and free services, Mulligan said.
The European Commission declined to comment on the questionnaires. Apple didn’t respond to requests for comment. Spotify declined to immediately comment.
Officials at Warner Music Group Corp., Universal Music Group Inc. and Sony Music Entertainment all declined to immediately comment.
21st Century Fox Inc., Time Warner Inc.’s Warner Brothers unit and other studios are also being scrutinized by the EU over licensing deals with pay-TV broadcasters that limit access to content outside one country.
The Financial Times and the New York Post previously reported on the EU questionnaires.