Apple seeking EU-wide iTunes prices

27 May 2009

Apple has been lobbying the European Union with the aim of ensuring that Europe’s 500 million-plus citizens can pay the same amount for their downloads. The first hurdle will be simplifying the way rights are secured for the continent’s 26 member states.

According to an online commerce roundtable report by EU commissioner Neelie Kroes released today, European consumers, particularly in the newer access states, suffer from price discrimination and digital rights management (DRM) where legitimate online music purchasing is made difficult.

“EU consumers seeking to buy via the internet content protected by intellectual property (IP) rights, such as music, films, videos and pictures as electronic data files, are often only allowed access to online stores directed to their country of residence. In spite of the open and borderless nature of the internet, territorial restrictions prevent a true and genuine internal market for online services, limit business opportunities and harm consumers,” Kroes said in the report.

The roundtable report pointed out the difficulties music distribution sites face in trying to go to market in the EU at present. In order to operate an online music distribution service, a distributor needs to obtain two essential inputs.

First, the online music store needs agreements with the record companies, which will provide it with the sound recordings to be sold in digital form. These contracts also involve the licensing of mechanical and public performance rights pertaining to the record companies as phonogram producers and to the performing artists involved in the recording, which the record companies have previously cleared.

Recording companies grant their rights either for the whole of the European Economic Area (EEA) or for certain countries only, but not for others, even if they own them for all territories.

A typical example of country-specific licensing models by record companies are ‘staggered releases’, according to which recording companies make available new songs or albums country by country within a time-frame of some few weeks, in order to maximise their marketing efforts in each country.

The same can be true for the opening of iTunes stores and services such as movies, which typically start in the large consumer economies of UK, Germany and France, and eventually smaller countries depending on where deals are struck first.

In addition, the online music store needs to obtain contracts with collecting societies, in order to clear the relevant mechanical and public performance rights pertaining to the creators of the music used for the sound recording.

A meeting on breaking down and simplifying these barriers was held in Brussels on 16 September last, and was attended by Ben Verwaayen of Alcatel-Lucent, Bernard Arnault of LVMH, John Donahoe from eBay, John Elkann of Fiat, Roger Faxon of EMI, Sir Mick Jagger from The Rolling Stones, Steve Jobs from Apple Inc, Bernard Miyet of SACEM and Thomas Houghton, publisher of Which? Magazine.

According to the roundtable report, the current blocking exemptions are to expire on 31 May 2010.

In a statement, Apple’s Steve Jobs told the committee: “Apple perceives the internet as an opportunity rather than as a threat, but observes that large-scale piracy is a big problem that still needs to be tackled effectively.

“Apple observes that its iTunes store is not available in every EU country because many countries do not offer a large enough marketplace to justify the expense and effort required to sell in that country.

“Since it cannot obtain the rights in the sound recordings and the global repertoire of musical works on a pan-EU basis, iTunes has to examine the situation in each country individually to determine whether the benefits are likely to outweigh the costs of distributing content into that country.”

By John Kennedy