iTunes downloads in UK to become cheaper

BRUSSELS Wed Jan 9, 2008 11:12am EST

A customer checks out Apple's iTunes at an Apple store in Tokyo, August 25, 2006. Britain's music fans will pay 10 percent less for downloads from Apple's online iTunes stores within six months, the European Commission said on Wednesday. REUTERS/Kiyoshi Ota

A customer checks out Apple's iTunes at an Apple store in Tokyo, August 25, 2006. Britain's music fans will pay 10 percent less for downloads from Apple's online iTunes stores within six months, the European Commission said on Wednesday.

Credit: Reuters/Kiyoshi Ota

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BRUSSELS (Reuters) - British music fans will pay less for downloads from Apple's online iTunes store after Apple Chief Executive Steve Jobs reached a deal with the European Commission.

British consumers have been angry at paying nearly 10 percent more than others in Europe for iTunes content to play on Apple's hugely popular iPods.

Apple will cut prices within six months as "the direct result of talks that have taken place between Steve Jobs and (European Competition Commissioner) Neelie Kroes", Commission spokesman Jonathan Todd said on Wednesday.

The deal, under which the Commission dropped charges against Apple, resolves one of several irritants in the relationship between consumers, Apple and record companies.

Apple said it has had to pay some record companies more for content in Britain and warned it would "reconsider its continuing relationship" with labels that do not lower wholesale prices in Britain to the pan-European level within six months.

"This is likely to further damage Apple's already fractious relationship with the major labels," said Jonathan Arber, an analyst at media consultancy Ovum.

Music companies are quickly moving towards dropping copy protection, known as digital rights management, in part to free themselves from the increasing power of iTunes, he said.

iPODS DON'T DOMINATE

Consumers have also complained about the failure of iTunes downloads to play on anything except iPods. But Apple may legally continue that practice, the Commission said.

"We are in favor of interoperability," said Commission spokesman Todd.

"But the bottom line is that Apple is not in a dominant position on the market, and therefore the fact that they choose not to ensure interoperability is not an antitrust violation."

The pricing problem addressed by the Commission arose because customers can only buy music from national versions of the iTunes store, as determined by their credit cards.

For example, a consumer in the UK must use a credit card from a bank with an address in Britain.

In addition, the music must be cleared for sale in that country under national copyright rules, meaning that not all iTunes content is for sale in all countries. A video available in France may be unavailable in Belgium, for example.

The Apple deal may foreshadow further Commission action against such inconsistencies.

A basic EU treaty provision assures a single market.

"The Commission is very much in favor of solutions which allow consumers to benefit from a truly single market for music downloads," Kroes said in a statement.

The Commission said its investigation disposed of its original concern that deals between the major record companies and Apple accounted for the price differences.

In April 2007, the Commission said Apple had breached EU rules by agreeing with Vivendi's Universal Music Group, Sony BMG Music Entertainment, EMI Group and Warner Music Group to curtail cross-border access to iTunes.

EMI said it was "pleased to have received the European Commission's confirmation that there is nothing in its agreement with Apple that restricts its iTunes stores from selling music downloads to fans across national boundaries at the same price."

The case dates back to 2005, when British consumer group Which? complained that iTunes stores in France and Germany charged 99 euro cents ($1.45) per download but Britons had to pay 79 pence ($1.56).

(Additional reporting by Kate Holton in London, editing by Will Waterman)

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