iTunes downloads in UK to become cheaper

By David Lawsky and Huw Jones

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.