US states probe music labels for streaming collusion

People wait for the start of an event by music streaming service Spotify in Berlin on May 20, 2015. Prosecutors in two US states are investigating whether major music labels have colluded to prevent competition in the booming area of music strea
People wait for the start of an event by music streaming service Spotify in Berlin on May 20, 2015. Prosecutors in two US states are investigating whether major music labels have colluded to prevent competition in the booming area of music streaming, officials said on Wednesday, June 10. -- PHOTO: AFP

NEW YORK (AFP) - Prosecutors in two US states are investigating whether major music labels have colluded to prevent competition in the booming area of music streaming, officials said on Wednesday.

The probe - which an official said has turned up no evidence of wrongdoing - comes as tech giant Apple entered the streaming battle with the launch of an updated service to compete with Spotify and other providers of unlimited, on-demand music.

A spokesman for New York Attorney-General Eric Schneiderman said that an investigation was under way into music streaming, "an industry in which competition has recently led to new and different ways for consumers to listen to music".

"To preserve these benefits, it's important to ensure that the market continues to develop free from collusion and other anti-competitive practices," said spokesman Matt Mittenthal.

A lawyer for Universal Music Group - the largest of the three major label conglomerates - said in a letter that the investigation centred on whether the companies were "working together to suppress the availability to consumers of free, advertising-supported, on-demand music streaming or similar services, such as those offered by Spotify and YouTube."

The lawyer, Mr D. Bruce Hoffman, denied that Universal had reached any deals with the two other label groups - Sony Music and Warner Music - or with Apple to inhibit free streaming services or to stop licensing content to particular companies.

But the letter, released by the New York attorney-general's office, said that Universal reserved the right to provide exclusives through streaming services.

Neighbouring Connecticut joined in the New York investigation and praised Universal's assurances.

"At this point, we are satisfied that Universal does not have in place - or in process - anti-competitive agreements to withhold music titles from no-charge streaming services," Connecticut Attorney-General George Jepsen said in a statement.

"We will continue to monitor that market to ensure that consumers and competition are protected," he said.

- Huge growth, value for Spotify -

A number of music executives and artists, most notably Taylor Swift, have criticised Spotify for offering a free, advertising-backed tier to listeners who do not pay for a subscription - which costs US$9.99 (S$13.40) a month in the United States.

Spotify nonetheless pays labels for their content and has shown phenomenal growth.

The Swedish company said on Wednesday that its base had nearly doubled from a year ago and that it now has 75 million active users, with 20 million of them paying subscribers.

Spotify said it has paid US$3 billion in royalties since its launch in 2008. Some US$300 million was in the first three months of 2015, indicating strong growth of payouts as the company booms.

In a sign of the huge value of streaming, Spotify was valued on Wednesday at more than US$8.2 billion.

The figure came to light as Nordic telecom operator TeliaSonera said it was acquiring a 1.4 per cent stake in Spotify for US$115 million.

Spotify is not publicly listed and so it is not obliged to detail its finances. But it has continuously announced annual losses, as the company gambles that its costly initial efforts will pay off in the long run.

- Apple enters fray -

Spotify has a growing number of rivals including Deezer, Rhapsody, Google Play and Tidal, which is spearheaded by rap mogul Jay Z.

Spotify announced its growth two days after Apple unveiled its long-anticipated streaming bid, which will include a social network for artists and an advertisement-free global radio network.

Apple in 2013 was placed under an anti-trust monitor by a US judge who found the Silicon Valley giant helped conspire to raise prices of electronic books for its iPad in a bid to stave off rivals such as Amazon.

Apple declined to comment on Wednesday on the streaming probe. Several news reports said that Apple had engaged in tough, last-minute negotiations with the labels before the streaming announcement.