Abstract
With the swift progress of Internet technology, the way to get access to copyrighted work is undergoing substantial change. A variety of licensing models, usually operated by intermediaries, such as Spotify or Pandora, have emerged. What are the impacts of such new models on the end users of the music? Will they generate anticompetitive concerns? The chapter examines the currently popular music licensing models from the perspective of competition law and concludes that the key players such as Apple and Tencent have a strong position in the music market. It is not certain whether such key players have a dominant market position, and this needs to be assessed on a case-by-case basis. However, some conduct of the licensing intermediaries may fall within the subject of antitrust scrutiny if the requirement of dominant position is satisfied. Particularly, in the new era of “crossover”, high tech giants such as Apple, Tencent and Alibaba are building up content libraries, and pose serious threat to their rivals without synthesized platforms. (Synthesized platform refers to the online services that provide a wide range of services, which may cover instant messaging, information portals, online games, online music, e-business etc. Such synthesizing has significant impacts on consumers’ switching cost.) Competition law should adopt a more flexible approach to define the “relevant market” in order to protect market competition.
Xiuqin Lin is Professor and Director of the Intellectual Property Research Institute of Xiamen University.
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Notes
- 1.
Digital downloading now accounts for 39 % of total industry revenues, and in three of the world’s top 10 markets, digital channels account for the majority of revenues, IFPI, 2014 Annual Report.
- 2.
Available at: www.spotifyartists.com/spotify-explained/.
- 3.
CMO here refers to organizations approved and registered in accordance with the applicable law to manage certain categories of copyrights on behalf of right holders.
- 4.
According to a study by French music industry trade group SNEP and accounting firm Ernst & Young, recording labels receive 46 % of streaming subscription revenues, while artists, publishers and songwriters share 17 %, with the rest going to streaming providers and taxes. Available at: www.spotifyartists.com/spotify-explained/.
- 5.
Recently, a report issued by the US Copyright Office states: “our rules for music licensing are complex and daunting even for those familiar with the terrain”; see US Copyright Office (2015), 16.
- 6.
In legal terms, a user, who “buys” a song, is granted a license by the licensor (“Apple”) to use the song under the conditions specified.
- 7.
Available at: www.apple.com/itunes/music/.
- 8.
A. Klebanow / T. Wu (2015), 4.
- 9.
“Spotify is Quickly Catching Up With Pandora”, available at: www.forbes.com/sites/greatspeculations/2015/02/03/spotify-is-quickly-catching-up-with-pandora/.
- 10.
Available at: www.spotifyartists.com/spotify-explained/.
- 11.
The BMI is entrusted by 475,000 songwriters, composers and copyright owners with their public performance right. D. von Wiegandt (2013), 180, 187-188.
- 12.
CD Baby represents over 250,000 artists, so the agreement provides Spotify’s users with access to over one million tracks.
- 13.
D. von Wiegandt (2013), 188.
- 14.
Available at: www.spotifyartists.com/spotify-explained/.
- 15.
European consumers, identified by the address on their credit card, paid the same price, 99 Euro cents, in Austria, Belgium, Denmark, Germany, Finland, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland and Spain, while UK users paid 79 pence.
- 16.
- 17.
Id.
- 18.
Available at: www.apple.com/itunes/music/.
- 19.
- 20.
A. Klebanow / T. Wu (2015), 5.
- 21.
A. Klebanow / T. Wu (2015), 11.
- 22.
By the end of 2014, there were 478 million users listening to music online in China, but the revenue generated therefrom was US$ 91.4 million, ranked at 21st in the world. Source: IFPI, 2014 Annual Report.
- 23.
Available at: blogs.wsj.com/digits/2015/06/09/qa-how-tencent-plans-to-get-chinese-consumers-to-pay-for-music/.
- 24.
- 25.
Switching cost of consumers depends on various factors such as the coverage of a platform’s service, a user’s existing connection with a service and the devices used by a consumer.
- 26.
MPI Report (2013), 4-5.
- 27.
U.S. Department of Justice and the Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property, 1995 (hereinafter “US 1995 Guidelines”), 7.
- 28.
MPI Report (2013), 27.
- 29.
The TTBER applies to agreements concerning the following IPRs: software copyright, designs and utility models, patents and know-how. The licensing of trade marks, copyright and other IPRs is not covered by the TTBER unless the licensing is ancillary to the licensing of the technology covered by the block exemption. Commission Regulation (EC) No 772/2004, Article 1(1)(b).
- 30.
It was alleged that the Aeolian Company, a manufacturer of player pianos, was seeking to buy up exclusive rights from publishers to create a monopoly for piano rolls.
- 31.
US Copyright Office (2015), 26.
- 32.
Id., 3.
- 33.
MPI Report (2013), 6.
- 34.
Id.
- 35.
In Apple iPod iTunes Antitrust Litigation, 96. Supp. 2d 1137—Dist. Court, ND California 2011.
- 36.
Court Order, in Apple iPod iTunes Antitrust Litigation, Case No.: 05-CV-0037 YGR, September 26, 2014.
- 37.
International Salt Co. v. United States, 332 U.S. at 396, the Court held, “it is unreasonable, per se, to foreclose competitors from any substantial market.” In Standard Oil Co. v. United States 337 U.S. 293, 305-06 (1949).
- 38.
H. Hovenkamp / M.D. Janis / M.A. Lemley (2010), § 21.5, at 21-113-115.
- 39.
D.S. Evans / J. Padilla / C. Ahlborn (2013).
- 40.
United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) [hereinafter Microsoft III].
- 41.
Microsoft III, part IV.
- 42.
Microsoft III.
- 43.
It reads: “every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal”.
- 44.
European Commission, Guidelines on Vertical Restraints (2000/C291/01).
- 45.
Case COMP/C-3/37.792, 796-798, Microsoft Corp. v. Comm’n, (unreported, Mar. 24, 2004) (CEC), available at: europa.eu.int/comm/competition/antitrust/cases/decisions/37792/en.pdf.
- 46.
D.S. Evans / J. Padilla / C. Ahlborn (2013), 39.
- 47.
A. Klebanow / T. Wu (2015), 27-28.
- 48.
- 49.
A. Klebanow / T. Wu (2015), 17.
- 50.
The music market changes swiftly, so it is not clear whether Apple has a dominant market position. In the UK music retail market in 2014, Amazon overtook Apple as the UK’s biggest music retailer last year, with 27 % of all spending, with iTunes accounting for 26.7 %. However, the newly launched Apple Music has attracted millions of subscribers; available at: www.musicbusinessworldwide.com/amazon-sold-more-music-than-apple-in-the-uk-last-year/.
- 51.
A. Klebanow / T. Wu (2015), 18.
- 52.
Id.
- 53.
For example, in November 2014, Taylor Swift’s label, Big Machine Label Group, withdrew the entire Taylor Swift catalog from Spotify while keeping her music on other streaming services owned by Apple. A. Klebanow / T. Wu (2015).
- 54.
A. Klebanow / T. Wu (2015), 20-21.
- 55.
Id., 21.
- 56.
C. Kang (2015).
- 57.
EU Commission fears Apple may leverage its market power to corner the music streaming market, available at: eu-competitionlaw.com/eu-commission-fears-apple-may-leverage-its-market-power-to-corner-music-streaming-market/.
- 58.
See LaPeyre v. FTC, 366 F.2d 117 (5th Cir. 1966); Peelers Co. v. Wendt, 260 F. Supp. 193 (W.D. Wash. 1966); Laitram Corp. v. King Crab, Inc., 245 F. Supp. 1019 (D. Alaska 1965).
- 59.
See, e.g., USM Corp. v. SPS Techs. Inc., 694 F.2d 505 (7th Cir. 1982); see also, Akzo NV v. United States Int’l Trade Comm’n, 808 F.2d 1471 (Fed. Cir. 1986).
- 60.
European consumers in Austria, Belgium, Denmark, Germany, Finland, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland and Spain paid the same price, 99 Euro cents, while UK users paid 79 pence.
- 61.
Available at: www.theregister.co.uk/2008/01/09/apple_cuts_uk_prices/.
- 62.
Tencent claimed that the “blocking” was due to safety reasons, or malicious marketing on the part of Alibaba, but it lacks sufficient evidence to back up the claim.
- 63.
J. Osawa (2014), Tencent Customers Come for the Music, Stay for the Perks, http://www.wsj.com/articles/tencent-customers-come-for-the-music-stay-for-the-perks-1433869369.
- 64.
Cf. Qihoo 360 v. Tencent. China’s Supreme Court took a “broad approach” to define the “relevant market”, finding that the defendant did not have a dominant position in the relevant market.
References
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Lin, X. (2017). Music Individual Licensing Models and Competition Law. In: Liu, KC., Hilty, R. (eds) Remuneration of Copyright Owners. MPI Studies on Intellectual Property and Competition Law, vol 27. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-53809-8_11
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