DOJ Interested In Digital Music Pricing

    March 3, 2006
    WebProNews Staff

Subpoenas for more information from the major music labels are arriving from the Department of Justice, with industry sources claiming DOJ has opened a new investigation into possible industry collusion on prices.

The story was at the “sources say” stage, according to a Reuters report. A federal probe into a lack of competitive pricing for music as driven by music label influence parallels a similar investigation from New York Attorney General Eliot Spitzer.

Later, DOJ acknowledged that report as being legitimate. “The Antitrust Division is looking at the possibility of anti-competitive practices in the music download industry,” Justice Department spokeswoman Gina Talamona said to Reuters.

Spitzer’s interest in music label collusion became known in December, when news of subpoenas he sent regarding “most favored nation” clauses in contracts for digital music distribution was reported. It was earlier confirmed in December 2005 Warner Music Group had received a subpoena from Spitzer’s office.

The DOJ probe has reached Sony BMG, one Reuters source confirmed, with a subpoena having arrived there already. Other music labels reportedly will receive subpoenas soon.

News of the online music feud made headlines last September as Apple CEO Steve Jobs criticized as “greedy” the music label CEOs who demanded multiple tiers of pricing for songs. Warner Music head Edgar Bronfman Jr. took issue with the single price practice in response, saying, “Not all songs are created equal-not all time periods are created equal. We want, and will insist upon having, variable pricing.”

The major labels reportedly make upwards of 70 cents per song downloaded, and it could be higher. Mobile phone network operators have complained of a 78-cent per song fee charged by the major labels, but have not helped matters themselves with pricing substantially higher than iTunes’ 99-cents per download price.

Recently. Apple celebrated the download of song number one billion from iTunes. At 70 cents per single purchased, that would make 700 million dollars uploaded to the coffers of the music labels. This doesn’t include the purchases made from competitor sites like Napster, Rhapsody, and Yahoo Music.


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David Utter is a staff writer for WebProNews covering technology and business.