Spitzer Investigating Music Industry

23 Dec ’05

Eliot Spitzer is reported to have subpoenaed Warner Music on Tuesday “in connection with an ongoing antitrust investigation into the pricing of digital music downloads”.

Music industry sources said the current probe appeared to center on whether the Big Four music studios — Warner, Sony Corp’s (6758.T) Sony BMG Music Entertainment, EMI Group (EMI.L) and Vivendi’s (EAUG.PA) Universal Music — colluded to set wholesale pricing for song downloads.

The investigation also could be related to the studios’ upcoming licensing renegotiations with Apple, maker of the wildly popular iPod digital music player, for its iTunes music store, the sources said.

A topic widely blogged – by me as well – this summer.

Techdirt covers the story today but curiously suggests the concern must be Warner requiring Apple to fix its final price. That of course would be problematic but still achieved easily enough by simply setting the wholesale price so high that the retailer has no choice – if it wants to sell at a profit – but to sell at the desired price or higher.

But this is obviously not possible if the wholesaler has competition (we’ll put aside the issue of every label having a monopoly of its own artists – an aspect of this business that is becoming problematic enough in its own right in this time of copywars). And that – as the sources above suggest – must be the concern here – the concern that the labels have been joining together to take a run at Apple en masse – which is the point I made when I originally blogged the story: if Bronfman wanted Apple to raise its pricing on his songs, why didn’t he just increase his prices?

It’s worth noting that this would probably not be happening – or would be less effective as a tactic – if the market were free to compete with the possibility of full cross-platform and cross-vendor interoperability of all music – a scenario we are unlikely to see in a DRM’d environment. The walled garden approach stands a good chance of killing the sale of online music before it really gets off the ground.

On a related note, I’ve recently abandoned iTunes as our music app of choice, principally because the DRM makes it too troublesome to use in a networked environment. I run one database of music off of 4 different PCs, and in their zeal to lock down iTunes Apple has made the app a serious nuisance to use in that type of setting. A small point, perhaps, but a good practical example of the impact DRM has on crippling the user experience.

{ 2 comments… read them below or add one }

Rob Hyndman January 9, 2006 at 09:47

Thanks for the comment Peter.

I didn’t actually say I was opposed to any DRM (and I don’t see how I am trying to have anything both ways, as you say). But one of the problems with DRM is that someone else gets to decide whether / how I use the music for personal enjoyment. Apple’s enforcement of DRM is the reason why as an app it doesn’t serve my purposes well.

I also didn’t say that iTunes doesn’t allow sharing. But I’ve tried all of iTunes options for sharing, and none of them serve my needs. Which is why I am (very happily) now once again using the app I was on before iTunes was released.

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Peter Adams January 9, 2006 at 09:32

You’ve stopped using iTunes to protest the very thing that allows the iTunes Music Store to exist in the first place? Let’s face it, if it weren’t for the DRM in iTunes, none of the major labels would allow Apple to sell their music, and since Apple pioneered the sale of music online, without there would be nothing but streaming music by subscription and overpriced stores run by the labels themselves, which would all have their own DRMs and not allow you to copy your MP3s to an MP3 player.

You can’t have it both ways. Unfortunately, as you pointed out, we live in a society where music labels are government sanctioned monopolies and artists are either slaves to them or struggling to find an outlet on their own. In this society, you can break the law or you can play by the music monopolies’ terms, and Apple chose the latter course. I say good for them! They more or less dragged the labels kicking and screaming into the 21st century, and their attempts to undermine Apple are — we can hope — going to be their undoing. Between the outrage (and legal scrutiny) over Sony’s rootkit copy protection software and the current accusations of collusion among the labels to illegally fix pricing, we may finally have some lawmakers question why they allow the labels to have monopolies in the first place.

As for iTunes, I’ll grant you that its copy protection is annoying, and your scenario can be limiting. iTunes does allow sharing, though — many of us here have playlists we share over the network, which anyone can listen to. That may be the answer to your dilemma.

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