TELECOM Digest OnLine - Sorted: Spitzer Subpoenas Music Companies on Pricing

Spitzer Subpoenas Music Companies on Pricing

Mark Johnson (
Tue, 27 Dec 2005 18:29:10 -0600

By MARK JOHNSON, Associated Press Writer

State investigators have subpoenaed several major music companies as
part of a preliminary inquiry into whether the digital music services
have engaged in any illegal price-fixing activity.

Darren Dopp, a spokesman for state Attorney General Eliot Spitzer,
said the office was seeking information on wholesale prices the music
labels charge for digital music files that can be downloaded. Dopp
said Tuesday that it would take months for the office to launch a full
investigation, if one is warranted.

Warner Music Group Corp. said in a regulatory filing Friday that the
subpoena it received is part of "an industrywide investigation."

"As disclosed in our public filings, we are cooperating fully with the
inquiry," Amanda Collins, a spokeswoman for Warner Music Group, said
in a statement.

The Wall Street Journal reported earlier that Sony BMG Music
Entertainment and Vivendi Universal SA's Universal Music Group had
also received subpoenas.

Neither company returned calls for comment. Calls to EMI Group PLC's
offices in New York and London went unanswered.

In September, Apple Computer Inc. CEO Steve Jobs publicly criticized
music companies, calling some major labels "greedy" for pushing Apple
to hike prices on its popular iTunes service. Recording company
executives have scoffed at the suggestion.

In a speech before an investors conference, Warner Music Group CEO
Edgar Bronfman Jr. said that Apple's 99-cent price for single tracks
ignores the issue that not all songs are the same commercially and,
like any other product, shouldn't be priced the same.

Such discord has not kept the labels from licensing their music videos
to Apple. Still, as their contracts with Apple come up for renewal,
the music companies are seeking to improve their take.

"All the prices do seem to move in lock step," said industry analyst
Phil Leigh, who runs U.S. market research firm Inside Digital
Media. "There has been talk of raising prices for several months. I'm
surprised (music companies) raised the issue. It's clear the industry
convention is 99 cents."

The subpoenas issued this month are not the first time Spitzer, a
Democrat running for governor in 2006, has looked into the music

In November, Warner Music agreed to pay $5 million to settle an
investigation into payoffs for radio airplay of artists. In July, Sony
BMG agreed to pay $10 million and stop bribing radio stations to
feature artists.

Spitzer also asked for documents from EMI Group and Vivendi Universal
in that probe.

On the Net:

New York Attorney General's Office:

Copyright 2005 The Associated Press.

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