New York State Attorney General’s office has subpoenaed several major music companies as part of a preliminary investigation into whether digital music download services have engaged in illegal price-fixing activity.
The attorney general’s office is reportedly seeking information on the wholesale prices music labels charge digital download servers like Apple’s iTunes, RealNetworks”s Rhapsody, the reformed Napster, Yahoo Music, MSN Music, and others. The action is preliminary; even if evidence of price-fixing is found, spokespersons for the attorney general’s office indicate a formal investigation wouldn’t be launched for several months.
The Wall Street Journal reports that Vivendi Universal and Sony BMG received subpoenas as part of the inquiry; Warner Music Group reported in its most recent regulatory filing that it received the subpoena as part of an “industrywide investigation.”
The subpoenas fall at an important juncture for part of the digital music industry as major music labels and Apple Computer renegotiate pricing and availability of music on the iTunes Music Store. Music executives have privately (and in the case of Warner Music CEO Edgar Bronfman, quite publicly) criticized Apple’s uniform $0.99-per-song pricing policy, arguing that not all songs have the same commercial appeal and therefore, like any other product, shouldn’t be priced the same.
Apple CEO Steve Jobs has labelled music companies “greedy” for seeking variable pricing, holding that consistent pricing across the entire iTunes Music Store is a significant part of its appeal to consumers.
Part of the New York attorney general’s inquiry will be to determine the extent to which uniformity of wholesale prices for digital music is due to conspiracy amongst music labels, to the enormous success of the iTunes Music Store and its uniform pricing, or to a combination of factors.
Financial scandals and shady dealings are not new to the music industry: in July 2005 Sony BMG shelled out $10 million over payola accusations (paying radio stations to feature Sony BMG artists); in November 2005, Warner Music paid $5 million to settle similar payola accusations.
