Gigs & Bytes: The Big Fix
No, not Christmas presents, although the seasonal timing was just about right. Instead, the three major labels were gifted with subpoenas, courtesy of New York Attorney General Eliot Spitzer.
Warner Music listed the subpoena in a regulatory filing last month saying it was part of “an industry-wide investigation.” Around the same time, The Wall Street Journalreported that Sony BMG and UMG both received subpoenas.
Spitzer is no stranger to the recording business. Last year the attorney general / wannabee N.Y. governor conducted a lengthy investigation into payola practices, resulting in Warner Music agreeing to pay a $5 million cash settlement while Sony BMG agreed to pay $10 million along with a promise to stop bribing radio stations for air play.
But this time Spitzer isn’t looking for more signs of payola. Instead, he is conducting a preliminary inquiry into the wholesale prices labels charge digital download services such as Napster and iTunes in order to determine whether the labels were involved in illegal price fixing.
The industry-wide standard of charging 99 cents per download appears to be under scrutiny. While some online download services, including Wal-Mart, charge a few pennies less than 99 cents, most stick to charging just one penny short of a dollar.
But there are signs that the labels want more than just 99 cents per download.
It was last September when Apple CEO Steve Jobs described the labels as “greedy” for wanting his company’s iTunes Music Store to raise prices. At that time Apple was in the midst of renegotiating agreements with record companies to continue the major label presence on iTunes.
To be sure, not all record label execs are all that enamored with Apple’s 99-cent pricing standard. In a speech before an investors conference, Warner Music Group CEO Edgar Bronfman said that all songs are not commercially equal and that Apple, as well as other download services, should price accordingly.
But it’s far too early to accuse anyone of price fixing. That’s why Spitzer’s actions are seen as preliminary. The AG wants to see if there are enough signs to warrant further digging. It could take months for Spitzer’s office to launch a full-scale investigation. That is, if Spitzer has the time to conduct such an investigation.
After all, running for the office of New York Governor can be soooo time consuming.