Probe may delay change in digital-music prices

viewpointFor a while the complaint we kept hearing was that illegal downloads were killing the labels. Then along came Apple’s iTunes Music Store to save the day. With millions of downloads, all paid for, the complaining ceased. But it recently started up again. Not complaints about illegal downloads, though that complaint still exists, but rather that the price is to low on the legal downloads. The labels have pitted themselves against the online retailers such as Apple, vying for a larger percentage of the take, and or, a higher retail price. The retailers have refused to raise the prices, saying that the consumers are buying a lot at $0.99 per song, but that raising the price would discourage sales. The labels are wanting to use variable wholesale pricing, increasing the prices primarily on new releases, but the retailers want a simple pricing structure that doesn’t vary from one song to the next.

Just as things started to get heated, cnet.com is reporting that New York Attorney General Eliot Spitzer has launched an investigation that involves all the major labels and most of the online retailers. Spitzer’s office has sent information requests to all parties. It seems what he is looking for is evidence that the labels are working together to set prices.

A source familiar with the investigation said Spitzer was focusing on labels’ pricing decisions and is seeking e-mails and other communications that deal with setting prices for online sales.

Under state and federal antitrust laws, record labels are not allowed to work together to set prices for music. Any evidence that executives had agreed to offer similar terms or wholesale prices to companies like Apple and Napster could trigger an antitrust lawsuit against the companies.

The investigation seems to have silenced the labels’ cries for increased prices, at least for now. Steve Jobs, Apple CEO, says the labels are just being greedy. The labels say they aren’t making any money. Who do you believe?

  • Don’t forget artists in this mix. We have spoken to several who point out that many record company contracts offer them as liitle as $.06 – $.10 per downloaded track. Artists may deem that a paltry contribution to the “content creators.”