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Investigation into Online Music Price Fixing?

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Apr 12, 2001
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MSNBC reports that the U.S. Justice Department has launched an inquiry into possible price fixing in online music download industry.

According to the article, the Justice Department has already issued two subpoenas with more in the works. A spokesperson for the Justice Department commented on their actions:

"The antitrust division is looking at the possibility of anticompetitive practices in the music download industry"
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While details are scarce, the investigation may somehow be connected to Apple's re-negotiations with the record industry. Apple's previous terms with the record labels reportedly run out in "early 2006".
 
Article Link
https://www.macrumors.com/2006/03/03/investigation-into-online-music-price-fixing/
The same should go for normal CD's too, why should I pay $19 for one CD and $12 for another with the same amount of songs.
 
This shouldn't really come as a surprise - something like this was bound to happen. It will be interesting to see how Apple responds to this, especially since they're no doubt very busy right now talking to the movie studios about how to set up the pricing for the iTunes Movie Store. :D ;)
 
MacNut said:
The same should go for normal CD's too, why should I pay $19 for one CD and $12 for another with the same amount of songs.
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Because one CD has more popular music. Greater demand == greater price.

The important issue here is that you'd occasionally expect to see a music label release a CD at $5 or something to undercut the competition, but you don't. The investigation is to see if the major labels are conspiring together to offer the same price to digital vendors instead of competing legally by trying to offer the best prices.
 
MacNut said:
The same should go for normal CD's too, why should I pay $19 for one CD and $12 for another with the same amount of songs.
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No, you see, that's because there isnt price fixing, that's the competitive marketplace. One product thinks they can get more for the goods, so at the higher price it either sells (they were right) or it doesn't sell, or they drop the price.

If there was price fixing, you'd be paying $19 for each.

I can't see where Apple will be slapped here, since they are the ones bucking the industry's desire to raise the price per song.
 
180px-RIAA.jpg
 
stoid said:
The important issue here is that you'd occasionally expect to see a music label release a CD at $5 or something to undercut the competition, but you don't. The investigation is to see if the major labels are conspiring together to offer the same price to digital vendors instead of competing legally by trying to offer the best prices.
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Why would you expect that, since that would be below cost? The publishing company, artist(s) and songwriter(s) together should be making about $0.40 per song royalties, and that's before manufacturing and distribution.
 
MacNut said:
The same should go for normal CD's too, why should I pay $19 for one CD and $12 for another with the same amount of songs.
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I'd add to this that perhaps one has a single LP's worth of music, (about 40-45 minutes), the other has close to the full 80 minutes a CD can handle, (i.e. same number, but longer tracks).

If I was paying the same for an album that has 8 tracks, but is less than 40 minutes long and for one with 8 tracks and 80 minutes, I would feel a little cheated. It's certainly another way of looking at it.
 
This is ...


... BAD, BAD, BAD, BAD, BAD, BAAAAAAAAAAAD !!! :eek: :eek: :eek:


Things like this destroys stock value !!!



No wonder Steve is running away to Disney.



I might get my chance to run Apple after all :D
 
some thoughts...

Does anyone know who is being investigated? Record companies or internet download retailers?

The gubment (1) could be targetting a conspiracy among record companies against online retailers, or (2) they might be going after a conspiracy with online retailers against consumers.

I can think of scenarios for each. The first takes some leaps of thought to construct. The record companies were so exceedingly reluctant to sell for download, and the online retailers so eager to gain access to songs, that the record companies could essentially refuse to negotiate. This would enable them to engage in anti-competitive practices by setting industry standard prices and getting around explicitly fixing prices by pointing to an industry standard precedent that no record company was willing to deviate from.

The second is an obvious one, but seems unlikely. Apple sells songs for one price (a fixed price), yet I don't think that price fixing has anything to do with fixed/single pricing schemes. I couldn't see dollar stores (if everything were actually priced at a dollar) being a target.

In my opinion record companies have been ripping everybody off for a long time, but it still seems like their right to do so if there are customers who are willing to waste hard-earned or hardly-earned cash. I don't see why a market-encouraged rip off would not extend to the online world.
 
This doesn't have anything to do with Apple does it?

This doesn't have anything to do with Apple does it? I mean the music laels set the prices right, not Apple?

I wonder what Apple actually makes persong, if anything. I bet it is pennies. It was my understanding Apple developed/invented the iTunes store to help sell iPods.
 
i have to admit that i don't get the point here.

the record companies want flexible pricing for the songs based on popularity and they offer both download and subscription services for variable prices. hardly a basis for anti trust investigations.

apple has almost a monopoly on legal downloads. but their overall market share in music sales is far less than 10% and the competition is just waiting to get into the market. also hardly a case for investigations.

on top of that music is not a necessary good like oil or food or vitamins. so if price fixing was a problem people always could choose not to buy music. that alone IMHO should keep the goverment out. they should care about price fixing for goods that we have to buy like the above mentioned.
 
CanadaRAM said:
I can't see where Apple will be slapped here, since they are the ones bucking the industry's desire to raise the price per song.
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If anything, this might boost Apple/iTunes' reputation. The record industry claims that a tiered pricing model is appropriate, but it doesn't really cost more to produce a better selling album. The artist makes the music. Higher prices just mean higher margins for "The Industry" (funny that they call it an industry when the companies involved don't actually produce anything themselves).
 
supermacdesign said:
This doesn't have anything to do with Apple does it? I mean the music laels set the prices right, not Apple?
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Nope, probably not Apples problem.

If Apple where to demand flat rate pricing that would be legal.

If Apple and the other online providers sat in a smokey room together and agreed to demand the same pricing - that would be illegal*.

If the record companies sat down together and agreed a pricing system then imposed it on the providers - that would be illegal*.

Of course if everyone agrees with everyone else by sheer coincidence then all is fine and dandy.


*perhaps
 
I see this as being good for Apple. In fact when I read the article, I immediately envisioned Apple as the last good soldier, pleading the execs for 99-cent song downloads across the board, with the sleazy music people huddled in the other corner whispering amonst themselves, "No! Now that everyone's hooked on music downloads, let's raise the prices to $1.99! Then $2.99! And let's make dinky ringtones and sell those for $2.99 too! Tomorrow, we conquer the world!"

From the article:
Warner Music Group CEO Edgar Bronfman Jr. said that Apple’s 99-cent price for single tracks — the service charges variable prices for some album downloads — ignores the issue that not all songs are the same commercially and, like any other commodity, shouldn’t be priced the same.
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This sounds reasonable in theory, but you just know that what he REALLY means is that songs should START at 99 cents, and cost MORE if they're more popular... and of course that would open the door for prices to creep higher and higher and higher...

(Wouldn't it be nice if tunes by, say, M.C. Hammer or New Kids on the Block, sold for like a nickel apiece? :p)

Kinda like the video rental store and their two-tiered "new release" versus "favourites" pricing -- it all sounds good in theory, until you realize that some of their "new release" movies are 2 years old.
 
supermacdesign said:
This doesn't have anything to do with Apple does it? I mean the music laels set the prices right, not Apple?

I wonder what Apple actually makes persong, if anything. I bet it is pennies. It was my understanding Apple developed/invented the iTunes store to help sell iPods.
Click to expand...

Awhile back there was a quote about Apple only making $.05 to $.10 per song. I think they were questioning Napster and Yahoo for trying to make money off of song sales. I believe this was also where they talked about selling the songs to sell the iPods (where they really made the money in the process).
 
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