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January 4, 2006

Update on the Spitzer Probe on Digital Song Pricing

More details are coming out in the Spitzer probe on digital download pricing.  The first news came out in regulatory filings with the SEC by various music distributors and online services.  Those who have acknowledged that they have received subpoenas have basically said they are cooperating with the probe and nothing more.

Analysts are speculating that because of past conduct of the industry, the New York Attorney General isn't taking any chances on collusive pricing activity by the major labels.  Steve Jobs of Apple acknowledged that labels were exerting pressure to change pricing from a standard 99 cents per track to a higher price for more current tracks and a lesser price for slow movers. 

While the market can play a role in the demand for tracks, no one in the industry has suggested a price point on either end of the scale or what is in fact a slow moving track.  Jobs was widely quoted as calling the music industry as "greedy."  From a populist perspective, Job's comment was not generating much debate about its accuracy.  The studios did have to settle a CD pricing collusion case some time back.  There was also the payola scandal where manufacturers paid stations and DJ's to place some songs in a heavier rotation which resulted in monetary damages. 

Some speculate that this probe is less about pressuring the labels to maintain a consistent pricing as they should not use illegal means to set those variable prices.  Jobs comment aside, it is one salvo in the upcoming iTunes Store licensing negotiations.  Spitzer's probe is another way of saying to the labels that they should play legal on this one.

CNN Money and CNET have stories on this.

January 4, 2006 | Permalink

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