A long-simmering U.S. Justice Dept. probe into whether two online music services backed by the major labels are anti-competitive may be coming to a boil as the government watchdog ships out civil subpoenas to the record industry, demanding more information about their licensing practices.
At issue is whether the labels have used their position as owners of musical content to proffer favorable licenses to their own services, while giving independent music Netcos, like FullAudio and the now-defunct Uplister, the cold shoulder.
Label-supported services MusicNet and Pressplay, which will offer several thousand tracks each for streaming and downloading, are expected to bow by the end of the year. MusicNet is backed by AOL Time Warner, EMI, Bertelsmann and RealNetworks, while Pressplay is owned by Sony and Vivendi Universal and has licensed songs from EMI.
The services also have obtained clearance from the music publishing community, thanks to a deal inked earlier this month between the Recording Industry Assn. of America and the National Music Publishers Assn.
The RIAA acknowledged Monday that it had received notice from Justice of the investigation; the music trade org said it intends to cooperate fully.
“We are confident that, once it has gathered the relevant facts, the department will conclude that our actions have been fully compliant with all applicable laws,” said RIAA rep Amy Weiss in a statement. “Indeed, the steps we have taken to facilitate the legitimate online marketplace have been pro-competitive and beneficial to consumers.”
Playing it safe
Label insiders added that the companies have taken great pains to ensure that their online licensing contracts provide the same terms to all licensees, precisely because they anticipated close scrutiny from competition authorities.
The Justice Dept.’s moves are being echoed by the European Union’s competition authority, which has vowed to examine business practices of any label-backed digital music service very closely.
Reps from all five labels declined to comment on the regulatory investigations.