The New York attorney-general, Eliot Spitzer, is investigating whether the four record companies that dominate the industry have violated antitrust laws in the pricing of songs that are sold by Internet music services, according to people involved in the inquiry.
Spitzer's office recently began serving subpoenas on the major record companies -- the Universal Music Group, a unit of Vivendi Universal; Sony BMG Music Entertainment, a joint venture of Sony and Bertelsmann; the EMI Group; and the Warner Music Group, according to people involved.
Warner Music disclosed on Friday in a regulatory filing that it had received a subpoena on Tuesday in connection with "an industrywide investigation" into whether the companies colluded in the pricing of music downloads.
Representatives for Warner and Sony BMG said their companies would cooperate with the investigation. Representatives for the other major companies could not be reached or declined to comment.
Spitzer's inquiry comes as the recording industry is divided over how to expand the digital market, which has been dominated by the iTunes service of Apple Computer, which charges a retail price of US$0.99 a song. Of that price, the music companies typically receive about US$0.70.
Some major record companies have been pushing to introduce flexible pricing, charging more for hit songs and less for oldies, for example. But some executives say that a more complex price structure would turn off buyers and hurt industry efforts to woo music listeners away from free, unauthorized file-swapping networks.
Two major companies -- Sony BMG and Warner -- hit an impasse with Apple this year in talks about the price of music on the iTunes service in Japan. Apple started its service without music from the two companies, potentially offering a sign of the discord to come as the companies face contract renewal talks with Apple over its US service.
Steven Jobs, the chief executive of Apple, later called the industry greedy for pressing for higher prices. Jobs' critics in the music industry, in turn, have complained privately that Jobs is hoarding cash by holding down song prices to protect sales of Apple's more lucrative iPod music player. An Apple spokesman declined to comment on Friday.
The digital market has become a coveted source of revenue for the industry, which has been suffering a protracted slide in sales of compact discs. Sales of song downloads exceed 323 million so far this year, up from 129 million for the period last year, according to Nielsen SoundScan data.
Spitzer's inquiry comes just as digital sales are starting to make a meaningful contribution to the companies' bottom lines. Warner, for example, generated digital revenue of more than US$50 million last quarter, up more than 300 percent from its fourth quarter last year.
Spitzer has already been investigating the music industry for more than a year. His office has been pressing an investigation into the major labels' practices for promoting their songs to radio stations.
Two companies -- Sony BMG and Warner -- have reached agreements with Spitzer to settle accusations that their employees made undisclosed payments to radio programmers. The two companies also agreed to pay a combined US$15 million as part of the settlements.
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