Why Doesn’t Digital Music Go On Sale?

Ever wonder why online music never goes on sale?

The Justice Department has — and is wondering if its merely a coincidence:

"The Department of Justice said Thursday it has opened an
investigation into possible anti-competitive pricing of online music by
the world’s major music labels.

The probe closely tracks a similar investigation by New York State
Attorney General Eliot Spitzer into the pricing of digital music
downloads, sources familiar with the matter told Reuters.

"The Antitrust Division is looking at the possibility of
anti-competitive practices in the music download industry," Justice
Department spokeswoman Gina Talamona said, confirming an earlier
Reuters report based on details from sources. She declined to comment further about the investigation.

One music industry source said that some subpoenas may have been issued
already in connection with the probe, while other labels had been
tipped off that subpoenas would likely be coming in the next few days."

Unidentified sources in Reuters and AP reports "the investigation seems to be focusing on whether the labels are in cahoots when it comes to setting prices for tunes. So far, nearly all the sites that offer online music sell singles for about $1 and albums for just under $10."

And these guys want to raise prices for individual tracks . . .


UPDATE  March 7, 2006  11:31am

Not surprisingly, the Music biz is mute over online price fixing charges. That’s fairly typical of any Federal investigation.  Its something Martha should have known — you either lawyer up, or you tell the truth.



U.S. Opens Probe of Pricing Of Online Music by Four Firms


WSJ, March 3, 2006; Page A12



U.S. Inquiry on Online Music
NYT, March 3, 2006

Looking for Pirates on the Inside   
Associated Press
Wired, 09:30 AM Mar, 03, 2006 EST


Online music price fixing probed
Reuters, March 3, 2006: 6:52 AM EST

DoJ Investigating Possible Price-Setting in Online Music Biz
By Tim Arango
NY Post, 03/06/06 9:32 AM PT

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What's been said:

Discussions found on the web:
  1. andrew commented on Mar 7

    Apple regularly offers free songs as a promotional tool. These songs are often by major artists, and so the labels must somehow be involved. Does this not count as a sale?

    If you’re talking about reduced prices to help move merchandise, that’s often done to clear out inventory. But with online music sales, there’s no inventory to clear out.

  2. muckdog commented on Mar 7

    I was thinking about this. I wonder if it’s because honest and law-abiding folks don’t mind paying for songs and arent’ shopping for bargains. In otherwords, these are the folks who don’t haggle at the flea mart or car dealer. If it’s 99-cents, it’s 99-cents. G’nuff for them. I think the hagglers are still downloading music free somewhere.

  3. Robert Cote commented on Mar 7

    The music market has yet to find its’ price point. All they have is 99 cents so 99 cents it is. There -were- higher prices but they fell to the wayside. Photographic image prices probably represent the model going forward.

  4. donna commented on Mar 7

    Collusion and price fixing? Please. it costs pennies to make a CD, maybe a buck if you throw in the jewel case. Downloading is even cheaper. The whole industry is a damned price fix.

    I prefer to support artists directly and buy the CD they made themselves off their websites. The music is better, too.

  5. Jeff commented on Mar 8

    You’ve always got to pay full retail and there is no way to establish a second-hand marked for “used” mp3’s.

    I can see why the labels are so hot to bury the CD.

  6. Jason commented on Mar 8

    I don’t think that anyone would say that the $.99/track price is the result of market forces; there have got to be thousands of tracks on iTunes that have never been downloaded. Since there’s no real “inventory” costs for these tracks, if the labels priced an un-demanded track at $.01 and had one download, they’re still better off than they’d be selling zero at $.99.

    I would be interested to see statistics on how many tracks are available on iTunes for which there is statistically no demand. It would be a good indication of just how little most of the intellectual propery of the majors is actually worth.

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