Music industry's Napster assault backfires

Matt Beer
481 words
16 October 2001
Agence France-Presse
English
(Copyright 2001)

SAN FRANCISCO, Oct 16 (AFP) - The recording industry's legal assault on the Napster online music website and other song-swapping sites has touched off US and European antitrust probes, the industry's trade group acknowledged.

The Recording Industry Association of America (RIAA), which represents the major record labels, said Monday it was notified of a probe by the US Justice Department into the online licensing practices of the recording industry.

"We will, of course, cooperate fully with the Department of Justice's investigation," the RIAA said.

The probe follows deals made by the major record labels with online music distribution sites MusicNet and Pressplay, which are backed by the major record labels.

MusicNet is a joint venture of AOL Time Warner, EMI and German conglomerate Bertelsmann AG. Pressplay is funded by Sony and Vivendi. Both online music companies have said they've received papers from the US Justice Department seeking information on their alliances.

EU officials said earlier this year they were examining a similar question of whether the recording labels would have too much market power.

San Francisco Federal Judge Marilyn Hall Patel, who has ruled that Napster violated US copyright laws by allowing the wholesale infringement of copyrighted songs, said last week during a hearing that possible antitrust ramifications of record company online deals could endanger the Napster case.

The RIAA and others have been waging an all-out legal assault against Napster, which closed in July and is set to reopen soon as a legal for-pay subscription service.

During their Napster assault, the recording industry learned that millions of computer users are ready to download music from the Internet.

The record companies have since been busy establishing their own music download sites. This could give the record labels ownership control of both the distribution and sales of their titles, in addition to their power to create CDs. Record companies now distribute their music largely through independently owned retail outlets.

"The Justice Department would be very concerned if a monopoly owner -- such as someone who has singular power over the creation of a recording -- is now trying to export this monopoly power to another part of the market, such as distribution," said Nicholas Economides, professor of economics at the Stern School of Business at New York University.

Economides said a record company can distribute as well as create music if competing distributors can have access to the product at competitive terms.

"If, in the end, the record companies create a system so they can realistically be the only ones who can distribute their music, well, that would be a real problem," Economides added.

The RIAA said it believes it will pass antitrust muster.

"Indeed, the steps we have taken to facilitate the legitimate on- line marketplace have been pro-competitive and beneficial to consumers," the RIAA said.

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