Major Record Labels Suing and Being Sued – Sony BMG, Universal, Warner and EMI – who together control 85% of the music market – are being sued for allegedly fixing the price at which songs can be downloaded from the Internet. The class action suit is being brought by dozens of customers who use online music services such as iTunes. They accuse the record companies of conspiring to fix the wholesale price of individual song downloads at 70 cents, and of putting pressure on Apple to raise the retail price to more than the present 99 cents. Their suit states: “But for the defendants’ anticompetitive conduct, online music would be dramatically less expensive than CDs.” 6% of record companies’ sales now come from digital music. 420 million single tracks were downloaded in 2005 and $1.1 billion of music was sold via the Internet and cell phones.
Meanwhile, The Allman Brothers and Cheap Trick members have filed a class action suit against Sony BMG, alleging the company underpaid artist royalties associated with online music sales. The plaintiffs say they are owed 30 cents per 99 cent digital track sold, but they are only receiving 4 or 5 cents. The label is accused of still charging the artists for packaging, shipping and handling on all their Internet sales, when that doesn’t apply to music being sold electronically. The online software allows artists to check and see exactly how many of their songs got downloaded vs. what royalties were received. This should remedy the long-running accusations of record labels ripping off their artists.
On the other hand, the major labels continue their suit against XM Satellite Radio, claiming a new MP3 service is guilty of “massive wholesale infringement” of their recordings. Record labels and the two satellite radio services have been debating the recording, storage and collection of music performed on the satellite services’ channels. XM says it pays for public performance of the recordings under its license with SoundExchange, which negotiates and collects royalties with non-interactive digital services. Manufacturers of equipment pay royalties on all their recording devices. XM made the following point in their statement about the suit: “The music labels are trying to stifle innovation, limit consumer choice and roll back consumers’ rights to record content for their personal use.”