Labels Inflating Music Subscription Prices?
By Ed Oswald | Published January 13, 2006, 5:01 PM
Digital music industry officials are complaining that the record industry's alleged collusion extends into the subscription business as well, the Wall Street Journal reported on Thursday. According to industry insiders, the record companies are using "most favored nation" clauses in contracts to keep prices artificially high.
The clauses would allow another label to benefit from better licensing terms if a competing label renegotiates with a digital music provider. However, since the terms appear in just about every contract these providers have negotiated, it has the net effect of increasing the cost to procure music for these services.
Retailers use these clauses to ensure better prices on products they buy at wholesale. However, when the manufacturer or supplier use them, it has the completely opposite effect, say critics. "Seller-side MFNs are inherently price increasing and anticompetitive," Digital Media Association executive director Jonathan Potter told the paper.
There is no way of finding out which labels are employing the practice, as a clause within the contracts prevents their public disclosure. However, if an investigation were launched, officials would likely be able to gain access to the agreements.
The Wall Street Journal was able to obtain a copy of a Universal Music Group terms sheet which underlines how steadfast the labels may be on MFN status: "UMG will receive an MFN for all material terms." A spokesperson for the company said that such action is done to protect their artists from being "used and exploited in new and different ways."
But labels are becoming increasingly more aggressive in negotiating MFNs with digital music providers. Record companies are also trying to add more restrictions on how services can use their content.
According to the WSJ's sources, Universal Music Group and Sony BMG are two of the most aggressive in this practice.
The music industry has taken half of the fun out of computing. Everyone is afraid of using music on their computer or in their own movie creations in fear that it could be posted and become a smash hit on the net and someone would want to sue them. What a shame that beautiful sound is something to be afraid of. We spend lots of dollars on the latest sound cards, speaker systems, and Ipods and then don't get to enjoy them because we are afraid. Works great doesn't it, fear....Just isn't the same anymore is it? I wonder how much radio stations have to pay to play music over the air waves or how often they get sued for making someone famous. Guess we should stop buying music and just listen to free radio. What a novel idea...LOL...oh! and who you gonna sue when your CD gets a scratch or just fails because CD's shelf life sorta sucks? or a hard drive crashe$ that has all your downloaded mu$ic on it?...ain't life grand these days...they can go after you but you can't get them...LOL
Score: 0
|Quote: [A spokesperson for the company said that such action is done to protect their artists from being "used and exploited in new and different ways."]
You know, as opposed to all the old and normal ways that artists currently get exploited by the Lables....
Score: 0
|OK, this is news? I could have told everyone this was the case, this is the main reason I refuse to pay a dollar per song, inflated prices.. I am not going to do it. When they make the price reasonable, I will pay, otherwise, I will continue to download them for free.
Score: 0
|I don't really think a dollar is unreasonable for a song, but only one you own free and clear, not with a shedload of DRM attached.
Score: 0
|It is when you consider I can get legitimate songs for 10 cents. I am not going to tell you the site, but that's a long way from a dollar.
So what would you rather spend, 1 dollar or 10 cents?
A buck for a song is the same as buying a CD off the shelf, the ONLY difference is you can pick and choose your songs, but it ends up being the same price.
I can get the same songs for just over a dollar, maybe you have endless income, but I don't.. I will keep my dollar, thanks.
Score: 0
|No, I don't have unlimited income, and I don't DL music anyway, but it doesn't seem unreasonable to at least request that if the price PER SONG is not to go down, that we should at least have the freedom for music we download that we used to have, say, buying CDs. Why should we pay $1 if the deal is worse than before (i.e. DRM)?
BTW, If the site you mention is legitimate, let's hear where it is...
Score: 0
|Collusion? Unhealthy contractual agreements? Aggression? Exploitation?
Has the mob moved into town or what?
I have nothing better to do at this hour of the night, so here's my two cents rant on the subject...
Someone somewhere needs to take a step back and ask some serious questions about how the music industry should function in the digital age. Old notions of copyright and royalties have been completely out-gunned. The legal war over rights, and the mob-like way the business is being run, is so wrong it simply stinks. Nobody is happy, not the record companies, not the artists, and certainly not the customers. (Okay, maybe the lawyers are happy!)
So long as the music industry continues to sell products that are a synch to copy, they will have copyright problems, yet copy protection of sound is impossible. If you can hear it you can record it.
The business refuses to think the unthinkable - that its product is no longer worth what it used to be, whether as a CD or a download. That's a devaluation largely brought about by the industry itself: We are all very familiar with the industry's shameless propensity for extracting money from the customer. Then there are the occasional allegations of fakery, market-fixing, record promotion fiddles, turning talentless hounds into pitch-perfect singers in the recording studio, the publicity circus and so on, that all devalue the product. Then there's the merciless way artists hit the big time and get dumped when an album flops. Times have changed. Music is not gold any more. We all know it for the faddy one-hit-wonder commodity it is. There is precious little for the customer to invest in these days. What artists of today will still be around in ten years? Not many, the way the business is going, because many seem to have the rug pulled from under them when they drop out of the charts.
Digital music technology has made copying music a synch. Everyone has the choice now - to buy a legal copy or effortlessly acquire an illegal copy. It is almost the perfect crime, as the chance of being caught is almost zero. The only thing keeping the music business afloat is the morality of the public, which is ironic given the moral vacuum that is the music business.
As for subscription services, well, that seems to have become just another front on the war to extract money from the public. People buy music because they like it or love it, but within the industry there seems to be no love for it at all. For the business it's about the money. For the buyer it's about the music. This rift between buyer and seller goes to the root of the problem. The pricing of subscription services is being pushed up by the music business, forcing customers to pay more rather than actually justifying the price rise in any meaningful way. Profit alone is not a justification that will win many hearts.
My personal policy is to not buy music. I haven't bought ANY music since 2000. It's too expensive for me so I don't buy it. Nor do I subscribe to a srvice, or copy or download music legally or otherwise. I listen to internet radio. It's free and legal, and if I hunt around I can usually find what I want to listen to. UMG and its feinds/friends can swing on a rope for all I care. They won't be getting money out of me, except on the very rare occasion that I see a live show.
Thank you and goodnight :-)
Score: 0
|I'm not sure how much of an effect they are having on the online services. I can buy the same CD from Rhapsody at $7.99 that would cost me $15.99 in a brick and mortar store. Seems to me that the overhead of making and distributing the CD and staffing the store must account for a lot of that. Then again, if the record company take went down, I might get the music for $5.99.
Personally, I'm waiting to see Apple becoming a label and kill of CD distribtion completely.
Score: 0
|Actually, the whole argument of this case is that they are inflating music SUBSCRIPTION prices, not the purchase price of albums themselves.
Score: 0
|My subscription is $5 and month. I can't imagine how they are inflating that.
Score: 0
|Point noted. But at $4.95 a month, I can't really complain about that either.
Score: 0
|I am pretty sure that they are referring to the mainstream services like yahoo/napster/virgin digital that charge anywhere from $8 to $15 a month depending on whether or not you want to transfer stuff to a portable player.
Score: 0
|"Mainstream"??? Dude, you need to get your feet wet in the real stream. I been getting music from Rhapsody for years and doing whatever the hell I want with it!
Score: 0
|Sorry, I failed to mention that one. I had thought about it but it just failed to appear in my post so there is no need for you to jump on me as you did.
Score: 0
|Its influence, if they can influence susbscription prices, you don't think they have an overall affect on the price of downloaded music? Get real.
Score: 0
|Give me back that Brad Pitt memory!
In intellectual property news, the Motion Picture Association of America (MPAA) is pushing new copyright legislation that would make it a felony crime to actually remember watching any movies whatsoever. The argument? "By opening your eyes, you are making a copy of the movie in your memory." That copy, the MPAA insists, is a bootleg copy. To solve the problem, cinemas will now be outfitted with memory wiping devices that lobotomize movie memories as customers leave the theaters. The MPAA also believes the new technology, "...will be great for repeat business" since movie-goers won't be able to remember whether they saw movies or not. The new legislation is named "the Entertainment Preservation and Eco-Green Civil Rights Reforestation Clean Earth Anti-Terrorism Patriotic Duty Happy Happy People Act" of 2006 and is expected to pass with unanimous support in Washington.
Score: 0
|Boycott the music industry!
Score: 0
|I don't buy CD's, I don't download tunes, I don't purchase music online, and recently stropped listening to the radio. I do not go to concerts and I will have nothing to do with anyone in a band. Music industry and music in general has lost all apeal for me... I have become deaf to them.
there is no other way.
Score: 0
|Very good! Me too. Almost. I support independent media. It can be very lovely.
Try :
http://www.waveformhq.com
and specially :
www.radioioambient.com
cheers!
Score: 0
|So you are telling me that you also remove the soundtracks and music from various movies that I am sure you have watched as you still get to listen to the music there ;-)
Score: 0
|That's a bit extreme, but whatever makes your socks go up and down.
Personally, completely denying a whole industry just because you don't agree, is a tad psycho, especially when radio is free broadcast, there is no need to completely "deafen" yourself, that's just rediculous. But maybe you won't feel tempted to listen to other music, if you don't listen to the free stuff.
Plus you are ignoring people that legitimately are trying to convey their music, like the artists. Ignoring a band is rather childish, like your mother telling you can't have cookies, so you refuse to even eat.. that's just completely immature.
But hey, maybe its just me, you can do what you want, but I don't think I would brag about this behavior.
Score: 0
|try: the pirate bay dot org
Score: 0
|I smell a torrent party.
Score: 0
|There shear greed will kill of any real supporters of music.
I refuse to use any dload service, and at this stage only buy 12 cds a year at the most now due to the utter rubbish they are pumping out.
they are trying to milk the one hit wonders more and sucking in the teeny's
Score: 0
|I get the discs for the quality. No one can encode an album anymore.
Score: 0
|I think it will come to a point where people won't actually even bother buying anything anymore, it will be funny ....
Score: 0
|I have two words for them and they're NOT "Happy Birthday".
Subscription music services were, are, and will remain a fool's game.
Lossless in the stores costs LESS.
Score: 0
|2 words, I don't suppose one of them falls in the 4 letter variety?
Die Hard II - "I have 2 words for you. ____ & ___"
Score: 0
|Very good presumption. :)
Score: 0
|Paid for music is alredy too expensive, this will just push MORE people away.
Score: 0
|"According to the WSJ's sources, Universal Music Group and Sony BMG are two of the most aggressive in this practice."
Both owned by Sony...DRM won't work so just raise the prices instead. They've learned nothing.
Score: 0
|Any protection on a song is lost once it gets encoded onto an audio CD... ^.^
Score: 0
|morpheus 5.1 is pretty cool...betanews i love this place!
Score: 0
|