The Justice Department opened an antitrust investigation of the online music business, focusing on two new joint ventures backed by five major record labels, the Wall Street Journal reported in its online edition on Monday.
The probe, which is in a preliminary stage, is looking into possible anti-competitive problems posed by the joint ventures, lawyers close to the case said Friday, according to the report.
The government is also expected to examine the major record companies’ use of copyright rules and licensing practices to control online distribution of their music, according to these people, the report said.
The rival joint ventures, Pressplay and MusicNet, have said they will begin operating in the fall, and each is aligned with one of the two warring camps in the online world, the Wall Street Journal said.
Pressplay is working with Microsoft Corp. and is jointly owned by Sony Corp. and Vivendi Universal. MusicNet is based on RealNetworks Inc. technology and is owned by AOL Time Warner Inc., EMI Group Plc and Bertelsmann AG and RealNetworks.
The labels have been criticized for moving slowly into online music and failing to license music to smaller competitors; they respond that they have been trying to work out how to protect – and be paid for – online music and to negotiate terms with music publishers, the newspaper said.
According to the report, a lawyer familiar with the Justice Department investigation said that it isn’t unusual for joint ventures among competitors to attract antitrust scrutiny and that many such ventures have been permitted to continue operating.
The newspaper said both joint ventures declined to comment, as did all five major record labels.
The two ventures expect to charge consumers a monthly fee to get access to “streamed” music – which consumers listen to online, but can’t copy – and downloaded, or copied, songs from the labels’ catalogs, the report said. Both have said that their licenses from their label backers are nonexclusive and that they hope to cross-license so each service will have a broad range of music, according to the newspaper.
The newspaper said MusicNet will be available through AOL and RealNetworks, as well as Napster Inc., though the status of the music-swapping company remains uncertain due to its legal struggles. Pressplay has announced affiliate relationships with Web portal Yahoo Inc., as well as Microsoft’s MSN service and MP3.com Inc., which is being bought by Vivendi Universal, according to the report.