Music Industry Pays $67M Fine For Price Fixing

Krelnik writes "Reuters is reporting that the music industry is paying a $67.4 Million settlement to end a lawsuit where they were accused of artificially inflating CD prices at retail. Yeah, P2P is causing their problems. Sure, sure it is. Here's the story at Reuters UK."

Comments

Great timing.

[neoform]

they've been fixing prices for how long? and it took till now for a suit like this to win.. let's hope it's not the last.

Re:Great timing.

[homer_ca]

They were accused of using a minimum advertised pricing (MAP) policy between 1995 and 2000. In 2000 they settled an FTC lawsuit by agreeing not to use MAP for 7 years. Since then I've seen more and more new releases advertised for $11.99-12.99, but full retail price on CDs is as expensive as ever; you'll be lucky to get change out of a $20 after tax.

I like this bold prediction from the article:

"Former FTC chairman Robert Pitofsky said at the time that consumers had been overcharged by $480 million since 1997 and that CD prices would soon drop by as much as $5 a CD as a result."

Out of curiosity...

[Sheetrock]

I know that seems like an awful lot of money, but does it even approach the amount the industry gained through its unfair practices?

And at a board meeting, a single tear is shed..

[Komrade S.]

I'm sure the RIAA will be quite upset at losing that less than 1% of their annual income. Poor sods. But I think if judgements continue like this, and that moronic bill for "P2P warfare" is dropped, a real dent might be made in the RIAA's empire of art commodification.

Re:And at a board meeting, a single tear is shed..

[dasunt]

I have a theory that what geeks need is a large advertising budget. We need commercials on TV that tells our side of the story.

Imagine it...

View of a long haired pale man hunched over a keyboard
Johnny is a hacker. But he doesn't live in his parent's basement. He doesn't work for an evil foreign government. He's not part of a group that spells their name with numbers. No, Johnny works for the record companies. Under a proposed US law, Johnny will have the right to hack into your computer and break it. The record companies are very concerned with getting the ability to hack your computer - even though they aren't concerned about lower CD prices. They were recently convicted of overcharging Americans roughly half a billion dollars for CDs.

See, we need an agency to mix the FUD our way. :)

hrm

[carpe_noctem]

Is it just me, or does this seem like a reallllly low amount of money for a settlement in a judgement this serious? Not to complain about the victory, but shouldn't this have much greater consequences than what ultimately boils down to a weekly paycheck for these CEO's?

Re:hrm

[Anonymous Coward]

Well, the $67 million has to come out as a lump sum, and has tax implications. So, in a sense, the department that has to pay out the fine is so far removed from the line item where the extra profits went, that it might actually be a sore spot that could drive change from within.

I know if I were on the board of directors, I'd be asking for the head of the person who cost me this fine, and getting something signed in blood by the people who I can decapitate if it happens again.

And something like that is going on where the left hand paid the $67 mill, with regard to the right hand that caused the damage. This is probably the first time left and right hands have actually met in that organization. How fitting that it happens today, in a climate where suits begin to actually fear consequences of their actions!

Let's write a law

[pussycat]

Let's write a law to make it legal to hack* RIAA lawyers when we suspect them of "pirating" our money.

* hack meaning to chop into little pieces

only 67M?

[motardo]

That seems like peanuts compared to how much they're ripping off the artists and us, the consumers who buy their crap.

Re:only 67M?

[BrookHarty]

I was thinking that also, they overcharged $480 million, and only had to pay back $67 million.

Gotta love that logic.

Re:only 67M?

[Sarcasmooo!]

AND it was split between the different labels AND retailers involved, AND the settlement was called a "good business decision" by a Warner Bros. representative, AND they didn't have to admit any wrong doing.

Re:only 67M?

[Luyseyal]

Exactly, which is why juries should have no numerical restrictions in assessing punitive damages so long as said punishment suits the crime.

$0.02USD,
-l

Remember, it's only a settlement...

[questionlp]

From the USA Today article:

The companies, including Universal Music, Sony Music, Warner Music, Bertelsmann's BMG Music and EMI Group, plus retailers Musicland Stores, Trans World Entertainment and Tower Records, admitted no wrongdoing.

Since they still think that they are in the right and probably still want to fix the prices of CDs somehow.

They are just paying their way and donating CDs to certain organizations just to say drop the suit... that's it.

RIAA's next move?

[ABetterMan]

I would expect their next move would be to work a bit faster with MS, and get DRM pushed out there. While looking through Windows Update, I noticed Windows MediaPlayer v7.1 has DRM - and you can't uncheck the box for it. If you want Media Player 7.1+, you have no choice but to install the DRM portion along with it, or not install the player at all. Perhaps MP v7.1 is non-reversable - once you install it, you can't downgrade. I dont know if that is the case, but I'm not particularly in the mood to be a guinea pig, at the moment.

Re:RIAA's next move?

[littlerubberfeet]

You could get a mac. I have had absolutly no problems with itunes.....AND you can digitize from an analogue input. So output on a standard CD player, then digitize........

Re:RIAA's next move?

[alfredo]

Apple is the content creators platform of choice. These artist do not want anything on their computers that will inhibit the creation of content.

Apple will hold out to the bitter end. Jobs said on CNN that DRM will not work, there will always be a way to crack it.

Priceless...

[Cutriss]

"This is a landmark settlement to address years of illegal price-fixing," Spitzer said in a statement. "Our agreement will provide consumers with substantial refunds

No it won't! The suit was filed two years ago. $67.4M divided over all the CDs distributed by the labels ends up being fewer than pennies per consumer. At best, I'd expect little more than a $5 coupon off my next overpriced music purchase. The settlement also doesn't do anything to address future infringement.

and result in the distribution of a wide variety of recordings for use in our schools and communities."

Not under today's Fair Use laws...

Re:Where's my cheque?

[billbaggins]

Probably not if you're from a country where "checque" is standard spelling. From the article: "The settlement will go to all 50 states, based on population. Consumers may be able to seek compensation."

$480M vs $67M

[Tomy]

Let's see, consumers were overcharged $480M and the fine was $67M?

Well now we know what step two is:
Step one, rip off consumers.
Step two, settle out of court.
Step three, $413M profit!

Re:$480M vs $67M

[leviramsey]

Idiot.

The RIAA did not make a cent off the price fixing, as that had no effect on wholesale prices. What the RIAA was doing was to say to the chain stores, "you can't advertise the new Britney CD at less than a certain amount over wholesale". Why was this done? To prevent the Wal-Marts and Best Buys of the world from monopolizing CD retailing and using their distribution might against the RIAA. It's in the RIAA's interest to keep as many non-chain and small chain stores around as possible, as it prevents WalMart from holding CDs for ransom (as in, "we won't buy the CD for our stores unless you sell it to us for $2 less than normal wholesale").

The $480 million that consumers overpaid went to CD retailers, not the RIAA.

Re:$480M vs $67M

[7-Vodka]

omg.. To see someone make such a bold mistake... and a UMASS student on top of it..!!! EEEK!!.

1. You manage to contradict yourself in ONE SHORT POST:
   "The RIAA did not make a cent off the price fixing, as that had no effect on wholesale prices."
   Then..
   "won't buy the CD for our stores unless you sell it to us for $2 less than normal wholesale"
   Erm.. so better retail price competition will affect wholesale price and yet wholesale price is not affected. Bravo!
2. You allowed your head to be spun by the RIAA's lies (on purpose?). The very fact that wholesale prices are inextricably tied to retail prices (can't sell for $10 what you're buying for $14) means that wholesale prices were also allowed to be held high.
3. Unless you live on another planet you must realize by now that the music industry is an example of when the middleman holds more power than the producer and the consumer put together. I don't think they need you to come to their defense, they have $1.00x10^7(8?) for that.
4. oh, and most important of all never, ever start your point by calling someone an idiot if you want to be taken seriously. It's not much to ask for a little politeness. Especially when you turn out to be wrong, then you just feel like an ass. I'm an UMASS student too. Please, I have limited bandwith due to oit shenanigans, don't make me use it to read an UMASS studen't making an ass out of himself.

this is good news

[GoatPigSheep]

so where do I pick up my compensation check for getting screwed over for all these years?

Re:this is good news

[quintessent]

Heh. If you mod me down, I'll introduce you to my sister.

So are they going to lower prices now?

[Anonymous Coward]

Yeah right. When hell... hey wait a minute - massive climatic change? Maybe there is hope...

Re:It had to happen

[MaxVlast]

Have you seen the headquarters of Sony Records? Potted palm trees aren't cheap, mister. Think of the trees!

Re:Drop in the bucket

[Idarubicin]

They will just regain the cost of the fine when I pay the $21.99 for the new Brittany cd anyways!

The real problem here is that anybody is paying for a Britney CD.

Understand, in this case I'm most definitely not advocating piracy.

No it doesent

[dnoyeb]

NO this seems like an awefully small amount of money. Does 67M approach the amount they profitted off of the price fixing? It should be at least that amount, plus a punative amount.

$67M is a Joke. A single company could foot that.

Re:No it doesent

[Alsee]

wholesale prices were not affected by the MAP program

If you believe that a retail price war wouldn't have put any pressure on wholesale prices you're smoking crack.

Lower retail prices would mean higher retail sales. Can't make a retail sale without buying it wholesale first. If retail prices don't put any pressure on wholesale prices then the RIAA should have ENCOURAGED a pricewar.

-

Re:No it doesent

[blair1q]

It's less than Madonna's first big contract with Sony. It's a small fraction of Michael Jackson's contracts. It's not much more than Mariah Carey got.

It's Tommy Mottola's wall-safe money.

The lawyers get a third, the rest of us get 50-cents-off coupons for Chicago MCMXVIIIII.

And the money goes...

[YrWrstNtmr]

...where?

The music industry has been ripping us off (no news there) to the tune of $5 per CD.
The have to pay up $67 mil + $75 mil to non-profit, etc.

Who the hell gets that $67 mil? I want my cut!
~50 CD's over the last few years....where is my $250?

Great

[Evangelion]

So now the local indy shops that can't match the $8 a CD that the big chains can sell for will go under. They're already more expensive, but it just got pointless for them to even try.

It'll be like bookstores all over again.

Re:Great

[dirk]

So now the local indy shops that can't match the $8 a CD that the big chains can sell for will go under. They're already more expensive, but it just got pointless for them to even try.

SO people complain when CDs are too expensive, but also when they are too cheap? The CD manufacturers no longer have any control over how much Best Buy et. al. charge for their CDs. The chains like that can afford to take a loss on CDs because their hope is to get people in the door and sucker them into buying some other, more expensive, item. The RIAA actually tried to get them not to sell their CDs at a loss, since it was hurting other CD outlets, but the chains took them to court and won. So you can either complain about the RIAA making prices too high, or the chains making prices too low, but you can't complain about both.

Curiously enough...

[Idarubicin]

...I have noticed that the same CD's for sale in my native Canada selling for $18.95 are priced at about the same dollar amount south of the border.

This would at first blush seem perfectly reasonable, until one notices that one United States dollar buys about $1.58 Canadian. That's right--CD's are typically about 50% more costly as soon as you go from Windsor to Detroit.

Granted, I've noted a similar pricing trend with some other goods--groceries come to mind. But for non-perishables, the price disjoint is quite stunning.

Is it price fixing? Or plain old-fashioned gouging? All I know is that for a ten-cent piece of plastic, that's quite a markup. Charge what the market will bear, and hope nobody notices that the neighbours are getting a 30+% discount. Does anybody know if there are any retailers taking advantage of this price difference? Buy Canadian, sell American, pocket the difference. (Whatever you do, don't write a post containing the phrase "3. Profit!!!")

Re:Curiously enough...

[coupland]

Actually I'm Canadian too and found that in Canada, the U.S., and the U.K., for a basic meal you can expect to pay about $10 CAD, $10 USD or 10 GBP respectively. Considering there are about 2.5 Canadian dollars to the British pound you see that in Britain a meal "costs" about 2.5 times as much. But this is mostly elementary since their pay cheques (not checks!) are also paid in British pounds so there's no discrepancy unless you're a tourist. It's not really a matter of price gouging, simply of exchange rates and inflation.

What's more interesting is that a CD typically costs $20 to purchase yet a cassette tape costs around $10. Yet the cassette costs much more to make! (Cassettes are recorded, CDs are pressed on a high capacity assemply line.) This means that recording companies can turn a profit at $10 with higher cost of materials, so why the $%^@ do they charge us $20? This is the price fixing.

The other boot has yet to fall...

[Mammothrept]

The lawsuit that the recording companies settled is only not the whole story. The Attorneys General of a bunch of states sued them in civil court because they violated anti-trust law (allegedly). The Attorneys General, or the Federal Government could also have filed criminal charges against the record companies but they chose to file a civil lawsuit, presumably because it is much easier to win. In criminal proceedings, the defendant has to be proven guilty 'beyond a reasonable doubt.' To prevail in civil court, the standard is 'more likely than not.' It is the difference between being 51% sure they are guilty and being 99% sure.

While the record companies refused to admit fault with words, they did it with dollars. You don't settle a lawsuit for that much money unless you are pretty sure that you will be found liable at trial. If they were really settling for the 'nuisance value' of the lawsuits, the amount would have been much lower. Think of this settlement as plea bargaining for guilty corporations--"We won't fight the the punishment as long as we don't have to say 'we're guilty' out loud."

The other shoe, or boot, that is waiting to fall is private class action litigation. If someone robs you, the government can prosecute or sue them. But as a victim, you also have a right to sue. (Alas, you don't have a right to start a criminal prosecution--under US law--but you can, like the family of O.J.'s wife, sue in civil court.)

There was at least one private class action lawsuit filed against these record companies for price fixing in 1996. The last I saw (1997), it was still kicking around the courts. In dollar terms, private class action suits can easily exceed the damages they'll pay to settle the government's case.

The other damage the industry faces is that this settlement, while not technically an admission of guilt, is tantamount to it in the court of public opinion. The industry has been shown to be bigger pirates than Napster--they've been ripping off ALL of their customers.

Re:The other boot has yet to fall...

[kcbrown]

There was at least one private class action lawsuit filed against these record companies for price fixing in 1996. The last I saw (1997), it was still kicking around the courts. In dollar terms, private class action suits can easily exceed the damages they'll pay to settle the government's case.

That may be, but the problem with class action suits is that they are almost always brought in order to benefit the lawyers. It's rare indeed that the actual plaintiffs in such suits gain anything significant from them. Often the plaintiffs end up with a settlement that represents less than what they lost at the hands of the defendant. But the settlement amount is usually large enough that the lawyers representing the plaintiffs make enough to retire to a life of complete luxury.

Remember: the lawyers representing you in a class action lawsuit don't work for you: they work for themselves, and are just using you as a tool to gain for themselves insane amounts of money.

What that means in this case is that if the RIAA offers to settle early for $100 million, the lawyers will probably take the deal, because their cut will be something like 30% of that, and $30 million for a small group of lawyers is a lot of money if the amount of time it represents is small. They know that if they don't take the deal, the RIAA has the resources to drag the case out for decades if need be, so they'll take the deal. And the RIAA is thus still ahead a cool $300 million.

If there's another boot to fall, it'll be something other than a class action lawsuit. And if you want an idea of the likely long-term outcome, just look at the tobacco companies and how much they were "hurt" in the end (hint: not much) by the class action lawsuits.

WHAT!?!?!?!

[Eric_Cartman_South_P]

They don't even give money to the Artists, so I don't think you're going to get any.

It Pays to Read the Article

[guttentag]

Former FTC chairman Robert Pitofsky said at the time that consumers had been overcharged by $480 million since 1997 and that CD prices would soon drop by as much as $5 a CD as a result.

In other words, over the course of three years the industry forced consumers to pay nearly half a billion dollars more than they would have if real competition had existed in the market. Now we know where they find the money to give reviewers CD players that are glued shut.

Re:No surprise here....

[Kwikymart]

What if Celine's latest album is crap?

That kind of question is a priori.

Correction

[Snork Asaurus]

Sorry to reply to my own post, but I have made a serious error in my calculations - I forgot to include the artists' royalties that they'll have to pay. So, instead of $1,114,000.00 cost to the record industry, make that $1,114,003.65. My apologies for the oversight.

Wow. That gotta hurt!

[trezor]

• consumers had been overcharged by $480 million

That kinda makes $67 million a fortune or what? Why didn't they fine them at least $500 million? If the fine is lower than the overcharging, seriously, why should they care?

The worst part is

[Salsaman]

...we also paid for them to shut down Napster.

Re:NOT AT ALL

[Gonarat]

Actually Hollywood has been doing a better job of pricing DVDs than the RIAA has been with music. I have been able to pick up LOTR, Harry Potter, and Monsters Inc. (yes, I have a kid) all for (well) under $20.00 -- and Monsters Inc. was $14.88 (DVD OR VHS Tape) at Wallyworld (Wal*mart). I was also able to get War Games for under $10.00.

New Music CDs are $13 to $15 and old CDs run just as much! No wonder the RIAA's sales are down -- My 11 year old Daughter would rather spend her $15 on a DVD instead of a CD -- she gets more out of the DVD and she had grown bored with Britney and the boy bands. The only way the RIAA is going to get more of her (and her peer's) money is better music and lower prices. DVDs, PS2, and Gameboy Adavance is beating Music out in the battle for the pre-teen dollar.

Justifies P2P downloading!

[gosand]

OK, so the RIAA owes me. They can subtract all the music I have "pirated" from the bill. I bet they still owe me money.