- The US Department of Justice (DOJ) has launched an antitrust investigation into two online music distribution services that are about to be launched by the five major record companies, according to a report published this week.
The DOJ has opened the preliminary investigation into the rival online music subscription services, MusicNet and Pressplay -- which are both expected to be launched in September -- to determine if there are any anticompetitive issues, according to a report in The Wall Street Journal (WSJ) newspaper.
MusicNet is the digital music distribution company formed by AOL Time Warner, Bertelsmann, EMI Group and RealNetworks. Pressplay is the joint venture between Vivendi Universal (through its music division Universal Music Group) and Sony Music Entertainment and has partnered with Microsoft for its digital media technology and its MSN internet service.
Bertelsmann in Germany and Vivendi Universal in France both declined to comment, while the other parties could not immediately be reached for comment.
The major music labels have already been criticised for using MusicNet and Pressplay to squeeze out smaller players in the online music distribution market by denying their competitors rights to their music licences and also unfairly controlling the distribution of royalty fees.
Speaking at the Jupiter Media Metrix's Plug In forum in New York last month, Edgar Bronfman, Jr, executive vice chairman of Vivendi Universal, said that within two or three years MusicNet and Pressplay would have licenses to all music.
The DOJ is looking into the possibility that the music labels, through MusicNet and Pressplay, are using copyright rules and licensing practices to discourage competition and dominate the market for online distribution, the WSJ report says.
Another potential area of contention could be the technology that the subscription music services will use to distribute their online content. Pressplay will use Microsoft's Windows Media Audio (WMA) digital music file format and digital rights management (DRM) technology while MusicNet will use RealNetworks' competing system, RealPlayer.
Though Microsoft and AOL Time Warner -- which uses RealPlayer for its AOL services -- have been locked in disagreement over such issues as which media player will be used by Microsoft's newest operating system, Windows XP, if it has a link to AOL, the two giants still have the potential ability to push out the smaller players in the market.