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."

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.

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?

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.

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.

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 [wired.com] 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!

fit penalty?

[Slowping]

So is this $75.7 million worth of CD donations based on the price before or after the gouging?

In seriousness, it says in the article "consumers had been overcharged by $480 million since 1997." I don't know what the other details are, but it seems that the penalty is just a slap on the wrist since it barely adds to $200 million. Isn't that half of what they gouged? They still made off with a ton of cash. Where's the hurt?

Re:Drop in the bucket

[Anonymous Coward]

If you are listening to Britney, I truly pity you. Try some Stravinsky, or Radiohead.......

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:Dang I just submitted this, my 1 chance at fame

[Xtraneous]

They do that at my local lib. Except that it is not second hand CD's (yup, brand spanking new) and you get them for two weeks with unlimited refunds. I know a guy who went to the library, checked out the max (15 @ a time, I think) took them home, ripped them, then burned to mp3 cd. So what should they do now, sue the libraries?

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."

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.

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.

Reuters = Good reporting

[flollywebfrog]

This article does not mention piracy or file-sharing.

Reuters should be commended for not confusing the issues.

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!

Re:No No No

[Evangelion]

No the local book shops will continue to do what they do best sell GOOD and hard to find books, focus on what the customer wants, and build lasting relationships for steady sales. Barnes and Noble or Chapters might rake in more at 33% off the cover price of bestsellers but they'll get no loyalty from their customers. And no love from the real book lovers.

Re:MORON!

[greening]

The music industry is shooting itself right now. This isn't at all helping. P2p wouldn't hurt it at all if the industry would get busy and start producing better quality music. The RIAA is notorious for exaggerating their figures that they show to the general public. While the sales of records are up, they will show you the sales are down.

Plus, what's the point of paying $16 for 10 songs that of which only 2 are good.

JUSTaRESUMEpad

[Anonymous Coward]

Come on people, realize that these states' attorneys are just padding their resumes in prep for entering the private sector. They always settle - there's never an admission of guilt. That's the game. Meanwhile, prepare to get your proctology exam from the RIAA. Their vigilante powers to enact the corporate police state are in the works. That is, unless we can all get a little more proactive in the activism department, support the EFF with letters and, yes, money. Lots of money, to the EFF and the legislators who oppose the RIAA's latest legislation. We should have a lobby as powerful as the NRA. I mean, c'mon, if a bunch of gun-totin' rednecks can control the legislative process, geeks should be able to as well. We are an order of magnitude more literate. I say, put a lot of money into it now, it could pay off in the long term. Remember, a pound of prevention.....

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.

Re:I wonder

[Gerry Gleason]

What I wonder is how they get off calling anyone sharing music files criminals at the same time they are ripping off the consumer for hundreds of millions of dollars? They certainly don't have a ethical leg to stand on, and the legal one is a little shaky as well.

They will deserve their fate, which they have earned by continuing to treat their customers and talent with contempt.

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:Remember, it's only a settlement...

[AvitarX]

What dumbfounds me is that what they were doing was deamed illegal, so they cannot do it for seven years. What the fuck is that? How can it possible be acceptable 7 (5 now?) years from now to builk customers out of another $480,000,000

I am confused

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

The irrelevance of money to the legal debate is...

[inherent]

Yeah, P2P is causing their problems. Sure, sure it is.

Must I continually point out that it DOESN'T MATTER if P2P loses revenue for the record companies - P2P file sharing is still (in most instances) WRONG.

I'm so sick of hearing people whine and moan about how P2P should be considered legal because the record companies don't lose money because of it (typically followed by an argument that illustrates that the industry has sold more music since filesharing that before).

I'll say it again: IT DOES NOT MATTER.

Philosophically, this is called an "appeal to a complex argument," and it's considered a logical fallacy.

Let me give a more blatent example:

Suppose you own a really nice bicycle, but you only ride it from 5-6pm. Now suppose someone from down the street comes and "borrows" your bicycle from 7:30-8:00pm, and returns it in pristine condition...you can't tell it's been used. Their borrowing of the bicycle without your permission is still WRONG. The bicycle is your property, and they used it without your permission. You could even take it a step further and say that it would still have been wrong if they left a $5 bill on the seat, because they still used it without your permission.

We, a crowd of people of whom many make their living generating intellectual property, should understand that.

Music is simply property. If you use it without the owner's permission, it's wrong.

Are they cutting off their own noses by disallowing P2P sharing? I think they are in alot of cases. But it's their noses to be cut off.

Re:Where's my cheque?

[Snork Asaurus]

and distribute $75.7 million in CDs to public and non-profit groups

I don't see the words "for free" in that sentence, but we're not writing a contract, so let's assume that it is implied.

Want to bet that the $75.7 million is at RETAIL prices? Since it probably costs the record industry about $0.25 to manufacture and ship each CD, and assuming for argument's sake a retail price of $16.99, it's really more like a total cost to the record industry of [$75.7 million / $16.99 retail * $0.25] ~= $1.114 million ~= a single record company exec's annual entertainment budget. Furthermore, they'll probably use production overruns and be able to write some of the costs off.

M$ Settlement and this one....

[Anonymous Coward]

Can anyone spot the similarity between M$ proposing their crapware as part of a settlement and this mob offering $75 million worth of CD's?

Would such CD's count as sales for the next Brainless Spears or N'Stink they are trying to push to the top?

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.

Re:$480M vs $67M

[Anonymous Coward]

So basically you are saying that you want the RIAA to have a monopoly and you support their business practices?

They want to hurt the consumer with overpriced records...if Wal-Mart happens to offer the consumer a better price then by all means let them. I always say, never take the side of a corporation unless it is in the favor of the consumer, and never let them take away our power, or knowledge. If there is a concern regarding Wal=Mart monopolizing the CD industry, it too will drive competition, and the independent stores can still survive off of lesser known works since most people will need to get their lesser known stuff somewhere.

The most important thing is that we don't let the corporation tell us what they want...we tell them.

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.

Re:only 67M?

[Dusabre]

Ahem, in this case: settlement=no jury - agreed by parties.

Other cases: verdict=jury - jury sets punitive.

Re:only 67M?

[quintessent]

they didn't have to admit any wrong doing

Sad.

So they can sue hundreds of millions out of MP3.com for letting people listen to their own music, but when the record companies cheat consumers, they didn't do a thing wrong. Yuck.

Re:Great timing.

[Jace of Fuse!]

They already lost a similar lawsuit in the early 90's.

It resulted in a 3 dollar increase in CD prices.

I wish I had a link to a historical reference to the previous lawsuit. I have plenty of faith that CDs will now cost nearly $25 apiece, esspecially as DRM starts to make a strong foothold in the marketplace.

The worst part is

[Salsaman]

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

Legal File Sharing:

[glamslam]

Where can you find legal file sharing? Your local library! The ones in my area have a decent selection of CDs. If they don't have something you want, I recommend buying it (USED if possible) then donating it to the Library (you can even put a dedication to a lost loved one or a pet or whatever).

Eventually, if everyone pitches in, you can "check out" whatever music you want to explore. If you like it, then buy it at the store and support the Artist. If you don't, rip it (in case you change your mind and decide you like it ;)