December 23, 2005

Warner subpoenaed in music download probe

By Gina Keating

LOS ANGELES (Reuters) - Warner Music Group Corp. has been
subpoenaed by the New York Attorney General in connection with
an ongoing antitrust investigation into the pricing of digital
music downloads, the company said in a securities filing on

The disclosure of the subpoena appeared to be the first
time that the probe by New York Attorney General Eliot Spitzer
of the market for song downloads has come to light.

Warner said it received the request for information on

"As part of an industrywide investigation concerning
pricing of digital music downloads, we received a subpoena from
Attorney General Spitzer's office as disclosed in our public
filings. We are cooperating fully with the inquiry," said
Warner Music Group spokesman Will Tanous.

The New York Attorney General's Office could not be reached
for comment and the nature and scope of its investigation was
not immediately clear.

Music industry sources said the current probe appeared to
center on whether the Big Four music studios -- Warner, Sony
Corp's Sony BMG Music Entertainment, EMI Group and Vivendi's
Universal Music -- colluded to set wholesale pricing for song

The investigation also could be related to the studios'
upcoming licensing renegotiations with Apple, maker of the
wildly popular iPod digital music player, for its iTunes music
store, the sources said.

Apple could not immediately be reached for comment. But in
September, Apple Chief Executive Steve Jobs called the music
industry "greedy" for considering hiking digital download
prices and warned that the move could drive iPod users to

The studios have indicated that they want to institute
variable pricing at the iTunes store, which now charges 99
cents per song.

For his part, Warner CEO Edgar Bronfman told an investor
conference in September that "not all songs are created equal
... There are some songs for which consumers would be willing
to pay more and some we'd be willing to sell for less."

The New York investigation could also be an outgrowth of an
earlier probe, settled in 2003, which accused music studios and
retailers of colluding to fix minimum retail prices for CDs.

Last month, Warner Music agreed to pay $5 million to settle
a separate New York state "pay-for-play" probe into how the
music industry influences which songs are played on the radio.

Sony BMG paid $10 million in connection with the same
investigation and agreed to stop making payments to radio
stations for airplay to settle the "payola" probe. Universal
and EMI have not yet settled.