The Cartel That Couldn't Think Straight By George Ziemann -- October 14, 2007 Whenever one points out the fact that the four major labels work together as a monopolistic cartel, someone will ask, "Where's the collusion? Show me that the labels worked together." Unable to produce minutes of the RIAA meetings, we usually have to shut up. The RIAA is passed off as a "trade organization" which allows them to skirt the Sherman Antitrust Act. This stance is strengthened by the fact that three of the four major labels are in foreign countries which, in the past, has allowed them to tell the U.S. Justice Dept. that the DOJ has no jurisdiction over them (United States v. Time Warner, Inc., Sony, PolyGram, EMI Music, Bertelsmann, and MCA), even in a civil matter, even though the RIAA can sue 26,000 U.S. citizens over civil matters. Pretty confident that they are above the law, now they're going for flat-out, unhidden anticompetitive behavior. "[Universal Records' CEO Doug Morris] aims to join forces with other record companies to launch an industry-owned subscription service. BusinessWeek has learned that Morris has already enlisted Sony BMG Music Entertainment as a potential partner and is talking to Warner Music Group. Together the three would control about 75% of the music sold in the U.S." -- BusinessWeek No collusion going on here. No sirree. Nothing to see. Look! Over there! THE PIRATES ARE STEALING OUR STUFF!! However, I must admit that if I were personally in charge of enforcing antitrust laws, I would be inclined to let this one go for a while and see how it all plays out because just being part of this scheme is probably going to be punishment enough for those involved. This is primarily due to the fact that the target of this new alliance is Apple's iTunes Music Store, which is its first flaw. Morris wants to hurt Apple because Apple takes 29 out of every 99 cents from song sales, which is way more than Universal would ever consider giving the artists. Sony and Warner want variable pricing so they can charge more for new releases. The thing is, Apple has sold three billion songs and 75 percent of them belonged to Universal, Warner and Sony/BMG. For every 29 cents they deprive Steve Jobs of, they deprive themselves of 70 cents. Keeping in mind that Apple probably brought in more money on iPods last year than the entire record industry did selling music, it already seems as if Morris and company failed to think this cunning plan all the way through. Well, they did. They just didn't let common sense get in the way, which leads us to how they intend to go about it. "...get hardware makers or cell carriers to absorb the cost of a roughly $5-per-month subscription fee so consumers get a device with all-you-can-eat music that's essentially free. Music companies would collect the subscription fee, while hardware makers theoretically would move many more players." -- BusinessWeek (link above) So basically, the labels are going to drive the price of every mp3 player up $90, which will somehow mysteriously help sell more of them because they'll give the music away for "free". Oka-a-a-a-y... I'm sure the artists will all be thrilled about this, too. After all, what could be more gratifying than knowing the labels would be getting big piles of money to dole out as they see fit and if you keep your mouth shut about it, maybe they'll give you some. Please, master? One thing is for sure, Radiohead won't get any. Or Paul McCartney. Or Nine Inch Nails. Plus anyone else that got out from under record label contracts, or even those whose record label refuses to participate in the RIAA. The manufacturers aren't going to pay them. The money goes directly to the cartel. All of it. The cartel won't pay them or any of the other 99 percent of the world's musicians sharing their own work on the Internet. This is why the RIAA doesn't want some sort of compulsory licensing. If that happens, the rest of the acts get paid, too. Can't have that. The labels want it all. They think that they deserve it and if you want a piece of it, you've gotta work for them. For the consumer, when you buy a player there will be a $90 charge for the music that you'll put on it, no matter where it came from because you're a stealing bastard and this is the only way they can squeeze the money they deserve out of you. This all assumes that the average American is clueless enough to buy an mp3 player that comes with a $90 RIAA tax. Are they? As I said earlier, the labels seem to be making an attempt at some pretty overt non-competitive action but don't stop them yet. Let them invest a few billion dollars each before pointing out that the three largest labels working together to pool 75 percent of the market might be frowned upon in some financial circles. For this to even begin, the lawsuits have to end. If the music is free, you can't keep suing people for finding it. Today, you're a pirate. Tomorrow, the music is free. Did the law change? Was there ever a law in the first place? That'll have a messy ending, I'm sure, and when that necessary portion of the master plan is complete, we will have officially returned to square one. It took these guys 8 years to accept the fact that compressed, inferior-sounding copies of their songs will be found on the Internet, no matter what they do to try to stop it. It's like if we went back to the day that they were going to sue Napster, except a little reality was in the room, with the extra pressure that sales are down by half since then; new releases are less than a third of 1999. This time, they decided that the path to success is to undermine the largest reseller in the world. Brilliant scheme, eh?