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EMI, Music Labels Rejected by High Court in Appeal of Song-Pricing Lawsuit

The U.S. Supreme Court rejected an appeal from the country's four largest music labels, refusing to block a suit accusing them of conspiring to fix Internet song prices.  —  Units of Sony Corp., Vivendi SA …

Bloomberg Greg Stohr

Context & Ripple Effects

The Supreme Court's refusal to intervene leaves an antitrust suit accusing units of Sony Corp., Vivendi SA and EMI of conspiring to fix Internet song prices alive at the trial level. For EMI, the timing lands on top of an already strained position: the label cut back financial support of the RIAA and IFPI in early 2009 and churned through digital leadership, replacing Douglas Merrill with Cory Ondrejka, after what the corpus describes as a terrible year for the recorded-music majors.

The denial also extends a litigious run for the majors — they had already pursued a developer over use of the Seeqpod API to stream songs — meaning the industry's enforcement energy was being spread across copyright fights and, now, an accusation aimed inward at their own pricing behavior.

First-order effects

  • The four largest labels must carry the price-fixing suit through ordinary court proceedings instead of ending it via appellate intervention, absorbing litigation costs and defendant-side legal exposure at a moment when at least EMI was already trimming industry-body spending.

Second-order effects

  • If the investigation surfaces evidence of coordinated wholesale pricing, the majors' leverage in negotiations with download stores narrows, shifting bargaining power toward the retail side of digital music sales.

Third-order effects

  • The episode points toward courts functioning as the recurring check on the majors' collective control of digital pricing — a structural constraint on any return to unified label-set price floors as the business shifts format.

The trend: Judicial review is becoming the standing counterweight to the major labels' collective pricing power in digital music, arriving just as the majors' finances weaken and their trade-group commitments shrink.