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Feds Probe Online Music Biz

10 Aug, 2001 By: John Jimenez

In a move that has possible implications down the line for studios as they explore digital distribution of movies, the Justice Department has opened an antitrust investigation of the online music business focusing mainly on two joint ventures, pressplay and MusicNet.

Pressplay, which is working with Microsoft, is jointly owned by Sony Corp. and Vivendi Universal SA. MusicNet is owned by AOL Time Warner Inc., EMI Group PLC, Bertelsmann AG and RealNetworks Inc.

Congressman Rick Boucher (D-Va.) described the situation as a possible “distribution duopoly” in the online music marketplace and hasintroduced H.R. 2724, the Music Online Competition Act, with Rep. Chris Cannon (R-Utah).

The bill would rewrite music licensing and copyright laws to promote competition among online distributors. Specifically, it would requiremusic companies that enter online distribution agreements with firms tomake the same terms available to independent online music distributors.

This way, say Boucher and Cannon, major recording labels won’t be able to control the flow of songs distributed over the Internet by giving special treatment to online services they own.

“The keystone of the Music Online Competition Act is a provision that would prevent the labels from providing sweetheart deals to each other, then using their collective market power to shut out the competition,”Cannon stated. “I applaud the Justice Department for looking out for small music distributors and, more importantly, the consumers.”

It is easy to see that the investigation and proposed legislation could affect the movie industry as online delivery of video grows, though it is unclear what effect it will have.

“We’re aware of this and we’re keeping an eye on it,” says Sean Bersell, the Video Software Dealers Association’s v.p. of government affairs andmember communications. “We’re taking a look at it and seeing what type of implications it may have on the video industry.” He points out, though, that this has all been exclusively focused on the music industryso far.

But major studios are already getting involved in online movie delivery. As one anonymous studio spokesperson told Video Store Magazine, “Everybody’s working on this.”

One of the more notable ventures is Sony Pictures Entertainment Inc.’s Moviefly.com. The Moviefly site, which is under construction, advertisesit will provide “real movies right away.” The site says users can “rent hundreds of Hollywood hits, download directly to your PC and watch where you want, when you want.” Warner Bros. is a rumored partner but thatcould not be confirmed.

Another arrangement that may catch the Justice Department’s eye is Disney’s downloading project, Movies.com. If Movies.com were to receive Disney titles for distribution under terms not offered to otherindependent online distributors, it would mirror the music situation that is causing all the stir right now.

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