Napster shut down its free song-swapping service last summer. It has since been trying to agree terms with the major record labels that will allow it to offer their music as part of a subscription service. However, negotiations have so far failed to settle the legal action.
According to legal journal The Recorder, Napster’s antitrust argument runs that the major record labels misused their copyrights by imposing restrictive licensing terms and acting in an anti-competitive way. The company says that the record labels wanted Napster shut down to eliminate any competition.
Referring to the major labels’ ventures MusicNet and pressplay, Judge Marilyn Hall Patel wrote, “If Napster is correct, [the major record labels] are attempting the near monopolisation of the digital distribution market.”
BMG, Warner and EMI, three of the five major record labels, created MusicNet as an on-line joint venture. Napster signed a licensing agreement with MusicNet, although Napster claims that the terms are anti-competitive because it is barred from negotiating separately for content from Sony and Universal which compete with MusicNet through their own joint venture, pressplay.
Patel seemed to agree with Napster. She wrote,
“Even on the undeveloped record before the court, these joint ventures look bad, sound bad and smell bad. Even a naif must realise that in forming and operating a joint venture [the record labels] must necessarily meet and discuss pricing and licensing, raising the spectre of possible antitrust violation.”
Napster has been given an opportunity to examine the record labels’ ownership of copyrights and their alleged anti-competitive behaviour.