Blog Post

Japan Warns Record Labels Over Ringtones – Take 2

A week ago I linked to an article about the Japanese Fair Trade Commission warning five major record labels over restrictive music licensing for ringtones. I also opined that the labels were simply making the most of their intellectual property. This feature goes over the whole situation in a lot more detail, including the history of the case (which is the result of a nine-month long investigation) and the fact that the MIDI-based ringtone market has “a large number of providers and much competition based on price. In order to avoid this situation, the labels established a joint venture called Label Mobile which would be the exclusive content provider for the new service”. The issue appears to be one of collusion. If Sony had independantly decided to sell ringtones at a high price and refuse licences to other people the FTC may not have intervened – but when five large record labels collude to keep prices high and competition low the FTC decided it was a breach of the anti-monoply law…

I’m still not sure whether the labels have done anything wrong. I’m trying to put it into context – at first I thought it was like several petrol stations colluding to raise the price of petrol without fear of being undercut by the competition. However, petrol stations don’t create the petrol they distribute it, so it’s more akin to the OPEC nations colluding to set the price of petrol at the source – and the only reason OPEC got away with it is because they are nations. I’ve come to the tentative conclusion that licensing your intellectual property in a selective or restrictive way is not wrong, but colluding to reduce competition to allow you to license your intellectual property in a selective or restrictive way is. It’s certainly not good for the industry or for the consumers.