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FTC vs. music companies

Yesterday’s Yomiuri Online has an excellent article on the Fair Trade Commission’s raids on 10 music and chaku-uta (=ringtunes) distributors, including Sony Music Entertainment, Avex and Label Mobile.

The short story: KDDI launched its chaku-uta service in December 2002; soon Vodaphone and DoCoMo followed and started manufacturing mobile phones supporting (DRM protected) chaku-uta downloads. This move was followed by the launch of several alternative chaku-uta sites, Label Mobile (which is created by Japan’s major record labels and has 80% of the market) being one of them. Japan’s FTC now suspects the record labels to obstruct fair competition in the chaku-uta marketplace, by refusing to license songs to chaku-uta providers other than their own Label Mobile business.

The FTC suspects the five companies colluded to create a situation where the most popular songs were available for chaku-uta download only from Label Mobile’s Web site to maintain their high market share, the sources said.

It is interesting to note (and the Yomiuri article does this in an excellent way) that this strategy was not possible with the earlier ringtone or chaku-mero downloads. Chaku-mero, which are actually covers of popular songs (chaku-uta are closer to remixes of those songs), only involve copyright. Paying a fixed fee to JASRAC allows chaku-mero distributors to create a chaku-mero version of a popular song.

Chaku-uta on the other hand also involve neighboring rights (cfr. the remixing aspect) and thus the permission of the respective record company is required. This obviously places the record industry in a strong position – songs were only sometimes licensed to smaller chaku-uta providers and always to Label Mobile. Hence the FTC’s action.

To be continued.

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