|The song remains the same, but the price of CDs are going down.
In a victory for consumers, the government moved to lower the price of music CDs Wednesday as it settled federal charges with the major music companies, accusing them of colluding to inflate the prices Americans pay for their favorite compact discs.
The agreement puts a halt to the industry practice of "minimum pricing," whereby distributors force retailers to sell CDs at or above a fixed price, and in return, the industry underwrites a substantial amount of retailers' advertising. The Federal Trade Commission estimated the practice cost consumers $480 million over the last three years.
The FTC filed the formal complaint today detailing the charges, while also outlining its settlement with the five music giants: Time Warner Inc.'s Warner Music Group, Sony Corp.'s Sony Music Entertainment, Bertelsmann A.G.'s BMG Entertainment, EMI Group PLC's EMI Music, and Seagram Co. Ltd's Universal Music.
All will be barred from using minimum pricing programs for the next seven years. In exchange, the government will not impose damages for past prices nor require the companies to acknowledge any wrongdoing.
"These settlements...should help restore much needed competition to the retail music market," said FTC chairman Robert Pitofsky. "Today's news should be sweet music to the ears of all CD purchasers."
Nobody yet knows how much CD prices will drop, but consumers can expect to add the cheapies to their collection within a few months. Officials for the five distributors and the Recording Industry Association of America declined to comment.
The government accused distributors and retailers of keeping CD prices high in order to avoid a repeat of the price wars in the early '90s which had consumers paying as little as $9.99 for some popular CDs. CDs now cost anywhere between $14 to $17 today--up nearly 50% from the price of a cassette tape with identical content. The recording industry attributed the high prices to increased digital quality and ease of use.
The five companies account for 85 percent of CDs sold in the United States. The industry hit a record-breaking $15 billion in sales nationally last year.