DOJ Presses Pressplay, MusicNet

The U.S. Department of Justice has begun an antitrust investigation into two online music distribution services that are about to be launched by the five major record companies, according to a report published on Monday.

The Justice Department has opened a preliminary investigation into the rival online music subscription services, MusicNet and Pressplay--which are both expected to be launched in September--to determine if there are any anticompetitive issues, according to a report in The Wall Street Journal.

The department is looking into the possibility that the music labels, through MusicNet and Pressplay, are using copyright rules and licensing practices to discourage competition and dominate the market for online distribution, the WSJ report says.

MusicNet is the digital music distribution company formed by AOL Time Warner, Bertelsmann, EMI Group, and RealNetworks. Pressplay is a joint venture between Sony Music Entertainment and Vivendi Universal and has partnered with Microsoft for its digital media technology and the MSN Internet service.

Bertelsmann in Germany and Vivendi Universal in France both declined to comment, while the other parties could not immediately be reached.

The major music labels have already been criticized for using MusicNet and Pressplay to squeeze out smaller players in the online music distribution market by denying their competitors rights to their music licenses and unfairly controlling the distribution of royalty fees.

Another potential area of contention could be the technology that the subscription music services will use to distribute their online content. Pressplay will use Microsoft's Windows Media Audio digital music file format and digital rights management technology while MusicNet will use RealNetworks' competing system, RealPlayer.

Though Microsoft and AOL Time Warner, which uses RealPlayer for its AOL services, have been locked in disagreement over such issues as which media player will be used by Microsoft's newest operating system, Windows XP, if it has a link to AOL, the two giants still have the potential to push out the smaller players in the market.