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NY State May Probe Digital Download Pricing

New York State Attorney General Eliot Spitzer sent out something less than a cheerful Christmas jingle to major music publishers: subpoenas.

In a Securities and Exchange Commission filing last week, Warner Music Group disclosed that it had received subpoenas regarding the pricing of digital music downloads.

Apparently, WMG wasn't the only music publisher to receive holiday greetings from Spitzer. According to the document, Spitzer's office is conducting an "industry-wide investigation" into possible antitrust violations.

In the document, WMG said it planned to "cooperate fully" with the probe. WMG officials were unavailable for comment Tuesday while Spitzer's office did not return telephone inquiries.

WMG, along with Sony BMG, EMI Group and Universal Music, are the world's four largest music publishers.

Currently, the largest source of music downloads is through various illegal peer-to-peer (P2P) services. Apple's iTunes, which charges 99 cents per tune, is the largest source of legal downloads, having sold more than 600 million downloads.

Apple's music download service accounts for than 80 percent of all legal music downloads.

In September, Apple CEO Steve Jobs called the music publishers "greedy" for seeking price increases at iTunes for their music. Speaking at the Apple Expo in Paris, Jobs claimed the publishers already make more profit on a digital download than they do on a standard CD because of manufacturing and marketing costs.

Warner Music Group CEO Edgar Bronfman responded to Jobs by saying almost all consumer products have varying price points depending on the popularity of the item. He also complained that the music companies do not share any of the profits from iTunes.

Bronfman and the other music publishers want Apple to move to a tiered pricing scheme where popular songs sell for more than older tunes.

In November, Warner Music and Sony BMG settled a complaint brought by Spitzer accusing the music industry of making payments to radio stations to promote certain songs over more in a classic "payola" scheme.

Warner Music paid $5 million to settle the dispute while Sony BMG paid $10 million.