This latest legal threat comes as the music industry grapples with the meteoric rise of digital music sales balanced against a steep decline in total revenue of more than 40 percent in an eight-year period.
On Wednesday, the 2nd U.S. Circuit Court of Appeals in Manhattan said the lawsuit that accuses major record labels controlling most of the U.S. digital music sales of scheming together to set a floor of 70 cents for each downloaded song now will proceed before a federal judge in New York.
The lawsuit brought by music purchasers had been tossed out by a lower court judge in October 2008. It accused the major labels of conspiring to fix the prices and terms under which music would be sold over the Internet.
Defendants include the four major recording companies: Universal Music Group, Warner Music Group Corp., EMI Music North America, and Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG. Messages seeking comment left with lawyers for the companies were not immediately returned.
Sam Lipshie, a partner at Bradley Arant Boult Cummings LLP, a Nashville attorney who practices entertainment law, said if the plaintiffs can prove their case, it could result in "multi-hundred million dollar damages" against the major record labels.
"It would narrow their margin on their revenues from downloading," said Lipshie, who is not involved in this case. "It would also appear to open up the marketplace to competitors to iTunes."
The New York legal action, in effect, combines 28 lawsuits brought across the country from December 2005 through July 2006. The combined lawsuit was originally filed in Manhattan in April 2007.
The lawsuits accuse record companies of conspiring to charge at least
70 cents a song on the Internet, even though their costs were much lower.
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