By Paul Farhi
Washington Post Staff Writer
Thursday, December 16, 1999; Page E01

The Justice Department is investigating music television network MTV for possible antitrust violations.

The department is looking into long-standing complaints from record companies that MTV's control over the airing of music videos harms record companies and limits would-be competitors. Investigators also are looking at the purchase of two music-video channels by MTV's parent, Viacom Inc. Those deals will greatly expand MTV's power within the music business, according to sources.

Since MTV's founding in 1981, many in the record industry have chafed at its ability to make or break new artists and recordings. Airplay on MTV is considered crucial to a recording's success, not only because the network now reaches 72.6 million cable homes but also because it has a wide following among young viewers, who buy a disproportionate share of recorded music.

Record producers also have complained that MTV pays them only a nominal fee to air their videos. MTV has long argued that it provides priceless promotional value to record sellers.

The music industry is now worried about the future: As MTV and others begin "streaming" videos to computer users, companies fear they won't receive monetary compensation in return, one industry source said yesterday.

"This isn't about TV; it's about the Internet," the source said. "The industry wants leverage in its negotiations [with MTV], so they've run to the Justice Department for help."

Justice officials confirmed the investigation but gave few details yesterday. "We are looking at the possibility of potentially anti-competitive practices involving music-video networks," said a Justice Department spokeswoman, Jennifer Rose, who declined to specify alleged violations. MTV said it is cooperating with the investigation but provided no details.

The investigation centers on Viacom's purchase in July of the Box, a small cable TV channel that plays music videos. By acquiring the Box, Viacom added another music network to a lineup that includes MTV, VH-1 and M2, a channel distributed primarily overseas.

Viacom also has a $35 billion deal pending to purchase CBS Inc. The acquisition would expand Viacom's power within the music business by giving it ownership of CBS's Country Music Television cable channel and its Infinity Broadcasting chain of radio stations. Viacom Chairman Sumner Redstone has touted the cross-promotional benefits of owning the cable music networks and the Infinity stations, the second-largest radio chain.

All told, the music-video business appears to be a tightly knit circle. Viacom, for example, owns the Box in conjunction with Liberty Media Corp. Liberty Media, in turn, owns a minority stake in BET Holdings, the parent of District-based Black Entertainment Television. BET is among the few other national cable networks that regularly carry music videos.

Ironically, in 1993, Viacom itself raised antitrust issues in a lawsuit against Liberty's former parent company, Tele-Communications Inc., alleging that TCI was attempting to control the cable TV business. The lawsuit was dropped in 1995 after TCI agreed to purchase Viacom's cable systems.

Despite periodic attempts to launch independent competitors to MTV, the network and its spinoffs, VH-1 and M2, have not faced serious national competition since MTV began. MuchMusic, owned by a partnership that includes Cablevision Systems, NBC and others, is an independent competitor but has only a fraction of MTV's distribution nationally.