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A Big Mistake at Sony BMG

When you get caught doing something you've campaigned fervently against, it looks really bad. Just ask Eliot Spitzer, and maybe Sony's (NYSE: SNE  ) and Bertelsmann's Sony BMG music label. A small French company has alleged that Sony BMG pirated its software.

According to sources like Wired News, a small French software company named PointDev is after Sony BMG for pirating its software. Apparently, it was found on four of the company's servers. PointDev has said it isn't interested in "an amicable settlement" with Sony BMG, on account of principle. According to translations of the original article reporting the situation, Sony BMG even tried to convince French news source La Provence not to release the story.

I'm not the first and certainly not the last to think this story is steeped in irony. Sony BMG is one of the high-profile members of the Recording Industry Association of America (RIAA), a trade group that also includes major labels from Warner Music Group (NYSE: WMG  ) , EMI, and Vivendi's Universal Music Group. And of course, it's not lost on anybody that the RIAA has been hard at work for the last couple years suing the pants off consumers for piracy. But I guess that's different? Not really.

And of course, its zeal to stop piracy in its tracks led to the rootkit controversy a couple years ago, too. Sony BMG planted what many considered the equivalent of spyware on customers' machines when they loaded up some of its CDs onto their PCs.

When I'm considering stocks to invest in, I like to take a look at how the companies deal with customers and the world, and I like to try to avoid the ones that seem to teem with hubris or the implication that a company feels it can play by different rules than everybody else. And of course, the ongoing RIAA lawsuits have always struck me as a poor way to treat your fans when industry innovation would likely make everybody happy. And it's not like there isn't innovation and experimentation taking place -- take Nine Inch Nails' recent move.

Sony BMG may be only a small part of electronics and media giant Sony, but this type of story, with what appears to be a heaping dose of hypocrisy, gives us investors a textbook look at how companies should not conduct themselves.

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