Despite Move to MP3s, DRM Will Haunt Record Labels
While record labels' retreat from digital rights management software is designed to give consumers the ability to play songs on any device, music fans will likely be trapped in a DRM-filled world for years to come.
"In the big picture, we're probably 10 years into a 20-year evolutionary process here, from going to the store (and) buying a CD to downloading all music in the MP3 format on your computer," said Christopher Allen, chief operating officer of Napster.
The music industry is in the fledgling stages of an anti-DRM experiment that until recently seemed unlikely. With Apple's iTunes Store dominating the booming market for digital music sales, the Big Four record labels -- Sony BMG, Warner Music Group, Universal Music Group and EMI Music -- are scrambling for fresh ways to peddle their wares, even as they face creative new competitors.
On Monday, for example, Sony BMG announced it will release a mishmash of 37 albums in the unrestricted MP3 format, confirming last week's report that the label would ditch DRM. Under Sony's new plan, consumers would purchase a credit-card-like ticket from Best Buy, Target, Fred's, Winn-Dixie or other outlets. The cards will have a number that must be entered into the MusicPass site, where the full album can be downloaded.
"The MP3 files delivered through MusicPass play on computers, as well as on all MP3 players, including iPods," said Thomas Hesse, a Sony BMG sales president. "This makes them a simple, easy-to-use solution that will appeal to fans who already access their music on the internet, as well as to consumers who are just getting into the digital realm."
Nearly two weeks ago, Warner Music Group, another of the Big Four music concerns, announced it would make its entire selection available on Amazon.com in the MP3 format. That followed other DRM-removal announcements earlier in 2007 from Universal Music Group and EMI, which licensed its catalog to Apple's iTunes Store to sell in the unrestricted MP3 format.
Still, more than 80 percent of the digital music market remains encoded with DRM, despite the announcements from the big labels. That's because of the highly popular iTunes Store, and Apple's iPod and iPhone. Those devices, with more than 100 million units sold, only play music protected by Apple's proprietary FairPlay DRM technology, or music that isn't protected at all. Apple, since 2003, has sold more than 3 billion music downloads, capturing more than 80 percent of the market.
Apple chairman Steve Jobs has repeatedly balked at licensing FairPlay for use on competing download services or devices -- meaning music companies had to choose between using iTunes or going DRM-free if they wanted the songs to play on the all-important iPods. The industry stood by and allowed most of its music-download sales to come from Apple, but that is slowly changing.
Napster, the online music service that nearly a decade ago was synonymous with music piracy, announced Monday it was looking to strike unrestricted licensing arrangements with the Big Four. Right now, the subscription-based service's millions of downloads are not compatible with the iPod, which Warner chief Edgar Bronfman Jr. in September labeled the "default device" in the digital music scene.
"Talks are currently in progress with the labels," said Napster's Allen. He said the company anticipates selling unprotected music from the Big Four sometime in the second quarter.
"The move to MP3s is certainly a step in clearing up some of the dysfunction, and Apple's hermetically sealed proprietary system," Allen said.
Apple, which encodes digital downloads with DRM as a licensing condition, declined comment on whether it would begin removing DRM. The bulk of Apple's songs for sale contain the FairPlay DRM coding.
Yet the removal of DRM dramatically expands the music industry's marketing capabilities. Sony BMG's new campaign would have been impossible had the 37 albums been encoded with DRM. Digital rights management allows downloads to expire, or to be shared and played only a limited number of times or on certain devices.
"Physical products like this will be another way for Best Buy to deliver music and entertainment to our customers in a manner that suits their needs, whether it is an impulse purchase, gift or collectible," said Jennifer Johnston Schaidler, a Best Buy vice president. "Digital music doesn't need to be restricted to online environments."
Sony spokesman John McKay declined to say whether the company would demand that Apple remove its FairPlay technology from Sony's digital downloads. McKay also declined to say why just a few dozen albums -- from big artists such as Alicia Keys, Bob Dylan, Celine Dion and Tony Bennett -- were available in the unrestricted format, or when others would be made available.
Individual Sony BMG songs are not available, he said..
Sony's Idea of DRM-Free Music
"Leave it to Sony to mess up DRM-free music downloads. What is the point of DRM-free tracks if you still have to go to a retail store to buy them? From the Infoworld article: 'The tracks will be offered in MP3 format, without DRM, from Jan. 15 in the U.S. and from late January in Canada... The move is far from the all-digital service offered by its rivals, though. To obtain the Sony-BMG tracks, would-be listeners will first have to go to a retail store to buy a Platinum MusicPass, a card containing a secret code, for a suggested retail price of $12.99. Once they have scratched off the card's covering to expose the code, they will be able to download one of just 37 albums available through the service, including Britney Spears' "Blackout" and Barry Manilow's "The Greatest Songs of the Seventies."'"