April 02, 2007

Technology -- DRM and Apple and iPods

It had been telegraphed in advance for several weeks and it finally happened. iTunes now offers music tracks with no DRM. It's noteworthy that the non-DRM will be offered side-by-side with the DRM version. They will charge more for delivering the song without DRM. DRM is one of the hangnails of the music industry which has crimped sales for last three years.


EMI and Apple will now sell DRM-free catalog on the iTunes Store, according to a joint announcement issued today. The move is groundbreaking, and shatters a previously ironclad commitment to digital protections by the major labels. The decision means that well-known tracks from artists like the Rolling Stones, Norah Jones, Lily Allen, and Janet Jackson can now be downloaded in a protection-free format, an approach that eliminates usage and sharing restrictions. The company pointed to a refreshed product line that will feature "a much higher sound quality than existing downloads," and one that will be "free of digital rights management (DRM) restrictions". Specifically, the label will offer its catalog to digital music stores in a range of higher bitrates, including CD-quality fidelities. According to Steve Jobs, the DRM-free offering will be exclusively unveiled by iTunes in May. Other stores will offer the DRM-free catalog at dates thereafter.

The move represents a major shift, though several asterisks are dangling. The tracks themselves are being branded as "premium downloads," and will carry an elevated price tag above "standard," DRM-protected tracks. Instead of a standard, 99 cent, 79 pence, or 99 euro price tag, the premium tracks will be priced at $1.29, 0.99 pence, or €1.29. Both premium and standard tracks will sit alongside one another, and consumers will have the ability to upgrade their standard versions by simply paying the difference. That approach breaks an iTunes commitment to uniform pricing and format, and conflicts with earlier philosophies expressed by Jobs. But during the unveiling, Jobs noted that the offering means greater choice, and a more fine-tuned offering. "We think our customers are really going to appreciate this," Steve Jobs said. "iTunes will continue to offer its current catalog at the same price, alongside the DRM-free, higher quality versions." Jobs also disclosed that the iTunes Store has now sold more than 2.5 billion tracks.

Nice analysis by Paul Resnikoff

If you thought DRM was complicated, try DRM-free! At least, the brand of DRM-free being spun by EMI Music and Apple. Sure, you can have your freedom, but you have to pay the price! And if you don't know what DRM really is - like so many consumers out there - then you are now confronted with a more complicated iTunes Store. Newbies usually call more experienced friends for help in times like these, but doesn't that ruin the simplicity that Apple is so good at? If a mother has to dial her son at college to figure out why there are two prices for the (seemingly) same track, doesn't that make iPod+iTunes unnecessarily complicated and annoying? Can your grandma really understand what's going on now?

Jobs is famous for being consumer friendly, but the movement suddenly shifted into reverse! During the joint announcement, EMI chief executive Eric Nicoli pointed to research that showed that consumers are willing to pay extra for protection-free music. "In all of our research, consumers tell us overwhelmingly that they are willing to pay a higher price for tracks that work anywhere," he said. But just where did that focus group come from? On the digital streets, the opposite preference is being blared in the billions. Jump onto Limewire, and consumers are strongly expressing a preference for DRM-free tracks at a price tag of $0! Does that make a more expensive offering by iTunes suddenly attractive?

That's not to say that some consumers will pay more. But the number of consumers that will pay more for higher fidelity and flexibility represent a fraction of the current buying public. And the buying public represents a small fraction of the downloading mass. In other words, premium tracks at a higher price will appeal to a niche within a niche. And that sideshow will lessen the impact of iTunes, which gained so much traction based on its uniformity and simplicity.

Sure, Steve Jobs gets a win, and a potential domino effect involving other labels. The move will help to de-pressurize the regulatory standoff happening in Europe, and Jobs has now shifted the focus onto remaining labels Universal, Warner, and Sony BMG. Think that iTunes is non-interoperable? Just pay a little more, and you can dribble your ball on any court! Or, stay within the walls of iPod+iTunes at the existing price.

rest of story

Posted by staff at April 2, 2007 11:15 AM