Apr 4th 2007
From The Economist print edition
EMI decides to embrace unprotected digital music, to Apple's delight
WHEN your back is against the wall, you might as well try something unexpected. That, at least, seems to be the thinking at EMI, the world's third-biggest record company, which on April 2nd said it would start selling digital music online without the “digital rights-management” (DRM) technology normally used to hamper piracy.
EMI certainly needs to do something. Its sales of CDs are plummeting and it issued two profit warnings in the first two months of this year. So of the four big record labels, or majors, it has the least to lose by moving to DRM-free digital downloads. This was something Steve Jobs, the boss of Apple, called for in an essay published on his firm's website in February—even though Apple owns the dominant DRM standard, FairPlay.
Mr Jobs grumbled that he had been forced to introduce FairPlay by the majors, which would not otherwise have sold their music through Apple's iTunes, the leading online music store. As well as limiting piracy, DRM makes it hard to move music from one device to another. This annoys people and hurts sales, Mr Jobs argued. Most music is still sold unprotected, on CDs. By ditching DRM, the majors would gain more in sales than they would lose in piracy, he implied.
EMI is about to put this prediction to the test. It says it will make its digital catalogue available through iTunes and other online music stores without DRM and at a higher audio quality than existing downloads. The new tracks will be sold at a higher price—$1.29 per track rather than iTunes' usual $0.99 (and £0.99 rather than £0.79 in Britain)—justified by the improved quality and greater convenience, say Apple and EMI. Protected tracks will continue to be sold at the lower price.
It is a clever move on EMI's part, but it is even cleverer from Apple's point of view. It should reduce the pressure on the company from some European regulators, who worry that FairPlay is quite the opposite, and “locks in” customers by tightly linking iTunes with Apple's iPod music-players. Furthermore, the majors have long been keen to raise their prices on iTunes. Mr Jobs has always said no. But he has now, in effect, stated his terms: if they abandon DRM, they can charge more. EMI clearly thinks this is a good deal. But will consumers and the other majors?
