Look for the decision by EMI to start offering DRM-free content through Apple’s iTunes Store to push other major record labels to follow suit. But how quickly that happens is anyone’s guess, analysts say.
EMI announced Monday that
it will make its entire music and video catalog available in May without any digital-rights management protection. Those tracks, which will sell at the iTunes Store for $1.29 each, will also be encoded at 256kpbs AAC.
Other record labels have yet to react publicly to EMI’s move. Sony BMG declined to comment for this story, and representatives from Warner Music could not be reached for comment.
But analysts who follow digital media predict the major record labels may feel increased pressure to drop DRM from their own digital offerings.
“I think it’s a good thing that EMI is doing this, and, hopefully, it will push others in that direction,” said Roger Kay, president of market research firm Endpoint Technologies Associates. “But the other labels have more leverage because they are bigger, and they have more at stake in the current model. It’s the guys in the weaker position that have to take the risks or they end up losing overtime.”
However, JupiterResearch Vice President and Research Director Michael Gartenberg doesn’t believe consumers will have to wait long for the other labels to come on board. “I think it’s going to happen sooner, rather than later,” he said. “It takes getting one of the major partners onboard, but then everything quickly falls into place.”
If things do fall into place quickly, it will be after some record companies have expressed considerable resistance to dropping DRM. When Apple CEO Steve Jobs
made headlines in February by
proposing that the major record labels do away with DRM, Warner Music CEO Edgar Bronfman emerged as
a vocal critic of the idea.
“We advocate the continued use of DRM,” Bronfman said back in February. “The notion that music does not deserve the same protection as software, film, video games, or other intellectual property, simply because there is an unprotected legacy product in the physical world, is completely without logic or merit.”
But analysts think there’s something to the notion that digital-rights protection may be unnecessary for online music. In fact, they contend that if the experience of buying, downloading and syncing music is good enough, consumers won’t bother downloading songs illegally.
“If you give people the option to buy the music and move it wherever they want, they will respond,” said Tim Bajarin, president of high-tech consulting firm Creative Strategies.
Endpoint analyst Kay agrees and points to the frustrations illegal downloads often bring with them. From truncated files to malware and long download times, most people will opt to pay a small fee to get a high-quality, complete song with album art included, he said.
“You can never stomp out piracy completely,” Bajarin added. “This deal provides convenience, commerce and flexibility.”
That’s the point Jobs and EMI CEO Eric Nicoli stressed during the Monday event to announce EMI’s decision. “We have always argued that the best way to combat illegal traffic is to make legal content available, at a decent value and conveniently,” said Nicoli. “We take the view that we have to trust consumers—the fact that some will disappoint us and continue to steal the music is inevitable. This doesn’t in any way diminish our commitment to fighting piracy in all its forms and we will continue to do that.”
While the rest of the industry sits back and watches what happens with DRM-free music sales, analysts think that EMI will gain on its rivals because of its openness.
“This is a radical move and it will draw attention to them,” Kay predicted. “New hip artists will want to do business with EMI because of what they are doing.”
Apple could see an upside as well—the ability to maintain a leadership role in the market and in the mindshare of its customers. “Apple has an uncanny sense of when to do things in the market,” said JupiterResearch’s Gartenberg. “They have done an incredible job at staying in step of what consumers want and delivering on them.”