For years the music industry has been telling Congress that Digital Rights Management (DRM) technology is necessary to protect the music industry from the scourge of Peer-to-Peer (P2P) filesharing technology. Without DRM, the music labels have argued, they would be unable to provide services that could entice users to pay for music online. The push for mandatory DRM has also been presented as means of protecting innovation. Who wouldn’t want to protect innovation? In March I examined seven different online music stores to determine whether Digital Rights Management (DRM) technology really was enabling innovation in music distribution. Even though the Recording Industry Association of America (RIAA) and the big record labels seemed to feel that DRM was the only way to keep P2P filesharing from decimating the industry, I found a broader range of innovation in DRM-free music services. Since March, huge shifts in the online music market have taken place.

Moves Away from DRM

EMI, the world’s third-largest music label, started selling DRM-free songs on the iTunes Store in May. Shortly thereafter they went DRM-free with other online stores. EMI has reported higher online sales since the switch. Apple’s dominant iTunes Store now carries over 6 million songs, 2 million of which do not contain DRM. Apple has sold over 3 billion downloads to date, and a billion in the period from January to July. Apple chief Steve Jobs has publicly called for the elimination of DRM in the music industry. Amazon.com’s MP3 store launched in September with over 2 million songs. The store sells individual songs and albums on an a la carte basis with pricing between $.89 and $.99 per track. All of the tracks are DRM-free and will play on any computer or digital music player. Amazon’s reach makes it an instant competitor in this market, and its entry has already forced Apple to drop prices on its DRM-free tracks. Yahoo! Music is a subscription-based service that has used DRM since its inception. Ian Rogers, the new head of Yahoo! Music vented his frustrations with DRM in a speech to music industry execs in October:

I’m here to tell you today that I for one am no longer going to fall into this trap. If the licensing labels offer their content to Yahoo! put more barriers in front of the users, I’m not interested. Do what you feel you need to do for your business, I’ll be polite, say thank you, and decline to sign. I won’t let Yahoo! invest any more money in consumer inconvenience.

Microsoft’s revamped Zune Marketplace now offers over a million DRM-free songs, out of a library of 3 million tracks.

New Uses for DRM

Napster, which uses DRM for its subscription service, now has 750,000 subscribers, down from 850,000 in May. The aforementioned Yahoo! Music may be trimming its subscription service. But hope springs eternal. The ad-supported SpiralFrog site launched in September with just under a million songs. SpiralFrog allows users to download tracks for free. The tracks utilize Windows Media DRM, so they cannot function on iPods or Zunes (or Macintosh or Linux computers). The service also requires that users take a survey every month in order to maintain use of downloaded songs. Ruckus, another ad-supported service, is targeted at colleges and universities. The service has entered into agreements with over 100 schools. Ruckus subscriptions are free to students, but tracks will not function on iPods or Zunes, and once students lose their .edu email accounts, they lose access to downloaded music. Ruckus also uses Windows Media DRM, so Linux, Mac, iPod, and Zune users are all out of luck.

Can’t We All Just Get Along?

Manu Sporny, the founder of an innovative P2P-based music store called Bitmunk, made an insightful comment on my DRM post back in March. He wrote:

There are far more non-DRM business models that are interesting – but that doesn’t mean there isn’t room for DRM in the market. I think what should be focused on is that DRM isn’t a panacea as it was once predicted to be – there are cracks forming in its armor. In the end, the artists and the fans should be deciding the distribution methods – not the middle men (including us).

Not Congress either, let’s hope.

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