Changing Their Tune

EMI is going where no major record label has gone before.

In a joint press conference with Apple, the label announced it will sell its music on iTunes without any digital rights management attachments, thus going against the major label belief that digital downloads must be protected from unauthorized copying and distribution.

This doesn’t mean EMI endorses unlimited copying and file-sharing. Instead, it signifies that at least one major label believes DRM-wrapped digital downloads are hurting business, and more people will buy legal downloads if those songs come with no technological strings attached. Plus, by dropping DRM, EMI ensures its online music will play on every device, something proprietary copy-protection technologies currently prevent.

The unprotected EMI tracks will start appearing on iTunes in May.

Despite rumors leading up to the press conference, music from The Beatles is not included in the arrangement. However, EMI chief exec Eric Nicoli did say his company was "working on it."

The EMI DRM-free downloads on iTunes will be twice the sound quality and cost $1.29 per track, 30 cents more than the 99 cent, copy-protected songs the online music store already offers. Customers who already purchased the copy-protected songs can buy the "new and improved" tracks for 30 cents per song. Complete EMI album purchases on iTunes will be the DRM-free, higher-quality tracks with no change in price.

The DRM-less tracks sold on iTunes will still be in the AAC format Apple uses for all its online music. However, EMI indicated that the protection-free deal is not limited to iTunes, and other online stores striking similar agreements could end up offering the format of their choice, including MP3 and WMA.

Until now, the major record labels had been united in insisting that online music carry some form of digital rights management protection. There is no indication that the other three majors – Universal Music Group, Warner Music Group and Sony BMG – might follow EMI’s lead.

Earlier this year, Apple CEO Steve Jobs ticked off more than a few label executives when he posted his "Thoughts On Music" on his company’s Web site decrying the use of DRM, claiming copy protection technology hindered online music sales.

And he may have had a point. In his essay, Jobs argued that it made no sense to sell copy-protected music online when the same music was sold on CDs without any protection. Plus, when you consider that the original file-sharing piracy debacle began with music ripped from CDs, the claim that online music must carry some kind of anti-copying protection seems even less valid.

Of course, Jobs’ promotion of dropping DRM is about more than just selling more music. Apple is facing possible antitrust action from more than one European country over the proprietary DRM the company uses on iTunes. If Apple can eliminate DRM, it might very well eliminate some future legal problems.

But only time will tell if the other labels re-think their own DRM attitudes. Lately, copy-protection technology has been blamed for less than robust online music sales. But if EMI online sales go up, you can bet the other labels may soon change their tune.

"Our goal is to give consumers the best possible music experience," EMI’s Nicoli said. "By providing DRM-free downloads, we aim to address the lack of inter-operability which is frustrating for many music fans. We believe that offering consumers the opportunity to buy higher quality tracks and listen to them on the device or platform of their choice will boost sales of digital music."


Finish What You Started

Sometimes you can be your own worst enemy. Especially when you’re trying to market a new concept.

A couple of weeks ago, Apple began pushing a new iTunes feature where customers who had only purchased tracks from an album could download the rest of the songs for a fraction of what it would cost to individually purchase the remaining tunes.

Called "Complete My Album," the marketing ploy was just starting to gain traction when the first rumors of a major announcement from Apple and EMI about dropping anti-copying protections started making the rounds.

Here’s how "Complete My Album" works:

ITunes customers who have already purchased single tracks from an album can apply the cost of those tracks – 99 cents per song – to the purchase price of the entire album. That is, if the customer completes the album within six months of buying the individual tracks.

Because most single albums on iTunes cost $9.99, this can work out pretty well if you’ve already bought one or two tracks.

But you might want to do some math before you fire up iTunes to fill in the gaps in your music collection. That’s because "Complete My Album" is only a bargain when there are enough songs on an album to make individual track purchases total more than the offered discount.

For example, an iTunes customer purchasing two tracks from a 10-song album will end up spending $1.98. If, after purchasing the tracks, the user decides to buy the remaining 8 tracks from the album, that $1.98 will be deducted from the $9.99 purchase price, resulting in a $8.01 price tag.

But buying those remaining 8 tracks at 99 cents per will cost $7.92, so the "Complete My Album" deal isn’t all that special.

But if the customer has previously purchased, say, one track from a 12-song album, he or she can purchase the rest of the album for $9. That’s 99 cents less than iTunes’ $9.99 per album price and almost $2 less than if the customer chose to buy the tracks individually at 99 cents per. So you have to consider how many tracks are on the album as well as how many you’ve already purchased in order to determine if "Complete My Album" will save you some dough.

Nevertheless, since iTunes has been accused by both music lovers and music industry members as being partly responsible for the slow death of the CD, any marketing ploy by the computer / entertainment company designed to sell albums can hardly be a bad thing.

"Once we bought a song, we wondered why we had to buy it again if we wanted the album," iTunes VP Eddy Cue said. "We hope it helps us sell more songs ultimately, and from the customer point of the view, we think it’s the right thing to do."


The Long And Winding Lawsuit

One of the continuing lawsuits over the original Napster recently came to a close.

The recording industry originally filed its copyright infringement suit against the first Napster at the end of 1999. However, it took 18 months of legal wrangling before a court injunction ordered the file-swapper to shut down its servers, forcing it to close its doors.

It was during those 18 months leading up to the shutdown that Napster received investment capital, most notably an $85 million check from Bertelsmann. Copyright holders still wanted their pound of flesh after Napster sank into bankruptcy oblivion, and turned to those investors in order to satisfy their lust for compensation.

The record labels charged that it was Bertelsmann’s investment that kept Napster running during its final months. Plus, a former Bertelsmann executive eventually ended up as Napster’s CEO. In other words, without Bertelsmann, the labels argued, Napster would have ceased to exist long before an injunction forced it off the Net in July 2001.

Bertelsmann isn’t saying how much it paid EMI to settle the lawsuit, but published reports indicate the final figure is somewhere between $50 to $150 million. Last fall, Bertelsmann settled with Universal to the tune of $61.22 million.

But the settlement with EMI doesn’t mean Bertelsmann is out of the litigation jungle. At least not yet. Songwriters and music publishers are still looking for their own piece of the Napster lawsuit. But whether they’ll be able to hang in there and shoulder the lion’s share of legal expenses after EMI’s departure from the courtroom remains to be seen.