EMI drops DRM
WSJ.com - April 1, 2007 8:27 p.m.
EMI to Sell Much of its Music Without Antipiracy Software By ETHAN SMITH and NICK WINGFIELD
In a major reversal of the music industry’s longstanding antipiracy
strategy, EMI Group PLC is set to announce Monday that it plans to
sell significant amounts of its catalog without anticopying software,
according to people familiar with the matter.
The London-based music company is to make its announcement in a press
conference that will feature Apple Inc. Chief Executive Steve Jobs.
EMI is to sell songs without the software — known as digital rights
management, or DRM — through Apple’s iTunes Store and possibly
through other online outlets, too.
DRM has been a contentious issue in the world of online music sales.
Record companies have so far insisted that digital retailers employ
the software to prevent rampant copying. But because the DRM used by
Apple is proprietary and does not work with services or devices made
by competitors, it has had the unintended consequence of locking
owners of its popular iPod music players into buying the most popular
mainstream music from the iTunes store, and not its competitors.
Record companies have blamed this lock-in for limiting digital-music
sales, which account for around 15% of all recorded music sales in
the U.S.
EMI’s move comes after months of private discussions and public
advocacy by Internet and technology industry executives, including
Mr. Jobs, aimed at encouraging the music industry to change its
approach to licensing music for sale online. In February, Mr. Jobs
took the unusual step of posting an 1,800-word essay on Apple’s Web
site urging major recording companies to consider dropping their
insistence that music be sold over the Internet with DRM software.
Mr. Jobs contended that DRM software has been ineffective at solving
digital piracy of music. That’s in large part, he argued, because the
vast majority of music is sold today on CDs, which generally don’t
contain copy-protection, making them easily sharable over the
Internet through file-sharing technologies. Although he wasn’t the
first to suggest such a course change for the music industry, Mr.
Jobs’s essay spurred a vigorous debate throughout the technology and
entertainment industries. Also fueling the discussion recently has
been another steep drop in CD sales, which has forced the music
industry to try and accelerate its digital future.
Privately most labels rejected the idea out of hand, but EMI, the
world’s third-largest music company by sales, was already quietly
exploring the idea of dropping DRM. EMI has struggled to overcome
poor results and a laggard digital strategy, potentially contributing
to its willingness to take a bold stance on DRM.
But EMI temporarily shelved its plans to drop DRM after various
iTunes competitors declined to guarantee significant “risk insurance”
payments designed to offset potential losses from the risky move. It
is unclear whether Apple has guaranteed any such fee.
EMI’s decision, if it’s followed by other major recording companies,
could also lessen growing political pressure on Apple by consumer
rights organizations in several European countries, including Norway,
that want to see Apple make its digital music products, iTunes and
the iPod, work with songs and hardware from other companies. EMI
competitors have been divided on the DRM debate. Warner Music Group
Corp. has been consistently opposed to the idea of removing DRM from
its offerings, arguing that the technology will be increasingly
important once CD sales are eclipsed by digital sales. Vivendi SA’s
Universal Music Group and Sony BMG Music Entertainment, a joint
venture of Sony Corp. and Bertelsmann AG, on the other hand, have
conducted experiments of their own. Neither company has moved as
aggressively as EMI, though.