Confirmed: iTunes Going DRM-Free. Unclear: Does Anyone Care?
by Peter Kafka
Posted on January 6, 2009 at 6:43 AM PT
In 2007, Apple CEO Steve Jobs predicted that half the music offered at his iTunes store would be sold without digital rights management–the lock-and-key system that the music labels wrap their songs–by the end of that year. But until this week, only one big label–EMI Music Group–was selling iTunes music in a DRM-free format.
Better late than never: Apple (AAPL) has deals in place with three of the big music labels–Warner Music Group (WMG), Sony (SNE) and Universal Music Group–to sell DRM-free songs. In exchange, Jobs will give the labels some ability to introduce “flexible pricing”–a key demand for the industry. CNET’s Greg Sandoval reported the news yesterday, citing sources; I’ve confirmed with my own industry sources this morning. Expect an announcement this week; the logical timing would be during today’s MacWorld keynote. [UPDATE: Here's the press release]
You’ll be hearing a lot of hubbub in the Techmemeworld about the move: DRM has been one of the tech world’s biggest bugaboos. If you believe the people who write blogs and leave blog comments (please do!), the fact that the labels have sold their music with DRM has been a drag on iTunes sales.
But I don’t think that’s the case: Apple moves some two billion songs a year via iTunes, and unless you’re in a small minority of people who want to do something with your iTunes song other than listen to it on your computer, iPhone, or iPod, you’ll find it hard to butt heads with a DRM restriction.
In the real world, few people have even heard of DRM. That’s one reason why the fact that Amazon’s (AMZN) Jeff Bezos has sold DRM-free music for all of 2008 doesn’t seem to have helped the company even dent Apple’s commanding market share. And think about it this way: Who’s more eager to sell digital music–Steve Jobs or the struggling music labels? If DRM-free tunes were a cure-all, you would have seen the big guys moving to drop it a long time ago.
The bigger news here is the move to add flexible pricing to the iTunes store. The labels have long pushed for the ability to mark up certain songs above the 99-cent mark, and Jobs hasn’t given in (he initally sold EMI’s DRM-free songs for a premium, but ended that after a few months). Neither CNET nor I have details about the pricing, but expect three tiers: One for in-demand songs, one for “long tail” back catalog and one for midrange stuff.
If Apple and the labels play this right, the tiered pricing could move the needle. But it won’t be at the high end: While there’s some opportunity to squeeze a few more cents out of the buyers who absolutely have to have the new Beyoncé song, the real opportunity will be selling lots and lots of music at a steep discount.
That’s if the labels go ahead and offer music at a significant discount, which I think they will be reluctant to do, for various reasons (more on that later). But let’s hold off and see what the pricing actually looks like first.
UPDATE: Expect the following tiers: $0.79, $0.99 and $1.29 per track, I’m told. [Update: Make that $0.69, $0.99 and $1.29] Disappointing but understandable: I’d like the labels to sell most of their music for 50 cents or less; they think their best music is worth much more than $1.29.
UPDATE 2: Also coming to iTunes: Over-the-air downloads for iPhone 3G users.
Comments
Personally think charging MORE than $.99 per track would be a bad move. If Apple wants to stimulate revenue growth, they should focus on charging LESS for long tail music.
Posted by Adam Wexler at January 6th, 2009 at 9:17 amYup. We agree, Adam. But the labels think they are leaving money on the table when it comes to some songs, at least. We’ll see.
Posted by Peter Kafka at January 6th, 2009 at 9:32 amAround 90% of music sales are Top 40 — so tiered pricing probably makes a lot of sense. (I might not pay more than 99 cents for anything, but my daughters would pay $5 for a new Jonas Brothers song.)
Having DRM free files will in fact be a major convenience. The other day I was burning songs for the car and iTunes prevented me from creating an MP3 disk with songs that I purchased from the iTunes store.
Posted by John Peebles at January 6th, 2009 at 10:21 amDRM has been my biggest gripe about iTunes. I refuse to buy DRM music anymore. It’s a colossal inconvenience to share songs among family members (something we could easily and legally do in the CD era), and having to constantly authorize and deauthorize computers whenever we upgrade computers is ridiculous.
The reason Amazon hasn’t sold more mp3s is because they haven’t built a successful alternative to the integrated, push-button iTunes system. Had Amazon developed an iTunes-like client that allowed you to browse their store, easily buy and download music and drop it into iTunes libraries, it might be a different story.
Posted by Michael Bazeley at January 6th, 2009 at 11:36 amYou are exactly right that no one outside of the tech community cares about whether their music has DRM or not. That is, right up until the music they bought doesn’t play on their new device or the validation server is being shut down or they run out of activations or …
The number of people who care may be small but it grows every single day and it was only going to get larger. Now, hopefully, it will be a non-issue.
Posted by Michael Pate at January 6th, 2009 at 11:54 amFor my peers, the routine will continue to be the same in searching for a new album:
1. Friends
Posted by Liz Colville at January 6th, 2009 at 12:19 pm2. Message boards
3. Mp3 blogs that post entire albums
3. Bittorrent
4. iTunes
5. In no particular order: Beatport, 7digital, Amazon, eMusic, label websites
The gilded cage of DRM never bothered me much as I did not have enough devices to be constrained by it.
But I think the removal of DRM is important to companies like Sonus and Roku and others who will now be able play music files they previously could not. Basically, it brings them deeper into the iTunes ecosystem and broadens it further. This is important.
Aside from DRM I really like the increased bit rate. I mostly listen to my iTunes purchases on my stereo and 256 sounds much better to me than 128. Someday, I hope they offer lossless compression.
Posted by John Mahar at January 6th, 2009 at 3:33 pmApple joining Amazon in a DRM-Free world is kinda a seminal moment for the music business. Theft and unsavory behavior is commonplace in every industry. Yet, smarter business minds have long since chalked up the tomfoolery to a cost of doing business. Don’t believe me? Go ask Google and Yahoo how much of their revenue is generated by click-fraud, domain squatting and black hats. Large ad buyers are forced to assume a 10 – 20% breakage cost when determing CPC prices. So, the music industry outta get over the fact that digital is different from the physical, and get to restructuring their P&L drivers, pronto.
Posted by Jonathan Marcus at January 6th, 2009 at 3:53 pm