[A2k] EMI to sell some music dowloads without DRM

[Judit Rius Sanjuan]

 From BNA:

EMI has announced that it plans to sell music of several artists as
clean MP3s, without any DRM. The move represents a small but significant
retreat from one of the central tenets of the music industry's digital
strategy. EMI Group PLC's Blue Note and other music companies are
beginning to think they will have to sell some MP3-formatted music both
to satisfy customer demand and to provide access to Apple Computer
Inc.'s iPod for songs that are sold by online stores other than Apple's
iTunes Store.

http://online.wsj.com/public/article/SB116537603826741985-TfD3l60iYwyYgj2wH5P9gTDGDy0_20070105.html

In a Turnabout, Record Industry Releases MP3s
By ETHAN SMITH and NICK WINGFIELD
December 6, 2006; Page B1

The music industry has long resisted selling music in the MP3 format,
which lacks the copy protections that prevent songs from being
duplicated endlessly. But now, Blue Note Records and its marquee artist,
jazz-pop singer Norah Jones, are selling her latest single through Yahoo
Inc. as an MP3 -- despite the risk that it may add to piracy problems.

The move represents a small but significant retreat from one of the
central tenets of the music industry's digital strategy. EMI Group PLC's
Blue Note and other music companies are beginning to think they will
have to sell some MP3-formatted music both to satisfy customer demand
and to provide access to Apple Computer Inc.'s iPod for songs that are
sold by online stores other than Apple's iTunes Store.

Blue Note yesterday began letting Yahoo sell MP3s of Ms. Jones's latest
single, "Thinking About You." Another EMI act, Christian rock band
Relient K, also released two MP3s through Yahoo yesterday. All of the
songs will come without any of the software that normally keeps users
from making unlimited copies of songs they buy online.

The releases come as some high-tech and music-industry executives are
becoming increasingly concerned about Apple's growing clout in the music
business. Only online music files purchased from iTunes, ripped from
users' own CDs or downloaded from pirate services can be played on the
popular iPod. Copy-protected songs purchased from Yahoo and other
legitimate sources don't work on it. By selling music in the MP3 format
without copy-protection software, Yahoo can offer music that works
easily on iPods.

Blue Note General Manager Zach Hochkeppel called the initiative "an
experiment," adding that he doesn't believe it will cut into sales of
Ms. Jones's forthcoming album, also called "Thinking About You," which
is due out Jan. 30. That's because even if early copies of the song end
up widely copied among friends or online, Ms. Jones's mostly adult fan
base is thought to be less likely than teenage pop fans to be satisfied
with just one song from the album and thus willing to buy the entire
album even if they have gotten one song free.

"Nobody gets hurt -- we think," Mr. Hochkeppel said.

The MP3 releases are coming as digital-music sales have stalled for the
first time since Apple launched its iTunes Store in 2003. Digital track
sales held steady at 137 million songs in the second and third quarters
of this year, according to Nielsen SoundScan. That's a slight drop from
the 144 million sold in the first quarter.

The MP3 announcements highlight a growing internal debate at EMI and
other music companies over the correct approach to maximizing the impact
of digital sales. Throughout the music industry, executives at record
labels who suggested using MP3s for promotions spent years butting heads
with their corporate superiors.

Ted Cohen, an independent digital-media consultant who used to be EMI's
senior vice president for digital development, called yesterday's
announcement "a nice first step," but said the company hadn't gone far
enough. "We need to see some albums available as MP3," he said.

Mr. Hochkeppel confirms that he and other Blue Note executives had to
overcome what he called "general resistance" on the part of senior EMI
executives. He says they were ultimately persuaded there was a need to
try fresh approaches to digital sales.

Since the rise of the original Napster in 1999, the music industry has
largely blamed the free online trading of MP3 files for a 20% decline in
its sales. As a result, it has insisted that when music is sold online
by iTunes and others, it be delivered in formats that use special
software called digital rights management, or DRM, to prevent copying
and redistribution.

But music companies have grown increasingly troubled by Apple's
unwillingness to allow music it sells to play on devices from other
manufacturers, or to allow music sold on other mainstream sites to work
with the market-leading iPod. Music companies worry that those hurdles
are holding back legitimate sales of music on the Internet. For
instance, cellphone companies this season are rolling out numerous
handsets that can play music, but most of them won't play songs
purchased from iTunes, cutting off a potentially major new market.

Apple spokesman Steve Dowling declined to comment.

For Yahoo, the deal with EMI represents another step in a long-running
effort by David Goldberg, the vice president and general manager of
Yahoo Music, to persuade recording companies to abandon their insistence
on antipiracy software. Mr. Goldberg publicly floated the proposal at a
music industry conference in February, but initially found few takers.

His reasoning: Antipiracy software on music isn't helping the industry
because the same music is already available without copy protection on
CDs and through Internet file-sharing programs. What's more, many
consumers don't like the limitations that copy protection imposes on how
and on which devices they can listen to their music. If DRM benefits
anyone, Mr. Goldberg argued, it's technology companies like Apple,
because it makes it trickier for consumers that have made hefty
purchases of digital music through iTunes to switch to non-Apple music
devices in the future.

"It just isn't working," he said. "It's not solving piracy. It's not
helping consumers: They view it as a tax."

For music executives, allowing Apple to gain increasing control over
digital music sales -- iTunes accounts for more than 90% of the tracks
sold online some weeks, according to people who work in the music
industry -- is shaping up as the latest in a long series of strategic
blunders that have helped create powerful new gatekeepers between them
and their customers. (Past middlemen have included radio broadcasters,
MTV and big retailers like Best Buy Co. and Wal-Mart Stores Inc.

Even as digital sales have stalled, peer-to-peer networks that traffic
in pirated music -- virtually all of it MP3s that can be played on iPods
and other devices -- have much more traffic than all the legitimate
retailers put together.

Eric Garland, chief executive of BigChampagne LLC, which tracks
peer-to-peer traffic, says more than one billion songs are traded over
those networks every month. "It took iTunes several years to reach that
particular mile marker," he notes. "The pirate market -- if we
considered that a market -- would command better than 90% of the online
marketplace."

One online retailer has, in fact, made a healthy business of selling
MP3s. Dimensional Associates Inc.'s eMusic has made itself the No. 2
digital music retailer, by units sold, by selling all of its music as
unprotected MP3 files. The catch: The company offers only music sold by
independent labels, which don't generally have the same stringent
policies requiring copy-protection software that major labels do.

Sony BMG, Warner Music Group Corp. and Walt Disney Co.'s Hollywood
Records have also made a handful of selections from their catalogs
available as MP3s. Sony BMG, a joint venture of Sony Corp. and
Bertelsmann AG, sold MP3s of a Jessica Simpson song earlier this year,
as Hollywood did for Jesse McCartney.

Yahoo, which promoted the sale of MP3 tracks by Ms. Simpson and Mr.
McCartney, didn't see "massive, massive" sales of the music, but the
results were satisfying, says Mr. Goldberg. He adds that Yahoo is also
talking to independent labels about getting their music in the MP3
format and hopes to have a significant catalog of songs by next year.

Write to Ethan Smith at ethan.smith@wsj.com and Nick Wingfield at
nick.wingfield@wsj.com

Corrections & Amplifications

Norah Jones's forthcoming album is to be called "Not Too Late." This
article incorrectly said the title is "Thinking About You."



--
Judit Rius Sanjuan
judit.rius at cptech.org
www.cptech.org

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