[A2k] Amazon to Sell Music Without Copy Protection

[Michelle Childs]

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[ Picked text/plain from multipart/alternative ]
http://www.nytimes.com/2007/05/17/technology/17amazon.html?


Amazon to Sell Music Without Copy Protection

     * New York Times
By BRAD STONE and JEFF LEEDS
Published: May 17, 2007

Amazon.com, the biggest online seller of CDs, is joining the movement
against copy-protection software for digital music. It plans to sell
songs that can be freely copied to any computer, cellphone or music
player, including the iPod from Apple.

The move could be another step toward the demise of the copy-
protection systems that have frustrated some online music buyers and
created confusion about compatibility between digital players and
downloaded songs. Critics charge that the software has slowed the
public embrace of legal digital downloads while failing to stop
illicit copying, at a time when the music industry is desperate for
ways to make up for declining CD sales.

Amazon announced plans yesterday to add a music download store to its
Web site this year. It will sell songs and albums in the MP3 format
without the layer of software for digital rights management, or
D.R.M., that is used by most other online music retailers.

Amazon said its service would include music from one major label,
EMI, and from 12,000 independent music companies that have chosen not
to use copy-restricting software.

=93We are offering a great selection of music that our customers love
in a way they clearly desire, which is D.R.M.-free, so they can play
it on any device they own today or in the future,=94 said Bill Carr,
Amazon=92s vice president for digital media.

Amazon=92s announcement comes three months after Steven P. Jobs,
Apple=92s chief executive, wrote an open letter to the music industry
arguing that it should stop using D.R.M. He noted that consumers get
unprotected music anyway when they buy CDs and copy the songs to
their computers.

Last month, Apple followed up on that letter, striking a similar deal
with EMI to sell songs without copy protection through its iTunes
store. Apple, which controls more than 85 percent of the United
States market for music downloads, will charge $1.29 for unprotected
songs that will also have improved sound quality, versus 99 cents for
a protected track. Apple plans to start selling those songs this month.

If the unprotected tracks from Apple and Amazon prove popular, other
labels could feel pressure to follow EMI=92s example.

=93More than 50 percent of the entire music catalog is going be
available without D.R.M. before Christmas,=94 said David Goldberg, the
former general manager of Yahoo Music and now an entrepreneur in
residence at the venture capital firm Benchmark Capital. =93The music
labels do not want Apple to have control of the download space, and
although they won=92t say it, they are very, very concerned about the
lack of growth of digital music.=94

Among the four major record companies, EMI has the smallest share of
the United States market, and it has been struggling, posting two
profit warnings this year and fielding takeover proposals from
private equity investors. It potentially has the most to gain from
experimenting with new digital music formats as a way to increase
online sales.

Other major music labels, like Sony BMG Music Entertainment and
Warner Music Group, have appeared reluctant to join EMI in forgoing
copy protection. But Universal Music Group, which is the world=92s
largest label with about one-third of the United States market, may
be getting ready to make the leap. It has been dabbling with
unprotected files in Europe, where it is selling new recordings from
artists like the French singer =C9milie Simon in the MP3 format.

According to music executives briefed on the company=92s discussions,
Universal has recently devised a broader set of offerings meant to
test the market for unprotected songs through Amazon and other outlets.

In addition to the likely sale of classical music in MP3 form, these
executives said the company was discussing selling unprotected
recordings by stars like Gwen Stefani and Fergie, the lead singer
from the Black Eyed Peas.

Universal has also talked about possible MP3 sales through Google,
which has been studying the music market, the executives said. A
spokesman for Universal declined to comment.

Several analysts noted that the major labels could easily just stand
back and watch EMI=92s progress. =93The other labels will all wait to see
how the EMI experiment goes,=94 said James L. McQuivey, a vice
president at Forrester Research. =93They have the luxury of knowing
good data is just around the corner.=94

Amazon=92s service could lead to a shift in the record labels=92
relationship with Apple. Four years after the iTunes service
established the market for paid downloads, the music corporations
have become unsettled by the company=92s clout in determining pricing
and other terms.

Many label executives say a successful entrance by Amazon could
provide them with needed leverage in their current talks with Apple
over renewing their contracts. Of course, even if the iTunes service
faces new competition, Apple retains great power thanks to the
popularity of the iPod, which has 70 percent of the music player
market and works smoothly with the iTunes store.

Amazon did not announce many details of its new service, and it would
not comment on its planned pricing for songs and albums. Executives
who have talked with Amazon said they expected the service to sell
D.R.M.-free songs for 99 cents =97 less than Apple=92s $1.29 =97 though
they noted the terms could still change.

Yesterday=92s announcement puts to an end several years of industry
speculation about Amazon=92s plans for the digital music business. Last
year, for example, there were reports that the company was on the
verge of selling its own music players that would be linked to a
subscription service. But the company later changed course,
reportedly after Microsoft unveiled its own Zune player.

Despite the long wait, David Card, an analyst at JupiterResearch,
said Amazon=92s new store would immediately position the company as a
credible rival to Apple and Microsoft. =93We=92ve been waiting for Amazon
to be a serious player in digital music for some time,=94 Mr. Card
said. =93They know how to sell music, and this is a powerful
endorsement of the MP3 strategy.=94

Not everyone thinks selling unprotected music can offset the decline
in CD sales and save the music business. Many industry watchers are
urging the industry to experiment with other approaches, including
wholesale changes in its business model, like introducing music
services that are free and supported by advertising.
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Michelle Childs
Head of European Affairs
Knowledge Ecology International
michelle.childs@keionline.org