10 Points to Consider about iTunes, EMI and DRM

Apple and EMI yesterday announced that the record label will provide DRM-free music to Apple and others to sell online. This has many ramifications for the digital music market, and for consumers. Do you need DRM-free music? Do you need the better-quality tracks the iTunes Store is selling? How will all this affect you? Read on for ten points that you should consider.1. What DRM means to you

With Apple and EMI announcing that EMI music will be sold without DRM (digital rights management), what exactly does this mean to you? If you choose to purchase this “premium” music, you will get not only DRM-free songs, but also higher quality files: 256 kbps instead of 128 kbps. Since most people can’t tell the difference between these bit rates, you probably won’t notice much (though if you listen to your music on a home stereo, and have good ears, you might). However, the big difference is no DRM: you will be able to use the files you purchase on any device–iPod, Zune, or other MP3 player, as well as streaming players, such as the Sonos and others. In addition, you will be able to listen to your music on as many devices as you want–no more five computer limit.

However, it is not yet clear whether there will be any “digital watermarking” in these files. This is a technique that allows a vendor to add unique information–such as your name and account identifier–to the tracks, which would allow the vendor to tell who provided files to peer-to-peer services or illegal download sites. You will certainly be able to “share” music with friends; this is the same as lending someone a CD today so they can rip it. (While not legal, most musicians you speak to have no problem with this, since it gets more people to listen to their music.) You will still have the same “rights” you have with CDs, and the same limits: you are not supposed to copy the music for others, etc., but the vendors all realize that no matter what they do this copying will occur.

2. The price goes up

But only for individual songs. You’ll pay $1.29 per song, but albums won’t cost any more. This is an interesting concept: the record labels will be playing to consumers of two types. First, those who buy individual songs, which represent a non-negligable share of the music download market, will pay more. The labels have wanted to increase prices for a while, and this lets them do so, without looking as though they are simply raising prices with nothing given to consumers in return. But more “faithful” consumers–those who buy albums–will pay the same price, and get better quality and no DRM.

3. Upgrade your songs

In addition to this new price per song, consumers will be able to “upgrade” their songs for 30 cents each. It is not yet clear how this will work for album purchases; will they expect me to pay, say, $6 to “upgrade” an album that contains 20 tracks? What about a set of Shostakovich string quartets I purchased; 62 tracks, that cost me $30. Would I have to pay another $18 to upgrade to better quality DRM-free tracks? Or that Bob Dylan set, with some 800 tracks; at 30 cents a song, it would cost less to buy it again than to upgrade it. Apple has to think this out carefully, in order to not penalize their best customers.

4. Apple can now sell to people with other devices

Got a Zune? Think that Microsoft’s attempt to create an online store, complete with Redmond-only math, is pathetic? No problem. The Zune supports AAC (the file format the iTunes Store sells), so you’re in luck. Just purchase from iTunes and load on your Zune. (I don’t know if you’ll be able to squirt these tracks though…) The same is true for the hundreds of other devices; you will now be able to buy from the iTunes Store, which has much more selection than other online music vendors. Of course, it will take time for all the labels to accept music without DRM, and this won’t be happening tomorrow, but it won’t be long; they’ll have to follow, because it’s clear that consumers will choose no DRM.

5. I can now buy from other online music vendors

While regulators here in Europe have been hassling Apple over iTunes Store sales not being interoperable with other players, I’ve been irked in the other direction. As an iPod user–and especially as a Mac user–I haven’t been able to buy music from the other vendors. I’m not saying that I’ve found anything that I would buy from them, that’s not on the iTunes Store, but at least I’ll be able to now. If they let Mac users into their stores, that is.

6. Competition?

If all online vendors can sell the same music without DRM, then consumers will indeed have choice. Some vendors, of course, will sell in formats that won’t play on iPods; they may sell in WMA format, which only works on Microsoft-sancioned products. But that would shut them out of the largest part of the market. For that reason, I expect them all to move to MP3 or AAC format eventually. With no DRM, anyone can buy from anyone and play the music on any device. This is a Good Thing. However, I expect the iTunes Store to sign exclusive deals with some artists; not to be the only vendor to sell their music, but to have bonus tracks that aren’t available elsewhere.

7. Apple protects itself from regulators

Speaking of regulators, Apple has now shown that they can and will offer music without DRM, and this should lift the threats from EU regulators regarding interoperability. Of course, not all iTunes Store music will be DRM-free, but Apple can now show that it is the record labels who choose, not Apple. (Note that today’s announcement by European Union regulators of an anti-trust action against Apple and record labels is about different things; it is about territorial restrictions, which, again, are imposed by the record companies. So, once again, the EU is picking on Apple rather than going after all the various online vendors, who all apply the same geographical restrictions.)

8. Steve talks the talk

Steve Jobs got dissed by part of the press for his Thoughts on Music, the open letter where he said that Apple would be glad to sell music without DRM. He was said to be just strutting, whereas he wouldn’t really go through with the change. Well, he did. ‘Nuff said.

9. You need a higher-capacity iPod

Yep, if you want those 256 kbps files, you’ve just reduced the number of songs your iPod can hold by half. So that 80 GB iPod video looks pretty good now. Apple has never sold as many of the high-capacity iPods as the smaller models, but now consumers may want that extra disk space. Apple’s the winner here, with increased sales at the high end.

10. File Formats

The iTunes Store sells music in AAC format; this is part of the MP4 standard, and generally sounds better than MP3 or WMA files at the same bit rate. However, not all portable music players support AAC. Microsoft’s Zune does, as do some Sony players, and a handful of other models. If the iTunes Store reinforces its position in the market, you can expect to see other players start supporting AAC. However, if this new open competition gives equal footing to other online vendors, there may be no change. It’s hard to tell how this will play out.

Meanwhile, Wired got it very wrong again. In this article about the announcement, the Wired authors claimed, “Many onlookers had assumed that the company would go with the widely supported MP3 format. The decision to use AAC represents a crack in the wall that has separated services and devices that use Microsoft’s WMA from those that use AAC.” They even link to the EMI press release, but apparently, the smoke got in their eyes, and they missed this part of the release: “EMI expects that consumers will be able to purchase higher quality DRM-free downloads from a variety of digital music stores within the coming weeks, with each retailer choosing whether to sell downloads in AAC, WMA, MP3 or other unprotected formats of their choice.” It’s a shame when journalists can’t read…