DRM Is Dead – Sort Of

Less than two months ago, Steve Jobs, CEO of Apple, published his Thoughts on Music, suggesting that if the major labels would allow Apple to sell music without DRM (digital rights management) he would be happy to do so. Well, today EMI became the first major label to agree to Jobs’ offer, announcing, at a London press conference, that EMI will make available its entire catalog of music in a new, “premium” format. This format will be DRM-free, and will also be higher quality, at 256 kpbs compared to the current 128 kpbs that is sold on the iTunes Store.

This premium service comes with a price; 30 cents more in the US, though it sounds like album prices will remain the same. (The press conference was not clear enough on this question, which I’m sure will be straightened out soon.) Users who already have EMI music will be able to “upgrade” their iTunes purchases for 30 cents per track. So, the iTunes Store, at least for EMI purchases, will offer two pricing systems: all music will still be available in DRMed tracks at 99 cents, and will also be available in premium format.Now, one must ask the question, if DRM is the problem, then why continue to offer DRM-laden tracks at all? Jobs said that consumers will have choice, and that not everyone will want to pay more for better quality. But, again, if DRM is the problem, then why have DRM on the cheaper tracks? The other difference is quality; users who pay less have fewer rights, and lower quality. Does that really make any sense at all? I can understand that Apple can’t raise prices across the board–remember, this is a 30% price increase for “premium” tracks–but once those tracks are in the wild, it won’t matter if there are DRMed versions. (Just as it doesn’t matter now, since CDs have no DRM.)

After Jobs’ article was published in February, many naysayers criticized him, saying that he was simply tossing out an idea that no one would agree to. Ha!, say I. Sure, it took time for companies to get together and come up with something, but two months is really a very short time for such a major change. (You can imagine that there was a great deal of negotiations to get to this point.) I think we can expect other labels to follow suit. Jobs said, during the press conference, that this option would be available to other labels, so all the independents who want to sell their music without DRM will now be able to do so.

Apple gets too bonuses from this–higher revenue from the iTunes Store (though Apple’s profits are slim, and the Store is not intended to make a lot of money), and, more importantly, more iPod sales. After all, double the bit rate of music tracks sold, and you’ll have fewer songs to fit on an iPod. While most iPod owners don’t buy music from the iTunes Store–or not much–this could be the beginning of a generalization of higher bit rates, which will certainly lead users to need higher-capacity iPods.

To sum up, this is a true earthquake. I can imagine that some executives at other record labels have had to change their underwear today. As Jobs said, there are leaders and there are followers, and EMI has clearly staked out first place in this new market. And Apple, as often, has been the prime mover in this change.