APPLE, EMI: DRM-FREE MUSIC

By Tom Ferguson and Juliana Koranteng, London

EMI Music has agreed to make its entire digital repertoire available free of digital rights management (DRM) restrictions, effective immediately. The move is groundbreaking for a major multinational music company such as EMI, as the majors have so far insisted that all their digitally distributed music be DRM-protected.

EMI’s new “higher quality” DRM-free music will first be available on Apple’s iTunes Music Store for $1.29 a track. At this morning’s (April 2) press conference in London, EMI Group CEO Eric Nicoli and Apple CEO Steve Jobs were joined by Parlophone/EMI act the Good, the Bad & the Queen, who performed two songs.

The new premium versions of EMI’s digital songs will complement the existing DRM-protected songs that iTunes is already selling. Other online music retailers are expected to come on board soon. Apple paid a $5 million advance to EMI for the right to sell music with DRM, sources familiar with the situation say. Apple and EMI declined comment.

Jobs called the EMI move the “next big step forward in the digital music revolution” and publicly appealed to “all other major and independent labels” to follow EMI’s lead. He declined to reveal details of negotiations with other labels, but predicted that half of iTunes’ catalog could be offered DRM-free by the end of 2007.

Nicoli said the move reflected EMI’s philosophy and strategy of being “committed to embracing change and to developing products and services that consumers really want to buy.” He added that EMI’s attitude to its digital music offer was, “It needs to be good value for money, needs to offer choice and needs to be simple to understand and easy to use.”

Industry observers and consumer groups have argued that digital music sales would not accelerate unless Apple dropped its proprietary DRM system, which locks iTunes customers into playing their music only on iPod digital players.

“From an iTunes perspective, we don’t think most of our customers are hitting up against the limitations of the DRM,” says Eddie Cue, VP of applications for Apple. “But the ability to know that the files could be used in the future without having to burn and rip a CD is an insurance policy that is worth a lot.”

Apple digitizes its stock of tracks in the AAC format using its Fairplay DRM software, which prevents pirates from making unauthorized copies but also stops consumers from making unlimited copies for personal use. Conversely, digital music downloaded via other DRM software will not play on the iPod.

Click here for complete story.