The Ek’s Files

Sony BMG has thus far been the lone holdout in electing to provide its music in digital form that includes DRM (technology that limits what you can do with the media files you purchase). Now it appears that even Sony has decided that DRM no longer serves its interests. Why’s that? Sony (of Sony Rootkit fame), along with the other major record labels, appears to want you to be able to get music onto your iPod without having to sell their music through Apple’s iTunes music store. Apple, you see, wields enormous power in the digital music distribution world, simply because they own 80% of the market share. Apple has essentially dictated the price and terms for music downloads to the recording labels. Now the labels want to cut Apple down a notch or two by nurturing some competition.

In other words, the record labels want to be able to sell you music in ways other than through iTunes. But they still want you to be able to put that music on your iPod. And since the only DRM technology that the iPod supports is Apple’s own FairPlay DRM, which Apple refuses to license to other companies, the only alternative for these record labels is to sell DRM-free tracks.

Enter Amazon.com.

Amazon now offers music downloads in .mp3 format without any DRM restrictions. Customers who buy their mp3 tracks can use them on any compatible device they choose (including iPods), they can burn them to CD, and they can even (gasp) share them (although not legally–the lack of DRM doesn’t equate to the lack of a copyright).

The labels appear to prefer Amazon because they’re more flexible in their contract and pricing terms, unlike Apple.

As far as I can tell, the reason iTunes has flourished up to this point is that they were able to provide the DRM that the record labels initially demanded in order to protect the rights to their music, and only devices supporting that DRM (the ubiquitous iPod) could use that music. Apple, being in the catbird seat, dictated the terms to the labels. So, the record labels are largely responsible for creating the monster that they now seek to destroy, and the only way to destroy it is to sell their music unencumbered by DRM. Instead of preserving their revenues as they had desired, DRM instead had exactly the opposite effect–their revenues were limited and curtailed. How ironic is that?

So, here is definitely an example of how competition is good for the consumer–even though it’s once again a company (or industry) essentially competing against itself.

(Disclaimer: I am one of the few poor, pathetic creatures on this planet that does not yet own an iPod. I hate earbuds. I have never purchased music downloads or, for that matter, engaged in illegal downloading of music. My digital music collection, pathetic such as it is, consists entirely of the music I’ve ripped from CDs I’ve purchased, which I occasionally play on my laptop or my Palm T|X. I probably buy less than ten CDs a year. I have no sympathy for people who are made to suffer the consequences for stealing music. I also have no sympathy for an industry whose primary strategy for preserving their revenues is to sue individuals for stealing music. The Motley Fool had some interesting comments on how such actions are indicators that the music industry is in trouble.)