EMI to Sell Much of its Music Without Antipiracy Software By ETHAN SMITH and NICK WINGFIELD
In a major reversal of the music industry's longstanding antipiracy strategy, EMI Group PLC is set to announce Monday that it plans to sell significant amounts of its catalog without anticopying software, according to people familiar with the matter.
The London-based music company is to make its announcement in a press conference that will feature Apple Inc. Chief Executive Steve Jobs. EMI is to sell songs without the software -- known as digital rights management, or DRM -- through Apple's iTunes Store and possibly through other online outlets, too.
DRM has been a contentious issue in the world of online music sales. Record companies have so far insisted that digital retailers employ the software to prevent rampant copying. But because the DRM used by Apple is proprietary and does not work with services or devices made by competitors, it has had the unintended consequence of locking owners of its popular iPod music players into buying the most popular mainstream music from the iTunes store, and not its competitors. Record companies have blamed this lock-in for limiting digital-music sales, which account for around 15% of all recorded music sales in the U.S.
EMI's move comes after months of private discussions and public advocacy by Internet and technology industry executives, including Mr. Jobs, aimed at encouraging the music industry to change its approach to licensing music for sale online. In February, Mr. Jobs took the unusual step of posting an 1,800-word essay on Apple's Web site urging major recording companies to consider dropping their insistence that music be sold over the Internet with DRM software.
Mr. Jobs contended that DRM software has been ineffective at solving digital piracy of music. That's in large part, he argued, because the vast majority of music is sold today on CDs, which generally don't contain copy-protection, making them easily sharable over the Internet through file-sharing technologies. Although he wasn't the first to suggest such a course change for the music industry, Mr. Jobs's essay spurred a vigorous debate throughout the technology and entertainment industries. Also fueling the discussion recently has been another steep drop in CD sales, which has forced the music industry to try and accelerate its digital future.
Privately most labels rejected the idea out of hand, but EMI, the world's third-largest music company by sales, was already quietly exploring the idea of dropping DRM. EMI has struggled to overcome poor results and a laggard digital strategy, potentially contributing to its willingness to take a bold stance on DRM.
But EMI temporarily shelved its plans to drop DRM after various iTunes competitors declined to guarantee significant "risk insurance" payments designed to offset potential losses from the risky move. It is unclear whether Apple has guaranteed any such fee.
EMI's decision, if it's followed by other major recording companies, could also lessen growing political pressure on Apple by consumer rights organizations in several European countries, including Norway, that want to see Apple make its digital music products, iTunes and the iPod, work with songs and hardware from other companies. EMI competitors have been divided on the DRM debate. Warner Music Group Corp. has been consistently opposed to the idea of removing DRM from its offerings, arguing that the technology will be increasingly important once CD sales are eclipsed by digital sales. Vivendi SA's Universal Music Group and Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG, on the other hand, have conducted experiments of their own. Neither company has moved as aggressively as EMI, though.