07 January 2009

The Death of DRM

The MacWorld Expo is mostly a platform for Apple to roll out new hardware. They did roll out a new 17" MacBook Pro yesterday, but at $2800, in the midst of economic chaos, I'm not sure it will fly off the shelves. Otherwise, the keynote was a bit of a yawn, all about software revisions (no wonder Jobs chose not to speak). But, the famous "one more thing" at the end was more interesting. DRM will be removed from all songs sold on iTunes (NYT article, Apple).

This was inevitable, but a long time coming. Steve Jobs wrote an open letter to the recording industry in Feb. '07, urging them to do just this. They in fact have not required DRM for music purchased from Amazon, but except for EMI, the labels have retained that restriction for Apple. This has probably been for two main reasons.

First, the labels have hated the iTunes monopoly. With it, Jobs has had them over a barrel for years. By allowing Amazon to sell tracks DRM-free, they have been hoping to build Amazon up as a competitor. And in fact, Amazon has not done badly, but they are no iTunes killer.

But (second reason) they've also finally gotten the big concession they wanted from Jobs: variable pricing for songs. Jobs has been adamant about his 99 cent flat pricing model. But the labels wanted their older back catalog to sell for less (so they could sell more) and their new, hot songs to sell for more (they'll probably sell the same number, but at higher margins). Jobs finally agreed to this and they dropped the DRM.

This is good. DRM is evil. It had to die. But what about all those DRM-poisoned tracks you've already purchased? You can "upgrade" them to DRM-free 256k tracks for 30% of the purchase cost, just as before. Think of it as a format migration. And expect to pay for those songs again and again as new formats emerge. Or, just buy CDs and turn them into whatever you want, whenever you want.

What's next for iTunes? I think lossless music has to be somewhere in its future (yet another format migration). And also a buffet-style all-you-can-hear subscription service, like Rhapsody. Again, Jobs hates the idea, but even he will relent in the face of necessity.

But another real revolution in digital music is social networking services. And here the gorilla in the room is not MySpace or Facebook, but imeem. imeem has licensing agreements with all the major labels that allow users to upload and share music and videos from their artists. And it's free (advertiser supported). Admittedly, this is not a challenge to portable music services, but social networking elements are already incorporated into subscription services. And this is what consumers want: a way to share music (not just playlists) with their friends. Apple certainly knows this and eventually will do it.

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