EMI sale unlikely to affect DRM-free music

Decision added value to company suitors, say analysts

Terra Firma's $6.4 billion purchase of record label EMI raises some questions about the future direction of one of the recording industry's Big Four music makers. But one thing that's unlikely to be affected by EMI's changing ownership is its decision to offer DRM-free tracks via the iTunes Store.

Last month, Apple and EMI announced that the iTunes Store would offer EMI's entire music catalog without any digital-rights management restrictions. The tracks would sell for $1.29 each -- 30 cents more than the standard 99-cent iTunes download -- and are encoded at a higher bit rate. EMI's DRM-free offerings were slated to appear this month.

Neither EMI nor Apple would comment on whether the record label's purchase this week might delay the arrival of DRM-free music at iTunes. But one industry analyst expects the launch to happen as scheduled.

"EMI made its decision to side-step DRM in part to demonstrate its forward-thinking strategy, so potential purchasers would see greater value in the company," said Aram Sinnreich, founder and managing partner of Radar Research, a Los Angeles media consulting firm. "They can't renege on the deals very easily without the value of the company plummeting."

Sinnreich believes EMI made a good decision to offer its catalog without DRM restrictions. The question now is will new owners Terra Firma will keep the forward-thinking strategies the record label has developed over the last year. While Sinnreich believes it will, that is the one part of the deal that remains unanswered.

"It's the only way for record companies to have a role in the emerging digital marketplace," said Sinnreich.

Even though EMI executives and Apple think selling DRM-free music is a good idea, that opinion is not necessarily shared by other record company executives. When Steve Jobs called on music companies to drop DRM restrictions from their offerings in an open letter this February, Warner Music CEO Edgar Bronfman reacted by calling the proposal "completely without merit."

"We advocate the continued use of DRM," Bronfman said at the time. "The notion that music does not deserve the same protection as software, film, video games or other intellectual property, simply because there is an unprotected legacy product in the physical world, is completely without logic or merit."

Sinnreich says that attitude is part of the problem facing the music industry. "Record companies are very conservative and very resistant to change and are only willing to take risks when they are in a desperate situation--they just don't see how desperate it already is."

Sinnreich believes the other record companies will follow EMI's lead eventually -- after they see lost market share and rising sales for EMI artists.

This story, "EMI sale unlikely to affect DRM-free music" was originally published by Playlist.


Copyright © 2007 IDG Communications, Inc.

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