Amazon to Sell Music Free of Copy Restrictions

wsj article today:

Amazon.com Inc. plans to launch a digital music store later this year that will sell all songs without antipiracy technology, creating a rival to Apple Inc.'s iTunes store.

The Seattle online retailer said its music store will have "millions of songs" in the MP3 format without so-called digital rights management, or DRM, software, which prevents consumers from freely copying and transfering their music among a variety of devices.

Amazon said the store will launch with music from EMI Group PLC, which said last month it would allow Apple and others to sell its music without copy protection. But Amazon didn't identify any other major music labels that have agreed to let it sell music without DRM restrictions, and it's unclear whether the e-commerce giant will be able to convince other big labels to open up their catalogs.

In its announcement Wednesday, Amazon said it has made deals with "more than 12,000 record labels," though much of the digital music now being sold online without DRM is from lesser known artists. Many of the biggest acts have resisted efforts to sell their music online without restrictions, for fear that it would lead to increased illicit file sharing.

FURTHER READING

• EMI to Sell Music Without Antipiracy Software¹
04/01/07

• Steve Jobs Raises Pressure on Music Firms²
02/07/07

• Statement: Jobs Speaks Against DRM³
02/07/07

• Reply All: Protecting Downloads, and Rights⁴
06/20/06

Amazon didn't provide other details about its much-discussed music store, including a specific launch date or pricing. The company, however, is starting from a position of strength, already being one of the largest distributors of music online, albeit on compact discs.

"Our MP3-only strategy means all the music that customers buy on Amazon is always DRM-free and plays on any device," said Amazon Chief Executive Jeff Bezos. "We're excited to have EMI joining us in this effort and look forward to offering our customers MP3s from amazing artists like Coldplay, Norah Jones and Joss Stone."

DRM has been a contentious issue in online music sales. Record companies have insisted that digital-download services like iTunes employ the software to prevent rampant copying. But because the DRM used by Apple is proprietary and doesn't work with services or devices made by competitors, music purchased on the iTunes store can only be played on the iPod, and not rival devices. Microsoft Corp. rolled out its own music store to sell copy-protected songs for its new Zune player.

Jonathan Hoopes, an analyst at ThinkEquity Partners, said Amazon's move validates the importance of the digital-music market and making files DRM-free. He said he doesn't expect Amazon's entry to pressure Apple, given that company's early arrival to the digital music market, its strong brand name and its wildly popular iPod.

"Apple's platform is so strong," said the analyst, who rates Apple a "buy."

Meanwhile, Shaw Wu, an analyst at American Technology Research, said Amazon's push could, ironically, yield more sales of Apple's iPods. "It might help Apple because they are selling unprotected music, which is something Steve Jobs has been pushing for," said Mr. Wu.

Apple Chief Executive Steve Jobs has spoken out against DRM restrictions⁵, and has said Apple is eager to sell music without them. But so far the majority of music sold on iTunes incorporates the anticopying technology.

Also fueling the DRM debate has been a drop in CD sales, which has forced the music industry to look at different ways to sell music online.

London's EMI announced with Mr. Jobs last month⁶ that it would offer a significant portion of its catalog on iTunes DRM-free, albeit at a higher price point than the 99 cents charged for other iTunes songs.

EMI's competitors have been divided on the DRM debate. Warner Music Group Corp. has argued that the technology will be increasingly important once digital sales eclipse CD 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 with dropping the technology.