Will Unlocking Online Songs Spur Sales Growth? Next month, Apple's iTunes store will start selling music files from the label EMI that are not protected by digital locks, or digital rights management software.
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Will Unlocking Online Songs Spur Sales Growth?

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Will Unlocking Online Songs Spur Sales Growth?

Will Unlocking Online Songs Spur Sales Growth?

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This is WEEKEND EDITION from NPR News. I'm Linda Wertheimer.

Next month, Apple's iTunes store will start selling musical files from the label EMI that are not protected by digital locks. These locks are intended to prevent unauthorized online file sharing. But many technology enthusiasts say, instead, the locks prevent consumers from listening to the music they paid for when and how they want.

That may be one reason online sales of music have not risen as fast as the industry had hoped. More people still use the unauthorized file-sharing sites. So the industry is watching the Apple-EMI experiment closely, waiting to see if the unprotected files will sell any better than the locked ones.

From member station WHYY, Joel Rose reports.

(Soundbite of noise)

JOEL ROSE: Commuters with tiny ear buds and MP3 players weave through a crowded train station during morning rush hour. Chelsea Kuzma(ph) is listening to her Creative Zen MP3 player when they came highly recommended by Web site CNET.

Ms. CHELSEA KUZMA (Creative Zen MP3 User): If you buy the wrong player, this one gets better review and you get that one and then you realize you can't get any of the music you want because it's on in different Web site. That's why I let my husband do the downloading for me because it gives me too much of a headache.

ROSE: One reason some music files won't play on some players is Digital Rights Management. DRM was supposed to prevent unauthorized file sharing online but there was a side effect. iPod-maker Apple has refused to license its version of DRM to other manufacturers. So songs purchased at the popular iTunes store won't work with other MP3 players. That stalemate is a big reason EMI music will start selling songs without DRM. Barney Wragg is the label's head of digital.

Mr. BARNEY WRAGG (Head of Digital, EMI Music): When we talked to people, when I've looked at buying online, I've felt that, you know, they wouldn't buy from store X because it wouldn't work with device Y and this enables people to buy from any store and use it on any device.

ROSE: That's a big turnaround. Until now, the four major labels had mostly focused on stopping unauthorized file sharing. They've sued peer-to-peer Web sites and thousands of individuals who allegedly used them. Yet, sales of physical CDs are still falling, down 20 percent in the first quarter of this year.

Sales of digital downloads are growing but they're still dwarfed by the number of files swapped on peer-to-peer networks. EMI, which has the smallest North American sales at the majors, is hoping consumers will embrace digital music downloads once DRM is out of the picture.

Mr. DWIGHT SILVERMAN (Columnist, TechBlog, Houston Chronicle): I'd say that's a $64,000-question. How many people really care about that? And that's what EMI is betting on.

ROSE: Dwight Silverman writes the Houston Chronicle's TechBlog. Like a lot of bloggers, Silverman is cautiously optimistic.

Mr. SILVERMAN: It's going to make the other labels, at the very least, look churlish. I think they're going to have to do it. They will offer both for a while. Eventually, though, I think DRM on music may go the way of the dinosaur.

ROSE: For now, EMI will in fact offer its catalog with and without DRM - minus, of course, the Beatles, who still aren't selling their music online anywhere. In an open letter on Apple's Web site earlier this year, CEO Steve Jobs called for everyone to abandon DRM so that consumers can use music however they want. At a press conference announcing the deal with EMI, Jobs said dropping DRM is the only course that makes sense.

Mr. STEVE JOBS (CEO, Apple): We're not offering anything to customers here today that they can't get on every CD that's shipped, right? They get DRM-free music on every CD that's shipped today. So we're not offering anything online that they can't get on a CD today.

ROSE: What Jobs did not say is that his company is facing pressure from European regulators to make iTunes compatible with other players, something the company has fiercely resisted. And Jobs says Apple has no plans to abandon DRM on video. As far as music is concerned, EMI has been quietly selling a number of its songs as unprotected MP3s for the past year, including this song played the budding British star, Lily Allen.

(Soundbite of song, "Little Things")

Ms. LILY ALLEN (Singer): (Singing) Sometimes I find myself sitting back and reminiscing. Especially when I have to watch other people kissing. And I remember when you started calling me your missus. All the play fighting, all the flirtatious disses…

ROSE: The other major should follow EMI's lead says David Pakman. He's the CEO of eMusic, the number two online retailer behind iTunes. eMusic sells MP3s from independent labels exclusively. Pakman says the industry, as a whole, would benefit from a more open marketplace when it's not so tied to the fortunes of Apple.

Mr. DAVID PAKMAN (President and CEO, eMusic): If the future of your business was dependent on one retailer, I think you'd be pretty nervous, particularly, because this retailer in particular doesn't really care about selling music, they care about selling iPods. And in it were to create effective competition, the way around it is for the majors to license an MP3 to hundreds of other retailers. And I really do think that that's going to happen.

ROSE: And other retailers will likely pick up on EMI's offer of DRM-free songs. For now, Apple is the first to sign up. iTunes will not sell MP3s as eMusic does but files in its own AAC format. Apple will offer this at a higher sampling rate than it's current downloads, which means higher audio quality. EMI's Barney Wragg says the improved sound helps justify a price increase from the current 99 cents a song to $1.29.

Mr. WRAGG: The research that we did show very clearly that people will vastly prefer to buy the high quality files. And in fact, in the research that we did that was at a ratio of 10:1. So, you know, we feel really confident that this is a product that people are comfortable with and that they think the price far more presents good value for money.

ROSE: An unscientific survey of commuters in Philadelphia suggested somewhat less enthusiasm for the idea.

(Soundbite of interview recording)

ROSE: If you could get a higher quality file from iTunes would you pay for that?

Mr. JUSTIN McNEER(ph) (Commuter, Market East Train Station, Philadelphia): Oh, yeah.

Mr. ERIC BRAISHE(ph) (Commuter, Market East Train Station, Philadelphia): No, I think it's another gimmick in the DRM scheme to charge paying customers more.

Mr. PAUL REED(ph) (Commuter, Market East Train Station, Philadelphia): I guess it would depend on how much, you know, how much of a difference they are talking.

ROSE: $1.29 per track instead of 99 cents.

Mr. REED: Probably not. That's like big(ph). God, it's like a 25 percent increase, almost - probably more than that. Yeah, no way, forget it. No.

ROSE: Justin McNeer, Eric Braishe and Paul Reed at the Market East train station on their way to work. Some industry insiders believe the price of songs will come down eventually, including eMusic's David Pakman.

Mr. PAKMAN: I believe that music's probably too expensive today compared to the price of video games and other content. So I do think that ultimately the majority of musical price offer a little bit less than 99 cents.

ROSE: Pakman's own company sells MP3s for as little as 25 cents apiece, depending on how many you buy. He doesn't expect the price of major labels songs to fall right away, but he does think another one of the majors will drop DRM by the end of the year. In the long run, he says, that's the only way the music industry can start to grow again.

For NPR News, I'm Joel Rose.

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