DRM Under Siege: The Yahoo Music Experiment

Continued from page 1

That's what Yahoo Music is hoping for. "We've been publicly trying to convince record labels that they should be selling [unprotected] MP3s for a while now," wrote Ian Rogers, a director of product management at Yahoo Music, in an announcement about the Simpson song on the service's blog last week. "Our position is simple: DRM doesn't add any value for the artist, label (who are selling DRM-free music every day -- the compact disc), or consumer." David Goldberg, vice president and general manager for Yahoo Music, has also argued this case at industry gatherings, including the Music 2.0 summit in Los Angeles last February, saying DRM was holding back sales of digital media.

"Goldberg has been telling it to whomever will listen," says von Lohmann. "But people were taken aback last week by just how clear they were about it. They said, 'We think DRM is bad for consumers, bad for artists, and bad for everyone except Apple.'" (Yahoo did not respond this week to requests for further comment.)

The major labels have long held back on releasing their catalogs in unprotected formats, believing it would only add to the supply of MP3 files exchanged illegally over peer-to-peer file-sharing networks, such as the original Napster, Kazaa, and BitTorrent. The Recording Industry Association of America says this and other forms of digital piracy cost music publishers $4.2 billion a year.

But there's some evidence that artists, labels, and retailers can make money selling unprotected MP3 files. New York-based subscription service eMusic, founded in 1998, has quietly grown into the second-largest retailer of music downloads. It's the only major company aside from Apple that sells music customers can transfer directly to their iPods.

"We don't believe DRM is inherently bad," says David Pakman, CEO of eMusic. "iTunes does a good job of making it reasonably seamless, so it's not in-your-face. But the history of the music business reveals that the only successful formats, in the long run, are those that are entirely interoperable between vendors" -- such as CDs, a format pioneered by Sony and Phillips, but licensed to all comers. Most DRM-protected files, by contrast, play only on one type of software or device.

Pakman says eMusic has a catalog of 1.5 million unprotected MP3s, most of them from independent labels. The service's customers, who pay a monthly fee of $10, $15, or $20, download five million tracks per month -- more than all those sold by Yahoo Music, Microsoft MSN Music, Sony's SonyConnect, and the resurrected Napster combined.

"Just because something is sold in MP3 doesn't mean it's going to be pirated," Pakman argues. In fact, in an experiment several years ago, eMusic released digitally watermarked versions of some songs, then hired another company to search the major file-sharing networks for files bearing the watermark. "They had no problem finding the same songs all over the networks -- but they didn't come from us, they came from people ripping CDs," says Pakman.