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DRM Under Siege: The Yahoo Music Experiment

Jessica Simpson’s DRM-free single could be the beginning of the end for copy-protected digital music.

There’s something noteworthy about the digital download version of “A Public Affair,” the latest single from pop star Jessica Simpson.

No, it’s not that the song can be personalized: Simpson and her backup singers actually recorded 500 first names, from Adriana to Zachary, that Yahoo Music will electronically insert at a dramatic moment in the music for $1.99 a pop.

Far more significant is another feature of the song: it is being distributed as a standard MP3 file, with no digital rights management (DRM) technology. And this offering comes from none other than Sony BMG, the record label that has taken the most extreme measures to keep customers from making digital copies of its songs (see “Inside the Spyware Scandal”).

Until now, essentially all the legally purchased and downloaded music from the four major record labels, Sony BMG, EMI, Warner, and Universal, has been offered in formats designed to make copying and sharing difficult. Apple’s iTunes Music Store – the source of more than 70 percent of all commercial music downloads – limits customers to playing its songs on their iPods or up to five “authorized” PCs.

But because it’s being released in the most universal audio format, Simpson’s song, which debuted on July 19 at Yahoo Music and goes on sale at other digital music retailers this week, can be copied and played on an unlimited number of devices, including the iPod. (Posting such digital files on file-sharing networks for anyone to copy is still illegal.)

Of course it’s only one song out of millions available at Yahoo Music, iTunes, and other online music stores. But music-industry watchers are interpreting this promotional offer as an important experiment – one that may foreshadow a wider loosening of the major labels’ restrictive policies.

“This is a sign that the enthusiasm for DRM is beginning to wane in the music industry,” says Fred von Lohmann, a senior staff attorney and intellectual-property expert at the Electronic Frontier Foundation (EFF) in San Francisco. “I certainly don’t expect DRM to disappear overnight. But I would not be surprised if you saw specific genres or subsidiaries of the major labels experimenting with more unprotected MP3s.”

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.

Pakman says Sony BMG offered the unprotected Jessica Simpson single to eMusic – and that he passed on the offer, partly because his customers aren’t interested in pop music, but mainly because he’d rather see the major labels experimenting with unprotected releases of older or more obscure tunes that don’t already have a huge built-in audience. “We asked Sony for Miles Davis’ ‘Kind of Blue,’ which we did not get – but we think that would be a more interesting experiment. You can sell the more obscure kinds of records by virtue of making them interoperable. In fact, we have no hit product – we are the long tail.”

But Pakman says he expects to see the major labels releasing more of their catalog in unprotected MP3 format soon. “It’s very unlikely this year, but I think it’s possible that it could happen next year,” he says.

Todd Chanko, who follows digital rights management and intellectual property issues for technology research firm Jupiter Research, agrees with that timeline – but predicts that the music industry’s version of glasnost will extend only to certain, less-popular musical genres. “I think there will continue to be a market for certain kinds of music that is not DRM-wrapped, but if you’re talking about mainstream, large-audience, high-visibility pop material, it’s not going to happen,” says Chanko. “Demand is the number-one issue. One of the unfortunate by-products of the digital age is that it’s incredibly easy to make multiple perfect copies of an original, and artists, publishers, and record labels all have a right to strongly protect their intellectual property.”

But von Lohmann at the Electronic Frontier Foundation believes that DRM will gradually disappear across the music business – in part because the major labels and recording artists are tiring of iTunes’ dominance of the market. “The labels are pretty much locked into a system developed by Apple,” he says. “They can’t even raise prices beyond 99 cents per song – Steve Jobs simply said ‘No.’ They will eventually see that their only way to get leverage against Apple is to offer unprotected songs. “

Music buyers are accustomed to paying $15 or $20 for a CD, then having the freedom to do as they see fit with it, von Lohmann points out. He thinks the major labels are slowly realizing that taking away that freedom through DRM is “just a recipe for trouble – a recipe that actually encourages unauthorized free peer-to-peer file sharing. If you’re going to compete with free, you need to have more features, not less – including interoperability.”

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