Mike McGuire

You might want to file this one under “Things That Should Have Happened Two Years Ago — but didn’t.”

News.com is reporting that Apple’s iTunes team is negotiating with Universal Music, Warner Music and SonyBMG to get them to follow EMI’s lead and drop their insistence on locking up songs using Apple’s FairPlay DRM technology.  Apple and EMI brokered their deal in 2007 and between then and now Amazon’s been able to secure a catalog of DRM-free content albeit a catalog that trails iTunes 8+ million songs. Additionally, RealNetworks’ Rhapsody MP3 download store, Napster’s store and MySpace’s service also support DRM free catalogs, although their catalogs are much smaller in total numbers than iTunes and are a mix of the major labels.

The jousting between the labels and iTunes on DRM-free songs has involved a number of issues including the labels’ desire for variable pricing and Apple’s desire to keep iTunes an iPod- and iPhone-only shop. What’s also been an open secret is that the labels have used the DRM-free catalog was a way to empower iTunes competitors in their effort to level the competitive playing field. 

My opinion? If the News.com story is accurate, a few things have happened with some interesting implications:

1) The major labels believe that Amazon’s MP3 store business is growing enough to convince them they have a solid, reliable iTunes competitor to use as leverage against iTunes.  If the other majors are going to license DRM-free catalogs to iTunes, we’re going to see a double-A-dominated market.

2) As good as Amazon’s growth has been, it still hasn’t put a dent in iTunes, nor have any of the other competitors selling open MP3s e.g. Napster, some of Zune’s Marketplace and Rhapsody’s download stores, and as a result, the labels have decided to adopt the “the-devil-you-know” approach to the online music market.  For those other services, they’ll have no real differentiator other than the intrinsic appeal of their stores. And that might be good enough, but if it was simply DRM-free that kept the customers coming back, things could get very slow very quickly for them.

3) Apple’s ecosystem of devices,  led by the iPhone, and the iTunes store, along with the App Store, is developing faster than the alternatives.  Hindering it by insisting on DRM is a bad long-term strategy.

But where does the DRM-free movement leave emerging services like Comes with Music from Nokia, or the subscription services such as Rhapsody? Nokia’s model is based on them having to have paid a significant amount of money up front to get the labels to go along with the plan to let consumers download and keep as many songs as they like for the first year they sign up for the service.  Using DRM is business imperative as much as it is a nod to the labels.  For the subscription services, the challenge isn’t so much from a DRM-free a la carte market as it is ad-supported streaming music coming off sites such as iMeem, MySpace music etc.

So is the hour of totally DRM-free catalogs nigh? For a la carte downloads, it’s looking that way.  Perhaps then all of those folks who claim to be willing to pay for music so long as it’s DRM-free will have to put their money where their rhetoric has been.