Comment Having been a big believer in DRM and its necessity, although dismissive of its inflexibility and lack of sophistication, we, Rethink Research, have to interpret the big news of last week that EMI will offer its catalog DRM-free, as at least dangerous and potentially disastrous. But that's only if it is looked at in the long term. In the short term it might even be beneficial to both EMI and Apple.
This has been dressed up as an Apple iTunes – EMI joint announcement, but it is a pure EMI move. We interpreted the recent call by Apple and Steve Jobs, for an end to DRM, as a move to get European law-makers off Apple’s back, and we still see it as that. We don't think that Jobs can really want an end to DRM, but EMI might.
We suppose it’s a matter of whether you believe that the EMI music will become MORE pirated than it is today just because it’s so easy to copy a track to a file sharing network, or if it would make little difference.
Apple risks little in the move as long as the rest of iTunes content still uses DRM, because that will mean that the great bulk of any individual music and video collection will HAVE to be played on an iPod or at least on iTunes, and not on anything else, which will mean the iPod retains most of its lock-in power. Even someone that upgrades all of his or her collection to the new EMI DRM-free format, will still have perhaps 75 per cent of their music in a DRM-enabled format and they would worry about buying a non Apple MP3 player, because of the worry of not being able to move some of their content.
And Jobs is very clear that he doesn’t think that video and music should be treated the same. Video comes with CSS protection, which although it is thought of as weak encryption protection, at least it takes a serious minded pirate to undo CSS, and put video in the clear. Jobs quite rightly points out that adding DRM for digital online music while leaving it off digital CDs, makes little sense.
Jobs at least has a sensible fallback position even if every one of the major record labels decides to follow EMI's move and remove DRM from their online music recordings. He can strongly advise video clients, such as Disney (where after all he is the largest shareholder), that they must retain DRM on video, and then Apple’s Fairplay DRM will remain in place and continue to put doubt into the minds of any consumer that considers buying a non-Apple mp3 player, worried that they may not be able to play some of their content, especially video, on any other make of device.
EMI claims that it is undertaking the move after a careful experiment it carried out with just a handful of songs, issuing them without DRM, and it perhaps has a feel for the likely consumer behavior around online purchasing with no DRM. By charging 30 cents more for each track, and offering it in a higher fidelity than previous online versions (up to 256 kbps AAC encoding, around double the previous quality) it will stimulate replacement sales as well as reaping more money from normal sales. Presumably all of that extra 30 cents goes to EMI, so it will be quite an important increase in revenue in the short term.
Gradually piracy should fall away, but it's not straightforward. If a new piece of P2P software appeared then the record labels now have the legal framework, at least in the US, to close it down. They also have much of the legal help they need in around 50% of Word Copyright Treaty countries, but there will always be some countries that have different interpretations of the law and weaker policing.
Even if acquiring new copies of P2P software which are clearly encouraging copyright abuse gets harder and harder, everyone still has Kazaa, or they can still get a copy of BitTorrent. Can people still use these copies for piracy? Yes of course.