The Day the Music Lived Again

There have been many indications in recent months that the music industry is on the cusp of a sea change, and two announcements on Monday suggested that the change is nigh.

First, as anticipated in reports last week, Sony BMG Music Entertainment officially announced the launch of its Platinum MusicPass, a series of digital album cards that enable consumers to download full-length albums and bonus content in the form of high-quality MP3 files.

The first 37 digital rights management (DRM)-free titles in the series, which represent musical genres ranging from rock and pop to R&B and country, will debut on Jan. 15, and will be available at retail outlets across the United States by the end of the month. In Canada, MusicPass will debut in late January.

Entire Download Catalog

Napster, meanwhile, announced Monday that it will shift the entire download sales catalog on its award-winning PC service to the MP3 format in the second calendar quarter of 2008.

All single-track and album sales through Napster will be made available exclusively in the MP3 format, which will be compatible with virtually all MP3 players and music phones around the globe, the company said. The news makes Napster the first music subscription service featuring major label content to announce such a complete shift to MP3 format for download sales, it added.

The news from both industry giants comes just shortly after Warner announced at the end of last year that it would allow Amazon.com (Nasdaq: AMZN) to sell its content in MP3 format, without attached DRM schemes.

Launched in September, Amazon.com's DRM-free music store, called "Amazon MP3," now boasts some 2.9 million songs from more than 33,000 record labels.

'Negative Connotations'

Music fans have long decried the use of DRM, which restricts the devices downloaded music can be played on. The lure of DRM-free MP3s is that they will play on virtually any device -- PCs, Macs, iPods, iPhones, Zunes and many others.

Rapidly declining CD sales have been plaguing the labels for years, however, due at least in part to piracy, they say, so the move to abandon the controls of DRM has been slow in coming.

Nevertheless, there is a clear trend in the industry away from DRM, Zippy Aima, an analyst for digital media with ABI Research, told TechNewsWorld.

"DRM is associated with a lot of negative connotations," Aima explained. "These shifts seem to be great news at least for consumers -- how successful the model will be in the market, only time will tell."

Last of the Big Four

Even Steve Jobs, Apple's (Nasdaq: AAPL) CEO, posted an open letter to the industry last year protesting the labels' requirement that music sold through iTunes be protected with DRM, arguing that the technology is ineffective as a deterrent against piracy.

Increased openness could ultimately spur sales of digital music, noted Napster Chairman and CEO Chris Gorog. "The ubiquity and cross-platform compatibility of MP3s should create a more level playing field for music services and hardware providers and result in greater ease of use and broader adoption of digital music."

With its announcement, Sony BMG becomes that last of the four major labels -- including also EMI Group and Universal Music Group -- to experiment with DRM-free sales.

'Kicking and Screaming'

Yet by focusing on sales of its cards through retail channels and just a narrow subset of its inventory, Sony's experiment falls short of what it could have done, Phil Leigh, senior analyst with Inside Digital Media, told TechNewsWorld.

"My response to their announcement is that Sony BMG is being drawn, kicking and screaming, into the future," Leigh said. "I was surprised by their decision to do it that way. But it's inevitable that by end of this year they will be selling DRM-free tracks online."

Indeed, "these are interesting experiments, but it would have been better if they had been done a year or two ago," Mike McGuire, vice president of research for media with Gartner (NYSE: IT), told TechNewsWorld.

"What you're seeing is the labels saying out of one side of their mouth that 'we'll go with MP3,' but only with select content," McGuire added. "It's an interesting game that's being played out."

More Changes to Come

Given that Sony's announcement involves only select content, Napster's plans must be taken as more of an indication that it expects Sony to relax its restrictions further over the course of the year, Leigh added.

"If you're the service provider, such as Napster or iTunes, you want to avoid having only part of your inventory DRM-free through a segregated catalog," McGuire agreed. "Consumers look for consistency and breadth, so from the service provider's side, this could be only partially good news. What they really want is a consistent catalog."

Looking forward, it would be surprising if all the major labels are not offering their music DRM-free by the end of this year, Leigh predicted.

An Ad-Supported Future

"To me, the most important conclusion from all this is that the obsession labels have had with DRM is like the obsession with the white whale," he explained. "Now that they're in the process of dropping it, I think they'll turn their attention to more productive things, such as ad-supported business concepts and looking to the Internet as a way to generate revenue."

DRM per se may not even need to disappear altogether, however, McGuire pointed out. Rather than focusing on controlling consumers' use of the music, it could be put to better use in helping labels understand how well music is embraced and how social networking features such as blogs and playlists affect its popularity, he said.

Such social networking features are "important to the long-term growth of online music and music distribution in general," he said.

"There will be value over time in being able to track how music is being used by consumers and to follow recommendations and other transmissions through social networks," he explained.

"If you think about it from a marketing perspective, including some tag or ID with music cuts can help the label see how music is doing without being intrusive or giving away private consumer information," he explained. "If one consumer turns five people onto a song that they then go out and buy, that's a powerful force to understand, and it costs the label nothing."