EMI Mulls Lifting Online-Music Restrictions

[mjzee]

EMI Mulls Lifting Online-Music Restrictions

By ETHAN SMITH and NICK WINGFIELD

February 9, 2007

In a move that could signal a shift in the music industry's antipiracy strategy, EMI Group PLC has been holding talks with several online retailers about the possibility of selling its entire digital music catalog in the unprotected MP3 format, which can be freely copied and played on virtually any device, according to numerous people familiar with the matter.

If EMI strikes such deals, it would become the first major music company to embrace a burgeoning effort to expand the digital marketplace by removing restrictions on the ways consumers can listen to music they purchase online. Earlier this week, Apple Inc.'s chief executive, Steve Jobs, endorsed the idea of selling music without copy protections, arguing that they have done little to slow the piracy that has beset the music industry.

The idea is that removing such barriers will help boost digital-music sales, because consumers would be able to play music purchased from any online store on any digital music device. Currently, for example, music purchased at Apple's iTunes Store can only be played on the company's iPod device, a problem that has caused much griping from record companies and competing music services.

One person familiar with the matter said that several major music companies have floated the idea of scrapping copy protections in recent months. However, none appears to have gone as far down the road as EMI, and others are clearly still opposed because they say that copy-protection software is critical to stop piracy. On Thursday, Warner Music Group Corp. chairman Edgar Bronfman Jr. said his company continues to believe that such protections are essential.

The London-based EMI is believed to have held talks with a wide range of online retailers that compete with Apple's iTunes. Those competing retailers include RealNetworks Inc., eMusic.com, MusicNet Inc. and Viacom Inc.'s MTV Networks. People familiar with the matter cautioned that EMI could still abandon the proposed strategy before implementing it. A decision about whether to keep pursuing the idea could come as soon as today.

An EMI spokeswoman declined to comment on what she called "speculation."

For EMI, the move represents a chance to shake off the notion that it has been a laggard in developing a digital-music strategy. While other music companies have experimented with different online endeavors, EMI, for example, is the only major music company that has not struck a licensing deal with Google Inc.'s YouTube.

EMI is the world's third-largest music company by sales. While the company is home to acts ranging from the Beatles to Radiohead and the Beastie Boys, not all of its acts -- notably the Beatles -- sell their music in any digital form yet.

With a few minor exceptions, the major music companies so far have insisted that their online music offerings come with copy-protection software. That software -- known as digital-rights management, or DRM -- is not always compatible between music players. For example, the DRM software in Apple's dominant iTunes Store isn't compatible with other companies' digital-music players, causing some to wonder whether it might be hampering sales.

Continued growth of digital-download sales is generally viewed as a key to the music industry's ability to survive the ongoing decimation of sales of its core product, compact discs. CD sales began dropping in 2000, when the original Napster file-sharing service made it simple for people to access free digital copies of songs online. CD sales represent about 85% of U.S. music sales, but they have fallen more than 20% this year alone, compared with the same period in 2006, according to Nielsen SoundScan.

Sales of digital tracks continues to rise, but the rate of growth has cooled in recent months, and has not kept pace with the decline in CD sales. That is a source of concern for the music industry.

The argument in favor of DRM holds that, with CD sales quickly fading and digital-track sales still on the rise -- albeit more slowly than in the past -- it is critical for the music industry to protect itself in the new digital age.

According to people familiar with the matter, EMI initially began exploring the issue in earnest in late December, when it circulated proposals to online music retailers. Part of its proposal was a request for a one-time, multimillion-dollar "risk-insurance" payment that would not be tallied against future sales. Three people familiar with the talks said online retailers generally balked at the request.

EMI then returned with a new proposal in late January, around the time of a music conference in Cannes, France. EMI asked the online retailers to tell it what size advance payments they would offer in exchange for the right to sell its music as MP3s. Those proposals were to be submitted yesterday, said one person familiar with the matter. This person understood that EMI would decide whether to forge ahead with the MP3 strategy based on the offers' aggregate worth.

The music industry's trade group, the Recording Industry Association of America, has continued to call for copy protections. It endorsed one alternative that Mr. Jobs outlined but dismissed, in which Apple would license its own DRM to competitors. RIAA chief Mitch Bainwol said in a statement that this would "enable the interoperability that we have been urging in the marketplace for a very long time."

People within the music and technology industries believe Mr. Jobs might have written his essay after learning of EMI's proposed plans. But a person familiar with the matter said Mr. Jobs began work on the essay three weeks ago in response to actions by European agencies to pressure Apple into making its music products work with hardware and online music service made by other companies.

In his essay, Mr. Jobs encouraged those groups to turn their attention to major music labels, several of which are partially or wholly owned by European companies. "Perhaps those unhappy with the current situation should redirect their energies toward persuading the music companies to sell their music DRM-free," he wrote.

[GA Russell]

Thanks for posting that mjzee! What is the news organization that was taken from?

[brownie]

An earlier thread on the subject...

http://www.organissimo.org/forum/index.php...79&hl=midem

[mjzee]

Thanks for posting that mjzee! What is the news organization that was taken from?

Wall St Journal