y Jessica Hodgson
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- Apple Inc. (AAPL) and EMI Group PLC (EMI.LN), Monday unveiled a plan to sell digital music in unprotected formats in a bid to buoy sales of digital music.
The announcement marks a major strategy shift both for Apple, whose iTunes Web site accounts for around 80% of legal music downloads, and for EMI, one of the world's four largest music companies, whose major artists include the Beatles, Norah Jones and Joss Stone.
"By providing DRM-free downloads, we aim to address the lack of interoperability which is frustrating for many music fans. We believe that offering consumers the opportunity to buy higher quality tracks and listen to them on the device or platform of their choice will boost sales of digital music," said Eric Nicoli, chief executive of EMI in a statement Monday.
"Selling digital music DRM-free is the right step forward for the music industry," said Steve Jobs, Apple's CEO.
Digital Rights Management (or DRM) software has been the cornerstone of the music industry's attempts to prevent the unauthorized downloading and copying of music since the launch of digital download services.
In recent months an increasingly vocal lobby of executives and technology experts have argued that the DRM system does little to prevent piracy and acts as a disincentive to consumers.
DRM software typically restricts music to certain listening devices, such as Apple's iPod, and bars consumers from making multiple copies of the music.
In February, Jobs issued a call to the music industry to abandon DRM in an "open letter" published on the Apple Web site.
On Monday, Apple said iTunes will make individual tracks available from EMI artists at twice the sound quality of existing downloads, with their DRM removed, at a price of $1.29/EUR1.29/GBP0.99. iTunes will continue to offer tracks to consumers at $0.99/EUR0.99/GBP0.79 but these will have standard sound quality and with DRM still applied. Customers who have already purchased standard tracks with DRM will be able to upgrade their digital music for $0.30/EUR0.30/GBP0.20 per track. All EMI music videos will also be available on iTunes DRM-free with no change in price.
It remains unclear whether the other large music companies, which include Universal, a unit of Vivendi (12777.FR), Sony BMG, a joint venture between Sony Corp. (SNE) and Bertelsmann. A.G. (BRT.YY) and Warner Music Group Corp. (WMG) will follow suit.
Edgar Bronfman Jr., Warner Music's chairman, said at a conference shortly after Jobs's call to action that Apple's argument was "without merit."
"DRM and interoperability aren't the same thing," Bronfman said.
Industry analysts have argued for some time that the removal of DRM will give consumers an added incentive to buy digital music.
But stock analysts who cover EMI said the news would have a limited short-term impact on the company's shares.
Miranda Carr, of Teather & Greenwood, said that while the initiative was "generally welcome", there was "limited visibility" on the impact it would have on EMI. She pointed out that until most or all of the major music companies agreed to scrap copyright protection, EMI's actions would have limited momentum on consumers, who identify music by artist and label, more than its ultimate corporate owner.
EMI has issued two profits warnings since the start of 2007 amid a steep decline in U.S. CD sales.
The company has been involved in repeated attempts to merge with Warner Music. In the most recent set of discussions, EMI said it had received and rejected a "non-binding" proposal from Warner Music at 260 pence per share, in early March.
Record industry mergers are currently overshadowed by continuing uncertainty over the legality of the Sony BMG merger. The European Union in 2006 overturned previous merger clearance granted to the deal.
At 1230 GMT, shares in EMI were up 0.75 pence, or 0.3%, at 228.25 pence in a higher U.K. market.
Company Web site:
http://www.emigroup.com
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