Media industry executives and analysts have expressed surprise andalarm at last week's decision by EMI, the record label, to start selling music videoswithout the protection of anti-piracy software.The decision was a little-noticed part of the company's ground-breaking deal withApple that made all of EMI's catalogue available on iTunes in a format that can becopied and played on any digital device without restriction. That deal, announced withfanfare by EMI chief executive Eric Nicoli and Apple founder Steve Jobs, was hailedas ushering in a new digital music era.EMI is expected to begin announcing deals with other online retailers within the nextfew weeks, and Apple is planning to give the record label's music a big promotional push when it starts selling the premium-priced restriction-free versions next month.Rival record companies are beginning behind-the-scenes preparations to follow suit,should EMI's experiment prove successful in boosting digital music sales.

Songs from EMI artists - from Lily Allen to Tina Turner, Coldplay to Queen - will all be made available in a higher-quality format free of so-called "digital rightsmanagement" (DRM) software, which allows the retailer to control how many devicesthe song can be played on. While labels have previously insisted on DRM to preventillegal copying, many in the industry have come to believe that the restrictions aredeterring people from buying songs and may be driving them on to peer-to-peer file-sharing networks such as LimeWire - where pirated music, free of constraints, can bedownloaded without paying.EMI said it would also strip all its music videos of DRM and is not raising the priceof a download, which is $1.99 in the US and £1.89 in the UK.David Pakman, chief executive of eMusic, the next most popular online music serviceafter iTunes, said the decision to abolish DRM on music videos came as a surprise."The reason DRM is not working in music is because it has never been present inmusic. CDs are not copy-protected so copy-protected digital music defeats consumers'expectations. But every DVD you have ever bought, you have been unable to copy."Mr Jobs, who had a second career running Pixar film studios and now sits on the board of Disney, which acquired it, insisted last week that video content such astelevision programmes and films would remain DRM-protected. Hollywood iscertainly insisting that it do so.With more video available through iTunes and other online stores, film and TV producers are determined to prevent the rampant piracy that afflicted the musicindustry, but most content is already available on file-sharing networks. The risk isthat internet users will get into the habit of downloading video for free before theindustry can get them into the habit of buying DRM-protected content.One media industry executive said that EMI's restriction-free video on the iTunes sitewas setting an unwelcome precedent. "We are perplexed as to why EMI has done thisand surprised at their thoughtlessness," he said.Supporters of EMI's decision say that music videos are different to other types of video content since they have traditionally acted as promotional tools for music salesrather than sources of revenue from consumers in their own right. In fact, sellingstandalone music videos at all represents a useful new revenue stream, they claim.Apple is believed to be making a slightly higher profit on EMI's DRM-free songs (39cents, compared to 29 cents on copy-protected songs, according to industry rumours)and has promised to give a major push to EMI songs when it starts selling the newformat next month. Since iTunes accounts for more than 80 per cent of paid-for digital downloads, that alone could alarm EMI's rivals, SonyBMG, Universal andWarner Music.These companies are all watching EMI's experiment closely. Most industry observers believe they will follow suit.The argument for not doing so is that unprotected songs will quickly find their way onto file-sharing networks where they can be freely downloaded, meaning that fewer

people will actually buy them. Ultimately, it will come down to the numbers - and probably quite quickly.Mr Pakman said EMI will find its move is not contributing significantly to piracy, butthat it does contribute usefully to its bottom line. "This is the beginning of the end of DRM in music. Paid-for downloads are dwarfed in number by the billions of songs on peer-to-peer networks, so that differential can't get much worse."EMI expressed confidence in its decision, saying it came after a string of experimentswith DRM-free music, including on some Norah Jones songs last year.

EMI still pursuing Warner in face of rival

By Stephen Foley

Monday, 24 November 2003

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