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Will the Record Industry Ditch DRM? Will the Record Industry Ditch DRM?
By Jennifer LeClaire
February 12, 2007 10:11AM

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Apple's Steve Jobs said he would do away with FairPlay, Apple's proprietary DRM technology, "in a heartbeat" if the major record labels would license their music without mandating copy-protection mechanisms. Jobs criticized Warner, EMI, Sony, and Universal for forcing online music stores to sell music with DRM while selling CDs without the same protection.
 

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Apple CEO Steve Jobs sparked an industry debate with a controversial suggestion to remove copy Relevant Products/Services-protection technologies on digital music. Jobs posed his notion to nix digital rights management, or DRM, in an open letter to record labels last week, but so far the responses have been mixed.

Warner Music has come out against the proposal, which would allow consumers to purchase digital music downloads without DRM. In an earnings conference call late last week, Warner Music CEO Edgar Bronfman said the idea was "completely without merit."

EMI, the third-largest record company in the world, however, has reportedly been pondering the idea of offering unrestricted downloads in an industry whose revenues are still dominated by traditional CD sales.

As the debate heats up, analysts are considering the impacts of a DRM-free download scenario on consumers who would have free rein to copy the music they purchase on multiple devices, or even share it with friends.

Apple's Stance

Apple's Jobs said he would do away with FairPlay, the company's proprietary DRM technology, "in a heartbeat" if the major record labels would license their music without mandating copy-protection mechanisms. He criticized Warner, EMI, Sony, and Universal for forcing online music stores to sell music with DRM while selling CDs without the same protection.

"So if the music companies are selling over 90 percent of their music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system Relevant Products/Services?" Jobs asked. "There appear to be none."

Warner Music's response is to continue advocating DRM. Bronfman said, "The notion that music does not deserve the same protection as software, film, video games, or other intellectual property, simply because there is an unprotected legacy product in the physical world, is completely without logic or merit."

With or Without Merit?

With expected total music industry revenues to decline to $11.5 billion in 2011 from $12.6 billion in 2005, according to data Relevant Products/Services from Jupiter Research, the industry is looking for answers. Part of that answer might be online sales, especially with CD revenues continuing to slip. But projected online sales don't bridge the lost revenue gap, and some label executives fear removing DRM would cannibalize both mediums.

Mike McGuire, an analyst with Gartner, cautioned consumers not to hold their breath waiting for recording labels to do away with DRM. He said he doesn't expect the industry to drop the DRM mandate in the next few months.

"The record labels spent years pushing technology companies to come up with solutions, and this debate is going to continue for a while as they try to grow the online business while maintaining their existing CD distributions," he predicted. "But it's healthy that we are having the discussion."
 

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