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Sony BMG Plans to Drop DRM
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The last major label will throw in the towel on digital rights management and prepare to fight Apple for valuable download revenues.
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Sony BMG, DRM, digital rights management, song downloads, music piracy, Apple, iTunes
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Sony BMG Plans to Drop DRM
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Sony BMG Plans to Drop DRM
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Technology
January 4, 2008, 12:01AM EST
Sony BMG Plans to Drop DRM
The last major label will throw in the towel on digital rights management and prepare to fight Apple for valuable download revenues
by
Catherine Holahan
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Getty Images/Jay Moorthy
In a move that would mark the end of a digital music era, Sony BMG Music Entertainment is finalizing plans to sell songs without the copyright protection software that has long restricted the use of music downloaded from the Internet, BusinessWeek.com has learned. Sony BMG, a joint venture of Sony (SNE) and Bertelsmann, will make at least part of its collection available without so-called digital rights management, or DRM, software some time in the first quarter, according to people familiar with the matter.
Sony BMG would become the last of the top four music labels to drop DRM, following Warner Music Group (WMG), which in late December said it would sell DRM-free songs through Amazon.com's (AMZN) digital music store. EMI and Vivendi's Universal Music Group announced their plans for DRM-free downloads earlier in 2007.
Getting Hip to the Internet
The impetus to lift copyright protection represents a sea change for the recording industry, which for the better part of a decade has used DRM to guard against what it considers illegal distribution and duplication of songs purchased online. In abandoning DRM on à la carte song purchases, the labels could create a raft of new, less restrictive ways of selling music over the Internet, such as through social networks like Facebook and News Corp.'s (NWS) MySpace. Partnerships with retailers such as Amazon could also help the music industry take a swipe at Apple (AAPL), which has come to dominate the legal download market through a one-size-fits-all pricing scheme record labels find restrictive.
Details of Sony BMG's plans are expected to emerge in the coming weeks. Justin Timberlake, the popular recording artist signed to the Sony-owned Jive label, is participating in a Super Bowl promotion with Pepsi (PEP) that will kick off Feb. 3 and offer free distribution of 1 billion songs from major labels, including Sony BMG, through Amazon's DRM-free download service, according to a person familiar with the matter. Sony has been experimenting with DRM-free songs for about six months. The company began giving away DRM-free promotional downloads for recording artists that sell less than 100,000 units, and at least one artist gained mainstream exposure through the effort. "A lot of these tests have led people to believe that maybe this works," says a Sony BMG executive who asked not to be identified. A Sony BMG spokesman declined to comment. Amazon also declined to comment on its DRM-free deals, beyond what it has disclosed in press releases.
The move by Sony BMG is especially noteworthy, given the company's checkered DRM past. In 2005, Sony BMG incited a consumer boycott and was the target of lawsuits after it embedded CDs with a form of DRM that was surreptitiously copied to and buried in users' PCs (BusinessWeek.com, 11/29/05), leaving the machines vulnerable to viruses.
Abandoning an Outmoded Idea
Many, including music executives, consider the industry's about-face long overdue. "This agreement is the first of many of these types we'll be announcing in the coming weeks and months," Warner Music Group Chief Executive Edgar Bronfman Jr. wrote in a Dec. 27 memo to employees explaining Warner's breakthrough deal with Amazon. "Many have argued that we could and should have done this long ago."
Labels used DRM software in an effort to prevent illegal sharing of songs on peer-to-peer networks, such as Gnutella. Instead, the restrictions served mainly to frustrate paying customers, forcing them to degrade the quality of music by first burning it to a CD before uploading it for play on the device of their choosing. Last year, consumers filed several class actions against the major record labels (BusinessWeek.com, 1/5/07) and, in a couple cases, against Apple, for restricting the devices and thereby controlling prices.
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