In January, Apple announced that all songs in the iTunes Store would be free from DRM. As part of the announcement, the company said that previous DRM-encumbered purchases would be upgradeable to DRM-free versions, with a higher bitrate as well. This isn't just a point of principle with me--I have a Zune player that automatically adds all the songs in my iTunes library, including AAC files, but which cannot see or play DRM-protected songs.
Today, while doing some shopping for songs I love but don't own (or have only on--gasp--cassette, which I can't digitize because of the way my stereo's set up), I finally got around to upgrading my previous DRM-encumbered purchases. iTunes found three of them, and let me upgrade to DRM-free versions for 30 cents a track. So far so good. Then, I went to buy "Bela Lugosi's Dead" by Bauhaus. iTunes told me I already had it in DRM-encumbered form, and asked me if I'd like to convert to iTunes Plus. Say what? I thought I did that already. But when I actually tried to convert it, iTunes said my conversion process was finished. I looked further, and found there were about 20 songs that iTunes wouldn't let me upgrade. Why not?
Psych! Fooled ya!
I had to do some digging but found the answer in this MacWorld article: these were all free songs I'd received through promotions, mainly when I bought concert tickets through Ticketmaster and for the Monterey Jazz Festival. It's not like these songs were never paid for--presumably the promotional partners paid some fee to Apple, thinking that these free downloads would create positive associations in their own customers' minds. (Ticketmaster can always use more good P.R.) But now I'm stuck--either I pay full price for a new download or accept that they'll never leave my iPod.
I wouldn't have minded so much if Apple hadn't tempted me by offering me the chance to upgrade, only to dash my hopes when I actually tried to complete the process. That's an annoying bug, but the policy itself is the real offender.
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CNET News' Greg Sandoval is already covering the story, so I won't belabor it, but kudos to Apple and the three holdout record labels--Sony, Universal, and Warner--for reaching an agreement that will result in more than 8 million songs being available on iTunes with no digital rights management (DRM) restrictions. (EMI has made DRM-free songs available on iTunes since last spring, but only 10 percent of the music sold in the U.S. comes from EMI.) As Greg reports, Apple will also let users with existing DRM-encrusted downloads upgrade to a DRM-free version at a higher bitrate--256kbps--for an extra 30 cents.
For only 60 cents, I can upgrade both of my iTunes Store music purchases to DRM-free versions.
To remind everybody why this is important: this now means that most of the songs you buy on iTunes will be playable on devices and software produced by other companies. Yes, the files are still going to be in Apple's preferred AAC format rather than the more widely supported MP3, but a lot of recent digital music products from other companies do support AAC, including Microsoft's Zune (software and device) and the next version of the Windows Media Player, as well as Sony's most recent Walkman digital media players. SanDisk's popular Fuze and Clip, however, don't support AAC--a failing the company will hopefully fix with a software update.
This truly means that DRM for single-song downloads is dead. iTunes is the No. 1 distributor of digital music by a huge margin, and in fact is the No. 1 music retailer in the U.S., ahead of all brick-and-mortar outlets. DRM will live on in subscription-based services--the record companies aren't going to let you download unlimited music for one month's $15 subscription, then cancel and keep all that music--but otherwise fuggedaboudit.
My only gripe: the news comes six days too late to make my No. 1 prediction for 2008 true. Apple is also making music downloads for the iPhone available over 3G cellular networks in addition to Wi-Fi--another prediction that I made for last year.
Two interesting pieces of news highlight the trouble online stores will face as the price of legal song downloads approaches the price of illegal downloads (which is zero).
On Monday, Amazon.com announced an extremely generous revenue-sharing program for affiliate sites to resell MP3s from the Amazon MP3 store. Amazon will give them 20 percent of the revenue from all sales until January 1, 2008, after which it will drop to 10 percent. Since Amazon sells some downloads for as low as 89 cents, this means it'll have only 71 cents left to pay to the copyright owners. I don't know exactly what the wholesale price of these per-song downloads is, but I expect that Amazon will barely break even, and perhaps lose money, on this deal.
The same day, Ars Technica reported a rumor that Apple was planning to drop prices on iTunes Plus songs to 99 cents, the same price as all other songs on the service. Like Amazon's MP3s, these files have no DRM, meaning they can be played on any computer or device that's capable of playing AAC files. (Amazon's MP3s are more broadly compatible--for instance, many Windows Media-based MP3 players can't play AAC files.) On Tuesday, Steve Jobs confirmed the rumor to The Wall Street Journal shortly thereafter. I don't think EMI's charging Apple more for the DRM-less files than the other labels are charging for their content, but the price drop suggests that Apple's feeling the competition from Amazon.
Prices will probably continue to drop until the retailers have no margin left. In other words, to make a business out of selling digital music, you have to have an attached product that's actually profitable. In Apple's case, it's hardware. In Amazon's case, they must be hoping it draws users to the site, where they eventually will buy other products. That's been Amazon's strategy from day one--I used to work in a bookstore, and retailers' margins on books are exceptionally low relative to the retail price of the book. I remember wondering how the heck Amazon was going to turn online bookselling into a viable business, but of course they have with massive scale and significant attach of other products.
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