DRM Free Is Not Free Enough

Rumor has it that Apple is on the verge of removing the digital rights protection from its iTunes Music Store products.

That will be a remarkable achievement should it happen -- even for Steve Jobs who more than a year ago tried to publicly bully the labels into letting him sell their songs without digital rights management.

You may remember that Jobs went public with a letter that the time had come to loosen up the reins on music protection. The labels responded by saying, you loosen up on Fairplay first. Fairplay is Apple's proprietary rights management system.

You may or may not be surprised to know that at least one label -- and I suspect more -- had contingency plans to eliminate DRM years ago. Internally, I was told, they were simply holding out for as long as they could.

Sound familiar?

To me that's the record labels only strategy -- hold out.

Now, if the DRM removal rumors are true, the labels are apparently going to cooperate with the inevitable -- even though it was inevitable a long time ago. They would be allowing the consumer to actually pay 99 cents for each song and let them transfer it to their other devices and use it as if they purchased a tangible product -- say, a CD.

Makes sense to the consumer -- now it's starting to make sense to the labels.

Kinda. Sorta.

By being late to the DRM free derby, the labels have actually helped grow the free file sharing market. Those of you who have teens will attest to the fact that your sons and daughters no longer have to come to you for money to buy music. Again I will say, this isn't about whether it's right or wrong -- that's another discussion. It's about whether the labels can control digital music the way they control CDs at Wal-Mart.

No one is walking out of Wal-Mart with a CD without paying -- not without punishment, of course.

But almost everyone is walking away from their computers with music that they didn't pay for.

I am separating the ethical issues because this is also a business discussion. The labels aren't going to be able to guilt or threaten the next generation into paying for their music any more than the Catholic Church could prevent Baby Boomers from using birth control.

So DRM free music -- especially on iTunes -- is a good thing.

You pay -- and you get to enjoy the music as you would if you bought a CD.

But DRM free is not free enough.

The next generation is in control -- as if the labels didn't know it. They want their music for free. They expect it for free. And they control the virtual record store.

I once said to a music industry class, how do you feel about the DRM issue? Is it important? And they answered -- no. Because all their music was DRM free -- it was stolen.

I've said this before -- unless or until record labels can control the checkout register, they can't control piracy. And by now they must be painfully aware that they cannot control the checkout register on bit torrent sites and other means of stealing music.

But, they hold on nonetheless hoping CD sales will miraculously rebound or that Apple will go hog wild selling so many 99 cent songs that digital will make up the difference with plastic.

In a way, I can understand their reluctance to blow up a big business.

Record labels still make billions and billions of dollars from the sale of product -- CDs. Why give it up? But they also must remember that these sales have been declining for all but one year since 2000.

They threatened.

They ran Napster out of business for letting the genie out of the bottle.

They stuck to their original 1950's game plan.

They offered products that have laid a big egg -- you know, $19.95 for all the music you can eat. Cell phones loaded with music. Monthly plans you don't want. They've all languished in some form of failure or another. And I imagine this sluggish economy isn't going to make $19.95 a month for music any more attractive.

That's it.

We've reached the end.

DRM free is not free enough.

Whether the labels like it or not, all music will be free. That is going to be tough for them to swallow -- easier when they are not still making billions from CD sales.

Free -- music for free.

Not for another five or ten years, say -- but the labels may not live long enough as a non-growth business to survive. You can only live on catalog, ringtones and publishing rights for so long.

But free is a faster way to profit than charging for CDs music lovers don't want to buy.

The labels will sooner or later understand that they will have to create ancillary streams of income around free music discovery in order to become a growth business again. That is, if they really want to remain a player.

And they'll have to use their nemesis -- the Internet -- to their advantage. Learning the real meaning of social networking -- the labels think it is a marketing tool like direct mail. It is not. It is a two-way beneficial relation as Barack Obama proved with his faithful.

They are going to have to kick Live Nation out of the concert business and acquire the skills to offer their own A to Z live performance services. (Note I did say "acquire the skills" because the labels do not presently have these abilities).

The labels could win fans by getting around Ticketmaster -- the hated middleman for concert goers -- and show consumers what a win-win ticket price really is.

Our friends at the labels could take merch out of the back room and make it a chief revenue source by redefining what merchandising can really be once you've won the hearts, souls and ears of consumers who are enjoying free music.

The labels could and should bypass radio and deliver their own "radio". I've been trying to get one of the big four to do this for a year now. Send music podcasts in every musical genre at 12 midnight every night with 30 minutes of new, free music. Don't -- I repeat -- don't add djs. That's radio and that will not work. But put experts and band members on to talk about the new tracks, the recording of the album -- get sponsors, make money.

I'm so damn excited just writing this piece I can't even see straight, but back to reality.

The labels haven't hit rock bottom as long as they make billions so they will flick off the digital future and hold on to what they've got -- which is what?

DRM free music -- four years too late.

Rampant piracy of their songs and artists.

Declining revenue from CD sales -- the only thing keeping them in business under their old school plan.

And no realistic, workable blueprint for the future.

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