EMI / Apple announcement: The beginning of the end for DRM

I never really thought I’d see this day, but today, EMI (one of the four large music labels) has announced that it will offer its music catalog DRM-free through iTunes (see also coverage in the NY Times). This means that users can buy any EMI song as an unrestricted MP3 file which they can then freely copy or use on any device, not just iPods.

Despite the groundbreaking nature of this announcement, it makes a lot of sense. Record labels have realized that DRM technology has done very little to prevent users from illegal copying and sharing of music. According to Steve Jobs, less than 3% of the music on iPods consists of DRM-protected files bought on iTunes. The rest are DRM-free files ripped from CDs. So, is EMI throwing in the towel? In a way yes, but that’s not the whole story. What they’ve finally realized is that they need to change the way they make money off of their recording artists. Instead of trying to force the market to consumer their product (music) their way (bundled in CDs or with restricted usage rights), they will let the market decide how to use the product (unbundled and flexible to use). And now they can concentrate on creating value-added services that go beyond the song itself (starting with the fact that they are charging more – $1.29 – for DRM-free songs). I wouldn’t be surprised if the recording labels started encroaching on areas that have traditionally been the bread and butter of musicians, like concerts.

How about Apple? Have they also thrown in the towel after the legal attacks on their highly restricted integration between iPods and iTunes? Call this a truce. Now nobody can accuse Apple of hijacking the market by forcing iTunes buyers to use iPods, since the DRM-free songs can be played on any device. Besides, why should Apple worry? For years people have speculated on what would be the “iPod killer.” Many have tried (including Microsoft – has anyone ever actually seen a Zune?) and all have failed. Not because iPods are necessary to play the music bought on iTunes (though I’m sure it’s helped), but because iPods are a marvel of design and functionality and because Apple is brilliant on building a brand. So, why should Steve Jobs care if iTunes songs will be played on non-iPod devices? Since the EMI catalog will be available DRM-free only at iTunes for now, Apple will actually gain more customers. It will be the owners of other digital devices that will come to iTunes to buy music. I don’t think it’s that far fetched to imagine Apple turning iTunes into a music store for all devices, with agreements to provide syncing for them as well. iTunes itself was never the strong point of the competitive strategy. That was the iPod. So, why not open iTunes to all and let iPod compete on its own merit, which is a formidable proposition anyway?

And there’s another huge benefit to Apple (and Steve Jobs) that comes from this announcement. They will be credited (again) with changing the digital media landscape and for managing to rid the world of the much hated DRM plague. Don’t you think that this alone will get them some more customers buying songs at iTunes? Not to mention it will make Steve Jobs feel even warmer and fuzzier inside than he already does?