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Steve Jobs One-Ups the Music Industry Again!

At the time they said it was probably a publicity stunt, but it appears that Steve Jobs had the right idea when he suggested that the music industry would be better off without putting DRM on the tracks sold by online retailers. Sure, Monday’s agreement with EMI may just be a grand experiment that could come crashing down, but I don’t think so.

I feel certain that Steve was right on the money this time, and that — if they are smart — the rest of the music industry will catch up with EMI real fast and institute the very same program.

For those of you who tuned in late, I won’t belabor the details. Instead, I’ll just cover them briefly, and you can go to Apple’s site to read the full press release. Basically, beginning in May, the songs you buy from iTunes will be available in two forms. The “standard” version will be the same ones you can download now at 99 cents per copy, and they will still include the “FairPlay” DRM encumbrance. However, there will also be a “premium” version, encoded at 256K instead of 128K, which will be DRM-free. It will sell for 30 cents additional.

Album prices will go unchanged and — once the new versions are available — you’ll be able to upgrade your existing iTunes music repertoire simply by paying the price difference.

This is the second recent policy change for iTunes. Just last week, they added a “Complete My Album” feature that allows you to upgrade from one or more singles to the full album simply by paying the difference in price. You have to upgrade within six months, though I’ve heard reports that older tracks may be included as well.

This is certainly a boon to the music industry, which has been long complaining that they want to sell albums, not singles. Now they have a chance; that is, of course, if you really want the album. That has always been a vexing issue, because lots of pop albums contain one or two hits and lots of filler. Customers know that, and perhaps the music industry will figure it out too one of these days.

In any case, now that DRM is being ditched at a premium price, the music industry gets something else it wanted, which is variable pricing. This may be a back door method to support a price increase, since supplying a higher-definition version of a song doesn’t cost them any extra, and not encoding the file in a DRM wrapper probably reduces processing time somewhat. In other words, as a practical matter, except for the additional storage required for the larger files, premium songs ought to be cheaper. But when is the music industry practical or even logical?

From a user standpoint, though, I suppose it makes sense to pay more for something better. How much better, only time will tell. Apple claims a 256K AAC file is “indistinguishable from the original recording,” and I suppose the golden ears out there will be quick to put that promise to the test on material that they regard as sufficiently revealing. One example might be acoustic piano, particularly when recorded in an intimate setting where every nuance of the original instrument is audible.

The next question is how the rest of the recording industry is going to react.

EMI is the smallest of the “big four,” and it has been flirting with DRM-free product for a while. So it probably isn’t a huge jump for them to agree to this new distribution scheme. I also expect that it’ll put the pressure on the rest of the industry to join them, and clearly that’s what Steve expects, since he claims that half of the iTunes catalog will be free of digital rights management protection by the end of the year.

Of course, the big question is whether this new marketing setup will help rescue the industry, which has seen sales fall steadily. Will music pirates simply take the superior tracks and put them up their peer-to-peer sites, without a corresponding increase in sales from people who choose to buy their music legally?

That’s a huge question, and I hope Steve is right that digital music sales will actually improve when you know that the songs you buy are not exclusive to a single supplier, or a single company’s line of music players. And, of course, that you’re getting a superior product. Already, some analysts are suggesting that Apple may even see an increase in iPod sales because customers have greater freedom to handle their music the way they want.

But what about the other companies? Well, Microsoft, which never met a DRM scheme it didn’t like, may really be caught with its knickers down here. Sure, after a period of exclusivity on iTunes, they can benefit from the same product, and offer it to their PlaysForSure” partners and to owners of the Zune player.

It will even mean, for example, that you can buy a song from iTunes and play it on a Zune, unencumbered by any restrictions. That is, except when you “squirt” the track by Wi-Fi to a fellow Zune owner — if you can find one. In theory, the song will still self-destruct after three plays or three days, whichever comes first.

How will Microsoft explain their way out of that dilemma?

More importantly, I wonder how the RIAA is going to treat the customers it has been suing with great vigor after this unlikely development? Alas, I do not expect that to change anytime soon, unless the RIAA sustains a few big losses in court.