Universal to test DRM-free music sales, snubs iTunes

In both shocking (and, frankly, kind of unshocking) news, Universal Music Group (whom we all know as the largest music conglomerate in the world) announced its intent to test DRM-free music through Real's Rhapsody, Wal-Mart, Amazon, even Google -- but not through long time begrudging online retail partner / frenemy Apple's iTunes Plus DRM-free music store. Apparently the restriction free Universal tracks will start popping up on those other music distributors next January, during which time the company intends to closely monitor sales, increases in music piracy, etc. before going all-in; for the time being we've no idea which artists Universal intends to free up or just how much of its total catalogue will be distributed in this little toe-dip of theirs. But one thing we do know: between EMI and Universal, two of the top four music businesses in the world have now announced or begun distributing music without DRM, and there's little we can find fault with about that.

[Thanks, somebody]

[Bernhard @ Aug 9th 2007 10:43PM]

Its still the honesty of most people that pushes sales

[humpty @ Aug 9th 2007 10:49PM]

Apple's push for DRM-free music basically renders their iTunes Store irrelevant. Labels can just as easily set up their own front and bypass the Steve Jobs Tax.

[bl0nde @ Aug 10th 2007 2:01AM]

The Steve Jobs tax which lets the labels take ~70c out of 99c per song and lets most of the rest go on bandwidth, overhead etc? Apple only make a few cents per song.

[TyBe @ Aug 10th 2007 2:35AM]

You are aware that when they use their own store they'll more than likely charge more than itunes which has been actually keeping prices down to a level that most people generally find acceptable over just downloading them for free.

[tekdroid @ Aug 11th 2007 8:13AM]

TyBe @ Aug 10th 2007 2:35AM

You are aware that when they use their own store they'll more than likely charge more than itunes which has been actually keeping prices down to a level that most people generally find acceptable over just downloading them for free.
------------
There are plenty of independent artists charging less and keeping far more than the crumbs the record company gives them (on a good day). Setting up simple online stores isn't rocket science or a huge capital investment.

[Mr. Yetti @ Aug 9th 2007 10:54PM]

I just want to see what happens to their online sales now that they've dropped iTunes, especially in light of this.

[Adam @ Aug 9th 2007 11:19PM]

They haven't dropped iTunes. They went to a month-to-month renter's lease. :-)

[T.H. @ Aug 9th 2007 11:03PM]

So...anyone taking bets on how long before Universal puts DRM free music on Apple? My guess is by November when the holiday buying season is in full swing.

I'm going to say that they are doing this to put pressure on Apple to either take more of the $ pie, of which Apple barely makes any profit after operating costs are taken out, or try to get Apple to price the tracks even higher than $1.39. After all, if you can get $3 for a friggin 30 second ringtone clip, why can't you get $3 for the whole song right?

Apple has a ton of clout in the music retail world, the big labels are very worried about the power wielded by Apple and is doing what it can to stop it. The other issue is that with the internet, it is easier to find music, even for those with obscure tastes.

They're also afraid Apple is too big and will be increasingly difficult to handle.

The music labels are scared they will lose their cash cows to etailers like Apple's iTunes Music Store if one of these etailers grow too big. Why go sign up with a label if most of your music is sold on iTunes? Why not just sign up with Apple and let Apple promote you? After all, it's been shown that when your music is spotlighted on the iTunes store, it gets a huge jump in sales.

[joe @ Aug 9th 2007 11:43PM]

So DRM free music is a bad thing that only Apple can save us from?

[Bloobie @ Aug 10th 2007 2:20AM]

Because it would be illegal for Apple to become a "label", which is essentially what you are describing in your last paragraph. This goes back to the original court decision made between Apple (Computer) and Apple Corps (owner of Apple Records).

[Bloobie @ Aug 10th 2007 2:25AM]

@joe:
He said nothing about DRM-free music being something "bad" that only Apple can save us from. What he is saying is that the big labels do not like the fact that Apple (through iTunes) has become such a major player in the digital download market. Apple, in fact, is the largest player in this market. As such, they have tremendous clout when it comes down to pricing for each download. The labels want to charge significantly more per download than what Apple is willing to allow.

[Eric @ Aug 10th 2007 9:09AM]

I think that they can actually become a record label now. As a result of the most recent lawsuit, Apple now owns everything and the Beatles lease some of the rights back.

[robothouse @ Aug 9th 2007 11:09PM]

I'm Brian Fellows!

[Andrew @ Aug 9th 2007 11:13PM]

@humpty

That's an interesting way of saying "The labels would have charged way more than .99c/song, but Steve Jobs wouldn't let them." Do you honestly think you would have gotten a better price if it came directly from the big labels? Yes, the smaller ones can may have wanted to sell cheaper, but this gives them a highly-visible digital storefront - think of it kinda like a mom-and-pop store that got a premium place in a busy mall. The 'foot traffic' in the iTunes music store is much, much higher than if they'd just set up a website to sell their music.

And no, it doesn't make their store irrelevant, it just means they compete on features, performance and good ol' customer service, rather than an artificial lock-in.

[humpty @ Aug 9th 2007 11:21PM]

Well, if Universal's experiment works.. expect other studios to follow suit. Remove the DRM and theres no point to having a single, heavily taxed, third party source for it. Take control of your music assets and sell under your terms... all Apple will be left with are those indy tunes that appeal to 0.0001% of the population.. no money to be made there.

And, why should Apple get any cut in their music sales? Does Apple get a cut when CDs are sold?

[Andrew @ Aug 9th 2007 11:34PM]

Perhaps a better analogy would be "Does a record store get a cut when a CD is sold" and the answer is "of course." Apple gets a cut because it set up the business, and has expenses to be paid from that business. That's pretty straightforward, and frankly, having seen the percentage of their cut, it's not a quantity that is exceedingly unfair, especially in light of the label's cut. Go look it up if you're interested. It's literally pennies on the dollar.

Apple's lynchpin in this whole works is the iPod. There's XX million iPods out there, iTunes is the logical extension of the iPod, and the iTMS is the logical extension of that - it's all right there, every time they plug their iPod in. With no DRM, they're counting on this ease of use to keep things going, rather than taking a page from Microsoft's (or their own pre-OS X) playbook and keeping people locked in to proprietary media.

[Adam @ Aug 9th 2007 11:21PM]

My first reaction was January?!?! Why would it take so long to push non-drm music?

[Thom Miller @ Aug 9th 2007 11:23PM]

'cept the problem is, they'll see an increase in piracy because piracy has always grown over time, say "see, we told you so.", and go back and lock stuff down even harder.

so yay, but not for long.

[comrade @ Aug 10th 2007 1:09AM]

Plus, they'll see crappy sales through these other services because everyone buys their music through iTunes, and so they'll be able to say selling DRM-free music was a failed experiment.

[Silver @ Aug 10th 2007 1:22AM]

Whoa, DRM-free music on Real's Rhapsody (they're still around?) using Microsoft's (Universal apparently loves an underdog) WMA format that doesn't play on iPods? Universal is going to sell literally *DOZENS* of songs with this new scheme! Cha-ching! Go, Universal, go!!!!

Idiots.

[matt graves @ Aug 10th 2007 3:54PM]

Silver, the DRM-free songs on Rhapsody will be 256 kbps MP3 files. And unlike with iTunes, they won't come embedded with the customer's username and email address in the metadata.

Full disclosure: I run PR for Rhapsody, and was part of the team that launched the service way back in 2001.

[Revrant2394 @ Aug 10th 2007 2:00AM]

*guy in the background after iTunes realizes it's been purposely left out*

Oh-ho-ho SNAP!

[Pastry Chef @ Aug 10th 2007 2:20AM]

I wonder who would be hurt more if Universal's music is no longer on iTunes Music Store.

[Jeff @ Aug 10th 2007 11:13AM]

Look at the record industry's sales over the past few years and I think you'll have your answer.

This is an industry that's doing all it can to shoot itself in the foot. Repeatedly. Then the other foot.

Sales are down. Digital sales are up but not by enough to offset physical sales dropping. So what do you do? Why, snub the most popular download service! That's a winning business strategy if I ever saw one.

It'd be like me coming out with a hot new product and then refusing to sell it at Wal-Mart even though they desperately wanted it. No, I don't need those 200,000 orders. I may be losing money hand over fist, but who needs to be profitable these days?

The music industry is in no position to be turning away sales, and that's what they're doing. I also fail to see how this is any sort of valid "test" of anything, because like it or not the iPod is about 70% of the market, and when iPod users do buy music online they almost always do it through iTunes. So what do you prove by sales of these non-DRM'd songs on other sites? That non-iPod users that happen to buy their music through Rhapsody do or don't like DRM? Great. That's definitely a useful piece of knowledge.

[TK @ Aug 10th 2007 12:48PM]

Theories:

1) Negotiating tactic with Apple and MS. Yeah, the major studios already take the lion's share, but in general, you go for what you can get. Is it a *smart* negotiating move at this point? That I don't know. They really don't seem to be in a good bargaining position.

2) Maybe they're just trying to test the longtail of internet music retail sites. Rhapsody can always cry foul at poor numbers by blaming market saturation on iTunes. You only way you get to the bottom of that is to take Apple out of the equation. So now Rhapsody and the others need to put up or shut up.

I'm sure there are more, but those two spring immediately to mind. Beginning of a long-term negotiation strategy of one kind or another makes the most sense.

[Billy Boy @ Aug 10th 2007 3:07AM]

I just have one thing to say... Chocolate Raaaiiiinnnn....

[cs0875 @ Aug 10th 2007 9:02AM]

I agree. I get Chocolate Rain stuck in my head, and I want to torture everyone at work with that song. But iTunes doesn't have. Whats wrong Apple?

[CF @ Aug 10th 2007 3:48AM]

Oh Dear...they haven't got a fricking clue have they!

First or all they are only going to reach non-Ipod users and so...

1: I'd suggest that people who buy a cheap and nasty mp3 player other than the ipod are not going to buy music. Why ? becuase they believe in 'cheap and nasty' as a personal preference and a lifestyle choice, and these kind of people don't buy anything if they can get it for nothing.

So that immediately rules out everyone but...

2: Zune fellows *may* be willing to buy since they are not quite as cheap but are making some kind of anti-apple statement by aligning with the death star ( although I must in all honesty question there ability to make good decisions as buying second best to spite number one classes as a form of self-harming - psychotherapy should be sought), but even so there are only about a million of them and not approaching 150 million ipod users and unless it's locked into the Zune client I doubt they will spend the time messing about with awkward clients.

BUT MOST OF ALL...

3: One store, easy to find easy to use. This is why iTunes works. Anywhere else is just a boring, crappy second rate experience and a total turn off.

[TDG01 @ Aug 10th 2007 9:07AM]

If you would take a few minutes to pull your head out of your ass, you'd see there there are awesome DAP/PMP players other than the iPod an Zune...such as those by meizu, irivier, cowan, archos, etc...

Personally I stopped w/any drm music..it's ridiculous...and while I love the ease of iTunes, i now have a ton more options.... even if i have to sacrifrice on the ergonomics of the experience...

[ToonPac @ Aug 10th 2007 10:04AM]

Maybe they only want to appeal to people with some kind of taste in PMPs, not a simple sheep who sees that iPods are fashionable, instead of buying something superior (and better value) such as a Creative Zen Vision: M...

[ak @ Aug 10th 2007 4:40AM]

@Billy Boy nice O&A quote

I don't know know who at UMG comes up with this stuff. Hmmm lets try out selling songs on the internet( or the tubes in thier eyes) and lets leave out the largest online music store in the us and the the thrid largest music store overall in the US. Sounds good to me.

[James Ollier @ Aug 10th 2007 5:20AM]

I still think the fact that Zune doesn't support PlayForSure is funny

[js912 @ Aug 10th 2007 6:11AM]

Yeah, great idea. Don't these people understand that what users want is simplicity. If everyone sets up their own music store it won't help sales. Why set up accounts with many different stores and then convert music and still PAY for it?

Why iTunes works is because of simplicity. One click and the song is on your PC with album artwork and all.

[Shaun @ Aug 10th 2007 6:38AM]

@Bloobie - The Apple (Computer) and Apple (Corp) dispute is over. Apple dropped 'Computer' from it's name and bought the rights to Apple Corp's music trademarks. Apple could set up it's own label if it wanted to now.

[Mac Dub @ Aug 10th 2007 7:31AM]

Better get in on some of that RNWK while it's at a new low!

[DaPhatty @ Aug 10th 2007 7:54AM]

I'm happy to see that I'm not the only one who see's the only reason iTunes is being excluded is so Universal can charge more than $1.29 per song. Greedy bastards...

[matt graves @ Aug 10th 2007 3:44PM]

DaPhatty, the DRM-free music from UMG will be the same price --99 cents per song-- as DRMed files. EMI and Apple are the ones imposing a 30-cent-per-song surcharge for getting DRM-free music.

Full disclosure: I work for Rhapsody, one of the retailers participating in the test when it launches on August 21st.

[Dave @ Aug 10th 2007 8:30AM]

I got it!! We'll sell our stuff drm free to the market segment that is the most tech savy. Watch piracy go up and sales plumet. Claim it doesn't work.

itunes has some of the most faithful customers that repeatedly buy songs. Why snub them and go after the tech kid with a subscription and a copy of fairuse4wm? he's not the buyer anyway.

[Michael @ Aug 10th 2007 1:04PM]

Dave, you miss the point entirely. Sure, DRM free means there is a chance that piracy will increase but trust me, piracy will always be out there regardless of whether tracks are DRM free or not. Those who are willing to trade DRM free files have had no shortage of supply to this point, why would things change?

It all goes down to both convenience and personal integrity. I've searched for files to download back in the day and frankly, it is a pain in the ass. I almost always had to wait practically forever before my turn came to download the tracks I was searching for. Many times my turn NEVER came or else I couldn't find a copy of what I was looking for in the first place so I finally gave up even trying. This is a good example of how inconvenient it is to illegally find and download tracks. Even though I could go through the time and effort to try and get something for nothing, it is worth more to me to just go and download it instantly with basically one click for a small amount of cash. Why in the world would I waste all my time getting something illegally if I can just go to one site and pay a token amount for it and go?

The second issue is personal integrity. I do want to support those who are making the music I enjoy so much and stealing something from them just isn't the right thing to do, regardless of the tiny sliver they actually see after the labels take their unfair share. Now, call me old fashioned or naive but I still believe that for the most part, the lion's share of us still have some level of personal integrity that we live by. Those who would steal will do so regardless of price, convenience, DRM, whatever. Those who refuse to steal, will always pay for what we download. It's basically that simple.

http://www.myspace.com/scoobarama

[cs0875 @ Aug 10th 2007 9:05AM]

Have you ever used a Sansa player? I didn't think so, when you pick up a Sansa Connect, and realize how easy it is to use, and how great it is to download music wirelessley over WiFi you will be convinced it is not a "cheap & nasty" mp3 player.

[EngadgetFanBot @ Aug 10th 2007 9:47AM]

DRM? Isn't that whats causing global warming?

[Michael @ Aug 10th 2007 11:15AM]

Not only do I want to buy all of my music DRM-free, I want the option to download it at 320 Mbps (or higher if I want it). I pay between $1.99 and $2.99 per track to get just that from Beatport.com and I do it GLADLY. I've got literally thousands of dollars invested in my audio systems in my home and car and the compression iTunes (and virtually every other site) uses is just abominable. Even though it only costs $ .99 or $1.39 to download whatever I want from iTunes, I would rather pay more to get an even higher quality product. Unfortunately, the idiots running the labels are too freaking STUPID to realize that they need to be charging by the Mb instead of by the song. This would basically solve everything by letting those who choose to buy longer, higher quality tracks pay for the privilege of getting them that way. $4.99 for a CD quality, 8 min long track is still a deal compared with paying upwards of $8-10 for the same import vinyl copy.

Then again, no one has ever accused the labels of doing ANYTHING smart...

http://www.myspace.com/scoobarama

[Silver @ Aug 10th 2007 12:14PM]

"I pay between $1.99 and $2.99 per track to get just that from Beatport.com and I do it GLADLY." - Michael

Michael, please don't give the greed-stained record companies any ideas...

[Michael @ Aug 10th 2007 12:40PM]

Silver, my point is that there are people out there like myself that will gladly pay more for higher quality tracks if they were made available. Currently, iTunes is starting to offer slightly higher quality files for a premium price but their premium tracks are still far from the 320 Mbps quality I use to rip all my CDs. The fact that I am willing to pay by the megabyte instead of by the song should incent the labels in some form or fashion to offer the largest files possible because believe me, there IS a market for them. Beatport allows their customers to choose what bitrate they prefer to download their tracks at right up to and including lossless compression if you want to pay for it. I think iTunes (and for that matter the labels in general) would end up selling more tracks in the long run and would make considerably more money as a result. As it stands right now today, I would NEVER download anything from iTunes because their bitrate sucks too much. I would rather do without a track than pay for sound quality that isn't worth the $ .99 they currently charge. That means I won't ever be an iTunes customer regardless of DRM, content, features, ease of use, etc. because of the QUALITY of the product being sold.

Now, the resistance of the labels to shift from the old school business model of selling full CDs to the currently consumer preferred individual tracks model has been like the immovable object against the irresistible force and they are STILL losing ground. Imagine chucking that entire business model and going to a pay-by-the-megabyte format instead. While it certainly makes sense to the tech-friendly consumer, I imagine that if it were up to the labels we might see a transition to this form say about... 2099? The whole electronic media industry is dragging the music/film industries kicking and screaming as hard as they possibly can. Look at how hard both industries are lobbying Congress for protection when they should be spending all that time and energy on coming up with a new business model that will actually allow them to make a lot more money than they currently do. Imagine how much they will save on infrastructure if they can reduce the physical costs of producing and packaging CDs. Imagine how much they can save on advertising and promotion if all they have to do is create web banners or teaser tracks for consumers to listen to. Instead they can't seem to get their heads around the fact that their world is changing and they better get on board or some other new upstart will do it instead.

After all, all the labels are is a way for music to be produced and marketed. Once artists no longer need that particular part of the supply chain, they WILL become dinosaurs. I for one look forward to seeing them sink slowly into the tar pits of their own creation. Good riddance.

http://www.myspace.com

[DW @ Aug 10th 2007 11:51AM]

What's surprising to me isn't that Universal is snubbing iTunes; it's that Universal is snubbing Zune, too! (Even while it favors Amazon's non-existent store!) Zune pays a little tax to Universal so I think they should at least have an incentive over a store that doesn't even exist yet. If I were MS, I'd be royally pissed!

[TjL @ Aug 11th 2007 12:52AM]

It won't take until January, it will run THROUGH January, according to

http://arstechnica.com/news.ars/post/20070809-music-drm-in-critical-condition-universal-tests-drm-free-music-sales.html

(quote)
The test will see UMG offering a portion of its catalog—primarily its most popular content—sold without DRM between August 21 and January 31 of next year.
(endquote)

More thoughts here:

http://tj.tntluoma.com/thoughts/universals-drm-free-test-drive

[sdf632 @ Aug 11th 2007 1:30AM]

Meh. If the music companies dismantle the iTunes pricing system and try and charge more for each song, we can just revert to the perennial solution of downloading. It's not like they can actually clamp down on that.

[nigel @ Aug 12th 2007 7:52AM]

And this is why universal pictures wont go Blu Ray, draconian sony DRM laws choking the industry

[Stunad @ Aug 13th 2007 9:37PM]

It always amuses me to hear so many people call the record labels greedy and that they are only out to screw the artist and the consumer.
I'll bet the same people calling the labels greedy are the ones who buy a $4.00 coffee at Starbucks...Every Day! But music that lasts forever? No...too much.

They should really read up on the business. To launch a new artist today costs millions just to get the first single out to radio, internet and TV. Does radio mean much today? Not as much as it used to, but you still need it. What sells music to the masses? TV.
How about the cost of tour support, dance lessons, recording, P.O.P material?
Did you know that it costs millions just to put a CD on the shelves of the mass merchants. You didn't?
Do you think getting your artist on TV is cheap? Do you think that TV guys are just begging artists to appear? You know the biggest TV driver out there? Sure you do. American Idol, you'll say. Not entirely true. Oprah is the biggiest influence on music just like she is on books. Another costly expense for the record company on a no-name artist with nothing going for them but a song that you hope will catch on.

I love those who think that you can market a new artist with just the internet. That one kills me. Here...go to this sight. "music.I.Never.heard.of.com"
Yeah, that will sell lots.

Good luck with all your business models guys. I hope you all make milliosn.

[Tim @ Aug 13th 2007 4:10PM]

Apple should offer a DRM free version of all songs their customers have downloaded. They could charge another 20 cents per song to convert to DRM free mp3 instead of the iPod specific format they have suckered everyone into using.