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EMI drops copy limits on online music

EMI Group Plc will begin offering downloads of its music on Apple Inc's iTunes music store next month minus anti-piracy software that limits its use on some players, following a deal that is expected to prompt a sea change in the global digital music industry.

EMI -- the world's third-largest music label and home to the Rolling Stones, Norah Jones, Coldplay and Kylie Minogue -- said on Monday that it was responding to an overwhelming demand from music buyers who want the ability to download tracks onto different devices.

Analysts said the deal with Apple was a bold move from London-based EMI that would be closely watched, and then almost certainly followed by the three other music majors -- Sony BMG Music Entertainment, Universal Music Group and Warner Music.

"This is a message to the industry as a whole about where the digital market is going in the future," Ovum senior analyst Carl Gressum said.

The iTunes Web site will be the first online retail outlet to sell the new "premium" package from EMI, which will offer all the record company's online content without restrictive anti-piracy software, known as DRM, and with enhanced sound quality.

Despite feverish speculation ahead of Monday's announcement, however, the Beatles will remain off-line, in the absence of an agreement with the Fab Four's music company Apple Corps Ltd to allow their music on any Internet music services, including iTunes.

The Apple site will offer the new premium tracks alongside the existing "standard" tracks, charging an extra 30 percent for the singles. Albums will be offered in both formats at the same price.

"Consumers tell us overwhelmingly that they would be prepared to play a higher price for digital music that they could use on any player," EMI chief executive Eric Nicoli said. "It is key to unlocking and energizing the digital music business."

Analysts suggest that an across-the-board lifting of the software restrictions could boost sales of online music, which currently account for around 10 percent of global music sales.

While iTunes will be the first to offer the DRM-free downloads, EMI has not signed an exclusive deal with Apple. Nicoli stressed that the company's catalog would be made available in the same way on other sites.

"I expected it to be an exclusive six or 12-month deal, but they didn't choose the security blanket and that's a good thing for the industry,'' said James McQuivey, an analyst at Forrester Research.

Apple chief executive Steve Jobs, who has been lobbying for months for record companies to remove the DRM software, said he hopes to offer half the tracks currently available on iTunes in a DRM-free format by the end of the year, indicating he expects other recording companies to follow suit.

"Doing the right thing for the customer going forward is to tear down the walls that impede interoperability," he said, but declined to comment specifically on whether he had held discussions with the other major players.

McQuivey said that he expected to see announcements from several independent labels in the coming months with the remaining big three likely to follow suit in six to 12 months.

Gressum said an industrywide increase in downloads of higher quality tracks could be a boon for Apple because consumers would likely need to buy devices that had more storage capacity.

Analysts said the only disappointment to an otherwise well-received deal was the absence of the Beatles catalog.

The situation was exacerbated by a long-running trademark dispute between Apple Inc and Apple Corps. That legal feud was resolved in February when the two companies agreed on joint use of the apple logo and name.

But Nicoli said no agreement had been reached on the Beatles catalog, saying only that EMI was "working on it."
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