iTunes drops DRM – embraces variable pricing

Nick | 07 Jan 2009, 09:42

Apple Inc has announced major changes to the way its iTunes digital music store will operate, including:

- Songs downloaded on its iTunes Plus service will be free of digital rights management protection (DRM)
- Variable pricing at three different price points
- 3G iPhone users will be able to download tracks and ringtones directly, opening up a new and potentially lucrative market

FT.com reports:

“EMI, the UK music group, agreed to drop DRM in 2007. Vivendi’s Universal Music, Sony Music Entertainment, Warner Music and many independent labels will now follow suit.

“The three-part agreement, heralded by Tony Bennett singing ‘The Best Is Yet To Come’, could boost digital music sales, as the iTunes store is by far the largest download service, having sold 6bn songs to 75m customers since it launched six years ago.“

Music Industry Blog suggests that despite the dominant player choosing to abandon DRM, the technology will continue to play a key role in future:

“It is, however, crucial for future differentiation of the next wave of digital music services. Subsidized and ad supported services such as Qtrax and Nokia’s Comes With Music give consumers music for free but with DRM restrictions. DRM will become the key tool for differentiating premium from subsidized. The more you pay, the less DRM you have.“

The changes to iTunes are the result of protracted negotiations with the music labels, which have been able to develop a position of greater strength through the cultivation of alternative services, such as those provided by Amazon, Nokia and MySpace, which now pose a real threat to iTunes’ market share. 

The complex dynamic between content producers, platform owners, format developers and the consumer is a central issue for much of the creative economy. C&binet seeks to encourage co-operation and sharing of best practice across the spectrum of creative industry.