Feeds

Free music has never looked so cheap

DRM's gone. Now the problems begin...

Designing a Defense for Mobile Applications

Analysis For the major record labels, yesterday's deal between EMI and Apple doesn't herald a new beginning, but the beginning of the end.

From next month, EMI will distribute much of its repertoire without DRM through Apple's iTunes store. Independent labels have been distributing DRM-free songs for three years, avoiding the lock-ins created by competing hardware manufacturers. But EMI is the first of the "Big Four" majors to recognise that artificially recreating the inconveniences of physical product in a digital form isn't good business.

Let's leave aside the many gotchas in the announcement, such as the price increase which takes the cost of an unencumbered song to almost $2 (that's the UK price converted to US dollars, folks), the absence of the Beatles' catalogue, and the continuation of DRM as "on by default".

Let's also leave aside the mutual panic which brought Apple and EMI together yesterday. EMI is in financial free-fall, it's unsuccessfully tried to find a buyer for several years, and it's now so desperate it will try anything. Apple is under regulatory pressure not only to modify its DRM consumer lock-in but, along with EMI and the labels, faces an EU anti-trust probe into its pricing. Both companies jumped before they were pushed.

But it's a move that will only make the major labels' digital agony increase. Why? Because legal digital downloads have always competed with free, illegal music. And by shattering the illusion that legal music is somehow special, because of these technological countermeasures, a like-for-like comparison can now take place. This isn't a face-off the big labels want.

This weekend, the Torrents carried all the major labels' premium CD cash cows. The albums are cleanly encoded and lovingly zipped up to include large, high quality JPEGs of the front and back of the CD covers. A broadband user can order all this for guaranteed overnight delivery. That's an excellent service for "free" - and one in which songwriters, publishers, and rights holders don't see a penny.

According to the RIAA, free downloads outnumber legal downloads by 40 to 1, although one experienced music business insider said this was an underestimate. These days, the major labels don't over-exaggerate the popularity of free music, they underestimate it.

"If the RIAA says it's 40 to 1, then it's probably 100 to 1," he said.

So how come, you might wonder, did so many of the independents agree to DRM free music when it's a step too far for the biggest three labels, Universal, SonyBMG, and Warner?

The answer is in what creates the cost structure in each case, indie or major? Independent labels typically offer artists a 50:50 revenue share and they create a sustainable business without incurring huge expenses. The Big Four are all about incurring huge expenses, then recouping them from huge sales. Expenses include notoriously large advances to artists, such as the £80m EMI paid to Robbie Williams in 2002 for a five album deal. These are clawed back in several ways. However, it's not the advance that's the problem. Defending the Williams deal at the time, EMI pointed out he'd shifted around £300m worth of CDs in the preceding five years. The problem is that for every Robbie, many more artists are recruited, given large advances and marketing budgets, before eventually being abandoned.

(EMI is occasionally described - usually by Americans - as "the world's biggest indie". But it's trapped in a major's cost structures).

Using blade systems to cut costs and sharpen efficiencies

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple ran off to IBM
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.