A barrier falls in digital music

A bold digital music policy launched yesterday by EMI Group and Apple Inc. could begin a new era for consumers, with higher-fidelity tunes designed to play on any music player or computer they own.

EMI said it will offer its digital music for purchase over the Internet in a format that provides higher sound quality than today's offerings. In addition, the company will remove barriers to copying music, known as "digital rights management," that limit how purchasers can use their digital songs. As a result, a customer at the Apple iTunes Music Store will be able to play the songs not only on its popular iPod music players, but also on Microsoft Corp.'s rival Zune player or any other digital music device. Buyers can also burn the tunes onto music CDs, making an unlimited number of copies. And while Apple's online store will be the first online venue to sell the newly open EMI recordings, EMI hopes to offer the music through other online sellers.

"This will put pressure on the other record labels to open up and go DRM-free," said Michael Goodman, an analyst at Boston-based research firm Yankee Group. "The assumption is that sales will increase. Apple will be banging on the heads of other record labels to go DRM-free."

Microsoft released a statement saying that its Zune store is already "working with a variety of partners to head in this direction."

Spokesman Adam Grossberg said "the vast majority" of EMI's recorded music, which includes such performers as Coldplay and Norah Jones, is available for purchase over the Internet. But Grossberg said the number of available tracks varies by country. He estimated that around 150,000 tracks are available to American listeners, while as many as 300,000 tracks may be offered in some overseas markets.

But EMI's most famous recording artists, the Beatles, will continue their Internet holdout. Despite the settlement in February of a trademark dispute between Apple Inc. and Apple Corps, the company that controls the Beatles music, tunes from the renowned rock band will not be sold at iTunes or any other Internet music retailer.

The new DRM-free songs will cost $1.29 each, compared to 99 cents for piracy-protected, lower-fidelity songs. EMI will offer its music in both formats. Consumers who have already bought the lower-fidelity songs will be able to get upgraded versions for 30 cents each. And customers who buy entire albums will be able to get either kind at the same price -- usually $9.99.

For EMI, the deal raises the risk of large-scale music piracy. Without built-in DRM software, which was designed to fight piracy by limiting the ways a digital music product could be copied, customers can easily make free copies for friends, or post the music on Internet file-swapping services like LimeWire or Ares. But EMI chief executive Eric Nicoli said the best defense against music piracy is giving the customer a square deal. "We've always argued that the best way to combat illegal traffic is to make legal content [more easily] available," Nicoli said. "We have to trust consumers."

Nicoli made clear that EMI is still committed to cracking down on music pirates. EMI is a member of the Recording Industry Association of America, an industry group that runs an aggressive antipiracy campaign. In February, the RIAA sent letters to colleges calling on them to identify hundreds of students suspected of music swapping, so the RIAA can sue the students for copyright violations.

EMI competitor Sony BMG declined to comment on EMI's new policy. Universal Music Group did not respond to a request for comment. A spokesman for Warner Music Group replied with a statement issued in February by chief executive Edgar Bronfman Jr. "There is no logical reason to abandon DRM nor to disadvantage services that are successfully implementing DRM," Bronfman said.

James McQuivey, digital music analyst with Forrester Research in Cambridge, said EMI's rivals will be in no hurry to follow its lead. He said that Sony BMG and others will wait to see if consumers are willing to pay extra to embrace EMI's new music format. "Sony's going to say, 'I'm not going to do a single thing with you until you show me how well this thing works,' " McQuivey said.

EMI's weak performance in online music sales means that it has little to lose in this experiment. The company has only about 8 percent of the market for digital singles sold online, compared to about 33 percent for the top seller, the Universal Music Group, according to data from Nielsen SoundScan.

For some analysts, the most significant aspect of EMI's new approach isn't piracy, but pricing. Ever since Apple's online music store became a hit, music companies have pressured Apple to raise its prices from the standard 99 cents per song or $9.99 per album. Until now, Apple has steadfastly refused, saying that flat pricing made things simpler for customers. Russ Crupnick, vice president and senior industry analyst at NPD Group Inc. said that Apple has now embraced the concept of different prices for different products. "That's something that the labels have clearly wanted for a long time," Crupnick said.

Meanwhile, doing away with software that restricts copying could cause problems for Apple. Until now, all songs sold at the company's online store have contained an exclusive DRM feature called FairPlay. Songs containing FairPlay can be played only on an Apple iPod, and Apple refused to license the technology to makers of other players. Critics accused Apple of using FairPlay to prevent customers from switching from iPods to rival devices.

But in February, Jobs surprised the music industry by calling for the elimination of all forms of antipiracy software, including FairPlay. Jobs said that only 3 percent of the music on a typical iPod was bought at iTunes, showing that his company's FairPlay wasn't locking in customers. And yesterday Jobs argued that EMI's abandonment of antipiracy software would expand the market for all digital music players, including his own.

"It's a risky strategy, and it takes a company with the confidence of Apple to do it," said McQuivey. Apple now has about 80 percent of the digital player market, he noted, and Jobs believes the company can maintain its lead, even when customers are free to migrate to other music players. "You're looking at a company that's very confident and a CEO who's very sure of himself," said McQuivey.

Material from Bloomberg News Service was used in this story.