Apple's move earlier this year toward a "DRM-free" model for some songs available at its iTunes store has created a great deal of speculation about the future of Digital Rights Management. Some industry watchers have even gone as far as heralding Apple's initiative as "the death of DRM." But what's the real story?
First some background. In late May, Apple's iTunes Store began selling "DRM-free" songs from record label EMI Group. This means that all the songs from EMI that are now sold on iTunes are available in "DRM-free" versions. Consumers have the option to purchase either an AAC-encoded DRM-free song for $1.29 via iTunes Plus, or the usual version for 99 cents with integrated DRM.
Previously purchased EMI songs can be upgraded to the DRM-free version for 30 cents per song, or $3 per album. EMI artists in the deal include Coldplay, The Rolling Stones, and Frank Sinatra. The deal excludes Beatles songs.
On the heels of Apple's DRM-free initiative, Amazon.com announced that it would also begin offering more than 12,000 songs from EMI in the MP3 format, without any integrated DRM software. Amazon stated that it announce more details closer to the launch date scheduled for later this year.
While these announcements were hailed by a few self-styled consumer groups as "the death of DRM," there are a few points that need to be emphasized:
EMI is the only major record label that has announced support for this initiative. So far, the other leading labels (Sony-BMG, Warner Music Group, and Universal Music Group) have not offered any support for DRM-free digital music products.

Every year the number of music tracks with an integrated DRM solution increases. Whether the tracks are new releases or classic "oldies" being digitized for the first time, recording industry executives emphasize that DRM technologies aren't going away anytime soon.
While the "DRM-free" term seems to imply that there are no DRM technologies at all on the music tracks, that is not exactly the case. Apple's DRM-free songs still come with embedded purchaser information such as a user name and email address. Apple has refused to comment about how the embedded information is used, although in other digital music files it is sometimes used as a "proof of purchase" tag that allows users to upgrade future song purchases.

So what's the bottom line? The reality is that DRM is neither dead nor dying. To date, and based solely upon anecdotal information, consumers who shop at the iTunes store still seem to base their purchasing decisions on low prices and a compelling catalog of songs instead of the presence, or absence, of DRM technology. Still, the DRM-free initiative is extremely interesting; both as a business model that could possibly increase revenues and as a potential change in the way that content is protected.


For more information on the DRM-free initiative, and more about the current status of DRM, check out In-Stat's recently published report "Digital Rights Management Update" (IN0703584CM).
http://www.instat.com/abstract.asp?id=212&SKU=IN0703584CM  

Mike Paxton, Principal Analyst
mpaxton@reedbusiness.com