Medialoper: January 5, 2008 — We began predicting the death of DRM a little over a year ago. Initially some of our readers thought it was just wishful thinking on our part. However, as 2007 progressed it became increasingly obvious that DRM really was doomed – at least as far as digital music distribution is concerned.
Here’s a recap of the events that lead to DRM’s downfall:
Amazon’s Digital Music Store
Early in 2007 Amazon launched its digital music store with DRM-free offerings from most of the major labels. While the initial launch did not include a complete back catalog of recordings, it did feature a wide enough selection to quickly make Amazon the number two seller of digital music, behind iTunes.
With its existing customer base Amazon was able to reach consumers who hadn’t yet tried digital music. By offering songs in a standard mp3 format Amazon leveraged its music store to sell a huge number of digital audio players. By year-end every mp3 player sold by Amazon came bundled with free downloads from the Amazon music store.
Amazon’s flexible pricing made the music industry happy, while offering consumers a reasonable alternative to iTunes fixed song prices. As almost everyone knows by now, the Amazon service offers variable song pricing as well as a subscription model that includes a maximum number of downloads per month for a flat fee.
eMusic’s Identity Crisis
eMusic built its reputation as the number one source of DRM-free music. After being bumped to number two by Amazon, eMusic began rethinking its strategy and marketing focus. As a result eMusic briefly experimented with releases from major labels. The experiment caused eMusic to raise its monthly subscription fee and lead to an ugly subscriber backlash. By year-end eMusic had dropped nearly all of the major label content and returned to its indy label roots. eMusic’s rate increase was rolled back and order was restored.
The Rise Of SanDisk
The widespread availability of DRM-free music lead to a substantial increase in the sale non-Apple media players, but still not enough to dethrone the iPod from its market leading position. SanDisk rose to the number two position with a variety of budget priced flash-based media players. Throughout the second half of 2007 the Amazon list of best selling media players was dominated by Apple and SanDisk.
Changes At iTunes
With Amazon now selling iPod compatible music at competitive prices, iTunes’ market share began to dip noticeably. In response Apple began negotiating with the major labels to sell DRM-free music through the iTunes music store. As part of the deal Apple finally agreed to more flexible song pricing. After finalizing the agreement a representative from EMI was quoted as saying “We finally got flexible pricing and we’re no longer locked into the iPod/iTunes platform. If we had known it would be this easy we would have abandoned DRM a long time ago”.
Zune Marketplace Closed
Zune music sales were never brisk to begin with, but as Amazon, iTunes, and others began selling DRM free music, Zune Marketplace sales ground to a halt. By Fall Microsoft finally pulled the plug and began referring Zune Marketplace subscribers to its few remaining PlaysForSure partners. The company also issued a firmware upgrade enabling PlaysForSure compatibility on the Zune media player.
Microsoft Admitted Zune Was A Red Herring
Shortly after the Zune Marketplace shut down, Microsoft CEO Steve Ballmer publicly admitted that the company’s Zune strategy was intended to undermine Apple’s market share — just not in the way you might expect.
We ultimately realized that the only way to beat Apple was to destabilize the market for DRM protected music. One of the goals for Zune was to create confusion in the marketplace by introducing yet another incompatible DRM scheme. Clearly, we succeeded.
Major Labels Expanded “Experiment”
Shortly before the holiday season the major recording labels announced that they would expand their “experiment” and would begin offering complete catalogs of DRM free music through Amazon and other online marketplaces.
PlaysForSure Partners Abandoned PlaysForSure
Late in the year, Napster and Rhapsody officially dropped support for the PlaysForSure standard and began selling DRM free music. Zune owners who made the switch at Microsoft’s suggestion are now stuck with music in two orphaned formats.
Mini-Zune Was A Hit
Microsoft released several Zune products throughout the year, but none was as popular as the small capacity flash-memory based Zune player. The player was the first in the Zune line to be released without support for the Zune DRM scheme, marking the second time in two years that Microsoft has turned its back on one of its own DRM systems. The product became a hit on Amazon where the device was bundled 100 free downloads.
The New Format War
While the major labels were busy patting themselves on the back for finally figuring out that consumers want DRM-free music, a format war was brewing. DefectiveByDesign, a former DRM protest group, regrouped and began protesting lossy music formats. While consumers and bloggers began agitating for lossless formats like FLAC, the labels responded by claiming it would be too risky to sell lossless music in an unprotected format. The DRM war was barely over and the next battle had already begun.
If You Can’t Beat ’em, Join ’em
Having failed to shut down AllOfMP3 with lawsuits, the RIAA finally entered into negotiations with Media Services to license the technology behind AllOfMP3.com. One of AllOfMP3’s key technologies is the ability to convert music to any digital format on demand. Some analysts have speculated the deal could indicate that the music industry is finally starting to listen to its customers, however unlikely that may seem.
Digital Music Sales Rise
Shortly after the new year the RIAA reported that annual music sales rose substantially for the first in nearly a decade. The increase was lead by digital music sales, which had begun to stagnate near the start of last year. An industry spokesman credited the increase in sales on the RIAA’s aggressive moves to embrace new technology.
A Loper Goes On Hiatus
By year-end Medialoper co-founder Kirk Biglione announced that he was taking a sabbatical, complaining “there’s nothing left to write about”.