UMG to drop DRM until January

The New York Times reported today that–in a incredible reversal of position–the world’s largest record company, Universal Music Group, has made the decision to sell music tracks DRM-free until January. DRM-free music will be available through Real Networks, Walmart, Amazon, and a few web sites of artists under the UMG umbrella.

An interesting twist to this story is that DRM-free music will not be available through Apple’s iTunes download music service. UMG, in trying to break iTunes stranglehold on the digital download market, would like to see users migrate to other services to purchase music from artists on their affiliated labels. By taking this step, UMG are playing their trump card, and it’s certainly a big card to play.

Just a few months ago, UMG refused to renew the iTunes license to sell UMG music when Apple founder Steve Jobs refused to pay UMG a per unit revenue share for every iPod sold. Last year, Microsoft agreed to pay $1 per unit to UMG for every Zune player sold, but the company has yet to see any real traction in user adoption of their product.

This game of cat and mouse could potentially hurt UMG if Apple pulls their catalog from the service before the Christmas shopping season. In fact, it could cripple UMG’s bottom line in the 4th quarter. I’m willing to guess that the other services have been working on solutions to launch in September or October and are going to roll out marketing campaigns to try to drive users to their services to get certain albums DRM-free.

This is a gamble. At this point, there are so many iPods in the marketplace connecting directly to the iTunes store that users may not really care if the music is DRM-free. They have something that works, is high quality and they can connect once and take away.

Does UMG think consumers are going to go out and purchase players that play only their music DRM-free, but not be able to connect to iTunes for the rest? Has EMI licensed their catalogs to all the new services, so users can get both UMG and EMI music? If so, could there be some collusion on the labels parts to work with these services to the disadvantage of Apple? That might spur an anti-trust law suit if Apple were to learn that the labels discussed this with each other and then with the various services they were willing to license. It’s a tricky situation.

As Times reporter, Jeff Leeds noted, UMG will keep their music DRM-free on these services until January in order to test the marketplace and see what the rate of user adoption is. If things go well, you could see Warner Brothers and Sony/BMG drop DRM soon thereafter, or maybe earlier as they feel the pressure to submit to what consumers have been demanding.

I didn’t expect to see this story in the headlines tonight. It’s quite shocking actually and is going to make for some interesting commentary in the blog-o-sphere. I’d keep my eye on, who I’m sure will have posted something about this turnabout very soon.

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One comment

  1. Daniel says:

    I have to say, that I could not agree with you in 100% regarding UMG to drop DRM until January, but it's just my opinion, which could be wrong 🙂

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