With EMI Group PLC (LSE: EMI)'s announcement Friday that its new Digital Rights Management technology-free tracks now available for sale on Apple Inc. (NASDAQ: AAPL)'s iTunes Store are performing well, will the compact disc finally go to the grave, as has been speculated for the past few years? Coolfer, a music industry site, notes that this may be one explanation, but can this truly be the case? Certainly the quick growth of DRM-free tracks is impressive, but is it long-term or simply a new service that consumers have embraced quickly and will cool?
For this listener, the differences in DRM-free tracks, "regular" iTunes tracks, and CD tracks are indiscernible, so the advantages between $1.29 iTunes Plus tracks versus CDs are nil. It is my belief, and this is strictly from someone who cannot let go of physical albums, that the curiosity with DRM-tracks has led to slight CD sales drops for specific EMI albums but these will not be permanent. After all, this new service is just another in a long line of "new services" that has challenged CD sales, and the CD is still with us. No, it is not in the same position it may have been 10 to 12 years ago, but it refused to die, or rather we refuse to truly kill it.
I am of the opinion that digital sales will eventually destroy prominent CD sales, but as long as the audio CD is manufactured, someone will purchase it. Even so, the CD as a tool, not simply as a device to hold music, will survive. After all, it is not always advantageous or simple to play music in a car from an iPod or other mp3 device. The transmitters to transfer the iPod signal to car radios exist, but the CD player still often comes "standard" in so many cars (I have a base-model car and it came with a CD player, so I'm using that as my example).
To think about the CD in these terms is not unlike talk about the cassette tape or the eight-track from previous generations and how those formats were replaced. DRM-free tracks act as the CD to the cassette and the LP, but even that similarity does not mean the end of the CD. The new iTunes Plus service is an EMI-product-only service right now, which makes the long-term effects of this growth very visible. If other music labels join EMI and offer DRM-free tracks, then the issue of CD sales dropping would be more prominent and lasting. As it is, Warner Music Group (NYSE: WMG) is staunchly committed to DRM and Universal Music Group is interested in beta testing without it to model the financial possibilities. SonyBMG seems content to remain with the business model it has, switching only if more than one company drops the technology.
The interesting notion about the quick growth of DRM-free tracks is whether other companies that intend to use the EMI tracks will enjoy the same popularity with the service that Apple has with iTunes Plus. When Amazon.com Inc. (NASDAQ: AMZN) opens its digital tracks store later in the year, will the "fervor" over DRM-free tracks have cooled or still be as hot? That is the real change to look forward to and then study. If Amazon's own iTunes Store can succeed while Apple has offered the same products for many months, then the possibility of CD destruction will be larger. Of course, it all depends on the other record companies.
Sales of DRM-free tracks from only one record label cannot kill the CD, but the sales could destroy CD sales for that company. How would the other labels view that and would it entice those companies to drop DRM, especially if they are committed to the technology? Watch for answers to these questions, especially as Apple enjoys much growth this summer.
http://www.bloggingstocks.com/2007/06/23/will-drm-free-tracks-kill-the-cd-once-and-for-all/
