What the Apple/EMI deal tells us about music sales

Apple and EMI have announced a new deal whereby all of EMI’s catalogue will be available on iTunes free of DRM. This was anticipated by Job’s remarks last year. That means that you will be able to move songs from computer to computer without restraint (although there is still the usual licensing restriction against copying). What is interesting about this deal is what it tells us about music sales in the download era.

But, first, let me explain just what the deal means. For songs, there is now a premium version (costing 30 percent more) that is DRM free and also of higher quality. What is more is that you can upgrade your existing library for that 30 percent premium. For albums, EMIs will be available DRM free but at the same price as before. I regard this as a most significant development.

Now, let’s be clear that DRM-free is not much of a difference over before. You could copy if you burned the songs to a CD and reimported them. That was costly in time and CD ROM expense but it was possible. Moreover, the AAC encoding remains and so the list of music players that can play this is not much bigger. What this is providing is convenience. But one thing is certain, with the upgrade option you don’t need to buy these premiums songs until such time as you actually need to copy them to more computers or another player. There is no reason to spend the weekend converting your purchased library.

What is important here is that the price of an album has dropped. Years ago (in 1997), prior to all this, I suggested that albums were the means by which high revenue was earned for music and unbundling was a threat. I think this latest move bears that out. What the music industry want is a lower album price relative to the song price. This latest move effectively generates that.

But this tells us more. One thing is that illegal downloads of songs are an issue. Hence, the premium DRM free version with higher quality. This will combat quality issues in illegal downloads and hit that head on. Albums are clearly less of a problem. The bandwidth required to illegally distribute albums is high and probably not much of a dint in actual sales. Indeed, all the talk of the decline in CD sales may be more to do with per song purchases than illegal downloads themselves.

There is a major advantage to EMI in leading on all of this. It will secure the most valuable market data in the music industry. They will find out how valuable DRM is and in the process how much a constraint illegal downloading is. The Beatles (an EMI product) are clearly waiting to see how this goes before committing to a DRM free world.

Finally, this gives us a clue as to how committed Apple’s pricing model is. The 99c rule will stay but it will introduce new product versions to accomodate changes. So don’t expect lower price DRM free versions any time soon.

7 thoughts on “What the Apple/EMI deal tells us about music sales”

  1. “Moreover, the AAC encoding remains and so the list of music players that can play this is not much bigger.”

    No, you can rip it back in any format you want. You can even rip it back in mp3 format using i-tunes.

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  2. on the point of piracy being more prevalent on individual songs i would disagree.

    If you have a look at the pirate sites (checkout thepiratebay.org ) you’ll notice that most of the downloads are for full albums, and on a regular broadband connection 87-100m takes 10-30minutes.

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