Warner to sell no-DRM MP3s on Amazon
Warner will not sell its music in DRM-free form on iTunes, which is in keeping with the general tenor of the move to DRM-free music. Apple's dominance in online music sales has been reinforced by the fact that nearly all the music it has sold is locked to Apple's players with a DRM scheme called FairPlay. Thanks to laws like the Digital Millennium Copyright Act, it's illegal for competitors of Apple to break this DRM and offer competing products that will play the music you bought from Apple. This lock-in gives Apple a Wal-Mart-like degree of control over the business-practices of the labels, since Apple customers who make a substantial investment in iTunes music face the prospect of losing their money should they switch to competing players.
The only way to maneuver around this is by offering DRM-free MP3 tracks, which can be played on iPods and their competitors. Apple CEO Steve Jobs called on the labels to deliver DRM-free music last year, even as several European nations were considering legislation, regulation or court action to force Apple to open up its DRM to competitors.
Warner's move to sell its music in the superior DRM-free form only through Apple's competitors seems like petty gamesmanship, since MP3s are MP3s, no matter where you buy them, and an Apple customer who buys an MP3 in the iTunes Store is every bit as able to shop somewhere else for music and players as is someone who buys music from Amazon. This is a move that pits Warner's long-term corporate strategy -- punishing Apple to reduce its market power -- against the needs of its artists, who benefit from having the largest possible pool of retail outlets for their music in its most superior form.
Of course, the labels -- Warner included -- already shamelessly steal from their artists in the realm of digital downloads, through a crooked accounting process. Here's how it works: artists are generally entitled to a seven percent royalty on "sales," but are contractually guaranteed a fifty percent royalty on "licensing." When the labels "sell" you a song online, they actually claim that they're only giving you a license to the music (and that's why they can attach all kinds of unreasonable conditions to the transaction -- see next paragraph for more). If you're only getting a license -- rather than making a purchase -- then 49.5 cents from every $0.99 track should go straight to the artist. Instead, they get a measly seven cents.
What kind of unreasonable conditions are attached to the "license" you get when you buy online music? Well, of course Sony made you "agree" to let them install spyware and a rootkit on your computer in order to listen to your music. But they're hardly alone -- Amazon's "license agreement" tells you you're not allowed to loan, re-sell, or make other uses of your music that would be consistent with a sale. If you buy a CD from Amazon, they not only don't try to stop you from selling it used -- they encourage you to do so, and will even broker the transaction. But if you "buy" (sorry, license) the same album from Amazon as a download -- often at a higher cost than the used CD will run you -- they make you "agree" that you won't even loan it to your kid brother, or give it away to the school library when you get tired of it.
A music distribution startup founder emailed me last week and asked what kind of terms and conditions I would consider reasonable for digital music sales. The answer was easy: "Don't violate copyright law." Anything more than that is just picking your customers' pockets by confiscating the rights that copyright law grants them -- the right to loan, sell, give away, format-shift, time-shift, etc.
But it's still good news that Warner has joined the war on DRM, even if they're screwing their artists (and the rest of us) to do so. At this rate, all four labels will go DRM-free by 2008, and by 2010, they'll finally start offering us a fair shake on their products, just as the last music fan and the last new artist defects to P2P, convinced that buying or selling music through the labels only gets you screwed, one way or another. Link (Thanks, Adam!)
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Oh, God, Cory, this is crazy, even for you.
I'd estimate there are maybe a handful of lines in there that aren't recap of drumbeats you've been slamming on your audience for half a decade now. I really want to keep reading your stuff, but gee whilikers, you're starting to sound like the very broken records that you obviously want banished in favor of digital recordings. Is it your intention to punish your regular reading audience with a constant flow of "Sony made a rootkit" every time anyone mentions MP3s, digital file sales, or the iPod?
Damn, my head hurts.
Yay, now if only Amazon would actually sell these MP3's to the rest of the world....
Jason, thank you for the well-thought-through rebuttal. Your carefully reasoned points have really helped me understand the issue better. It's readers like you that make Boing Boing a great spot to post on -- thanks for keeping on reading. I only hope I can offer you material that entertains you this much every day. You have a very happy New Year, now.
Jason does have a point, even it's not germane to the issue.
But setting that aside, I'm glad there is an alternative to the DRM-encumbered offerings from Apple. The whole "Apple is teh 3vil SUXXORS" chant was silly in the first place -- as if Apple really wants to spend engineering resources to protect the RIAA's crummy business model -- and I hope this gets them out of the DRM arms race.
I don't know that I buy the idea of Apple controlling the labels, like Wal-Mart controls it's suppliers -- as we have seen, Amazon is happy to offer an alternative and nothing prevents the labels from opening up their own storefront. If DRM is what keeps them bound to Apple, they're even dumber than I imagined. Never attribute to malice what can be explained by stupidity, as the old saw goes.
If Apple doesn't control the labels, then how come when the labels asked for variable pricing, the iTunes store didn't deliver it? Controlling the pricing of one's goods is about as fundamental a form of control over one's business as you can imagine. When one retail channel controls 80 percent of the market, and that channel doesn't allow for goods repricing, the channel controls the business of its suppliers.
Whether or not variable music pricing is a good idea, it's clear that the labels wanted to experiment with it -- and they couldn't do so for 8/10 digital downloads sold.
I don't think it benefits a market -- ANY market -- for one company to wield that much power, no matter which company we're talking about.
I personally couldn't care less what Apple or the big labels do. They've long since lost me as a customer, with the backhanded way they treat consumers and artists alike.
There are plenty of local bands in my town that are at the least decent, and more free streaming music online than I could possibly listen to in a life time. Heck, more music is added in a day than I could listen to in a lifetime! Sure most of it is complete utter crap, but even the top 1% is a lot to listen to, and now half the fun of listening is separating the wheat from the chaff.
My money is now spent not on the music, but on the merchandise (or just donated, if the band happens to have a paypal link but no swag).
Alternatively, if you can't ween yourself from the bands you already love, you can make free copies of your friend's CDs legally! As a twenty-something, everyone I know owns at the least a thousand CDs (between originals and copies). That is quite a large library I have to choose from.
c'mon Cory, variable pricing is just a cover for price increases. :)
Cory,
Where did you get the $0.07 figure from? The paragraph purports to be explaining "how it works", but after explaining the difference between royalties for licensing and for sales, you apparently pluck a random small number of cents out of thin air.
(Oh, also, it'd be lovely to be able to comment with my OpenID, rather than getting Yet Another Blog Account.)
Cheers!
Wit -- the standard royalty structure is 7 percent for sales, 50 percent for licensing. On a $0.99 track, 7 percent is ~$0.07.
I'm glad to see the industry wising up.
And just like #6, I buy mostly from local bands and support them. Of course, it is just my luck I like that kind of music, and have that kind of ideology.
When I buy CDs, I buy directly from the label, or band's web page. Most artists I listen to created their own label, or the label is a DIY startup in the first place.
Found a band's CD in FYE for 15.99, and on the label's actually website it was 12.99. Kudos to the internet.
"... artists are generally entitled to a seven percent royalty on "sales," but are contractually guaranteed a fifty percent royalty on "licensing." When the labels "sell" you a song online, they actually claim that they're only giving you a license to the music... If you're only getting a license -- rather than making a purchase -- then 49.5 cents from ever $0.99 track should go straight to the artist. Instead, they get a measly seven cents."
Huh? Something's backwards. Does licensing pay seven or fifty percent? The first sentence here doesn't mesh with the rest of it.
A portion of a post on my blog (pwnership.com): I like Cory's approach to this topic. When the labels do something good for the consumer, he reminds us of their abuse of the artists. And if the labels did something good for the artists, he would remind us of their abuse of consumer. Of course, I cannot recall the labels doing something good for the artists. Not recently.
Also, I noticed how easy it is to drop the 'i' when typing 'boingboing'. Funny that.
@cory - your comments re: Apple seem very germane, and level-headed even. Those ideas merit more front-page attention. Perhaps timed with Macworld.
@7 - variable pricing is for both price increases and price decreases. Arguably greatest hits albums should cost more that tepid backcatalog with 2.5 ok songs on a CD. Arguably, Shelter From The Storm shouldn't cost as much as Seasons In The Sun.
A band that writes a truly awesome song deserves a truly awesome revenue opportunity. First, though, the labels have to stop bogarting the revenue. Then variable pricing will have more clear value simply because it rewards the artist.
The labels will get their variable pricing if/when they bring Apple's market share down to 40-50%.
It will be interesting to see how much marketshare Amazon gets with their 1 billion song giveaway.
No matter how awful the license terms are for Amazon's MP3s, they are still better than FairPlay DRM'd AAC files.
Cory: "If Apple doesn't control the labels, then how come when the labels asked for variable pricing, the iTunes store didn't deliver it?"
This sort of hyperbole around these hot issues continues to trouble me. It doesn't lend itself to a rational, informed discussion. If Apple really controls the labels then why aren't Universal and Warner making their DRM-free tracks available on iTunes? Didn't Jobs say that's what Apple would prefer? In fact, it appears that when Amazon began selling DRM-free tracks at 89-99 cents each, Apple was "forced" to drop the price on the EMI DRM-free tracks that they sell. Pretty lousy control if you ask me.
Saying Apple controls the labels is akin to those who say because of iTunes DRM, Apple locks you into their iPods. With over 1,000 songs on my iPod, not one of them is "tied" to it since I've never bought a DRM-encumbered song from iTunes or anywhere else.
since MP3s are MP3s, no matter where you buy them
Actually, correct dme if I'm wrong, but iTunes are compressed in a lossless format. The quality is better than an MP3. I don't know if Amazon only offers the files in a lossy format (i.e. MP3). If it is only MP3, I'm not interested. I can download my music from iTunes and de-DRM the files with ease with a variety of tools (which is what I do).
Alexeck, I believe music on iTunes is AAC, which is lossy.
@alexeck - you're wrong. iTunes tracks are in AAC format, which is indeed better than MP3 but still lossy. iTunes Plus is unencrypted AAC with a somewhat higher bitrate. Neither format is lossless.
Cory, Apple iTunes can sell DRM-free sound files. As a matter of fact, Jobs invited the labels to do so. They have no problem with unencumbered music, and iTunes itself is not structured to only accept DRM. One can prove it by simply playing a ripped MP3 on the iTunes panel. The labels insist on the DRM, not Apple.
I think there are two dimensions to this format war. DRM v. nonDRM; and AAC v. MP3. I forget why AAC hasn't be widely adopted beyond Apple/iTunes/iPod, but it is the format developed to improve the MP3.
@alexeck - you're wrong. iTunes tracks are in AAC format, which is indeed better than MP3 but still lossy.
My bad, sorry.
I am no Apple fanboy, however. It's disgraceful that the majority of the music is still DRM'd. The illogic is peculiar -- You can't freely convert songs that you actually BOUGHT from them, but you can freely convert files off of CDs that you purchase .
I don't think the labels aren't selling MP3s on iTunes for spite, I think they are doing it where they are allowed to specify the price.
Steve Stair,
You are correct to an extent. They want to be able to charge you more than 99 cents per song and Apple is not agreeing to let them do that thru the iTunes store. In making the announcement a Warner VP said, "We believe that giving consumers the assurance that the music they purchase can be played on any device they own will only encourage more sales of music."
However as Wired's Gadget Lab points out, "Welcome to 2007, (Warner Bros). Just about every tech blog has been banging that drum since DRM was invented. Now all you need to do is realize that you can sell your music through many different outlets and make more money. Playing resellers off against each other has one pretty transparent purpose: Greedy price fixing.
If "[c]onsumers want flexibility" and you "want them to have that flexibility" as you say, why not sell via iTunes, or eMusic, or any number of stores wanting to push protection free music?"
DRM-free content makes sense for consumers. As long as big media executive keep fighting it, they will hurt themselves, and their consumers... Hell, Universal fought Sony with all its might until the Supreme Court came out with its Time Shift ruling in Sony's favor. We all know the outcome: happy customers and a new mega source of revenues for big media companies.
All we need in 2008 is more DRM-fighting spirit from Cory and have more consumers vote with their wallets and keep buying DRM-free music. It will certainly take a lot more convincing to change the old structures put in place by media companies to benefit from content distribution, but it will certainly help establish the foundation for a DRM-free world in the future.
The best way to get money to the artists ... and empty the pockets of shits like the RIAA and Warner and Apple ... is to buy the music from the artists.
With all that money, the artists can buy production and buy promotion. Viola ... no more fkcing "music industry".
Apple didn't want to protect RIAA's business model, it wanted to protect its own. FairPlay existed to lock iPod users into iTMS as the only legal download service. Apple, after all, didn't just refuse to license FairPlay — they actively threatened Real with the DMCA over Harmony.
Sure, after Apple was approached by EMI through business channels about setting up DRM-free downloads, after it was clear that the closed Apple ecosystem was going to be ended by a label, Jobs came out and made his announcement about how he hated the DRM that gave him a piece of every legal download for the iPod. And because people for some reason like to believe whatever Steve Jobs is saying, they bought bullshit that they wouldn't have taken from any other CEO of any other company.
"If Apple doesn't control the labels, then how come when the labels asked for variable pricing, the iTunes store didn't deliver it? "
Probably because the labels didn't want to pay for the database changes, is my guess.
Fine, I tried.
Cory, you wrote "If you're only getting a license -- rather than making a purchase -- then 49.5 cents from every $0.99 track should go straight to the artist. Instead, they get a measly seven cents."
My understanding of the revenue sharing arrangement between Apple and the major labels is that Apple retains 29¢ per track and passes 70¢ on to the labels. Content from indie labels is funneled in via aggregators like The Orchard or IRIS Distribution, who make their living by keeping a 15% cut of the 70¢ payout, meaning that 59.5¢ is given to the label.
It would be interesting to know what the actual arrangements are between labels and artists. Are you able to cite specific examples of bands getting 7 cents (or other payment amounts)? I don't mean to come across as an apologist for Apple or the labels, but it does seem like this part of your post is more *opinion* than fact.
I'm aware that we're not supposed to be able to break apple DRM but the Microsoft Zune breaks it and plays it no problem. I'm surprised the lawyers don't fight over that.
Of course only ten of us own a zune so what's there to fight about. (It also lets you copy any of your songs to any computer your come across as long as it has the zune support software, a very pleasant surprise).