Will the Apple-EMI deal end DRM‾

Arik Hesseldahl and Peter Burrows
09 Apr 2007

Of all the parties walking away as winners in the deal between Apple and EMI to remove copy restrictions from digital music, Tom Cullen is among those who worked the least, but benefited greatly. Sonos, a five-year-old company that sells a line of wireless devices that play digital music tracks around the home, has always suffered because it couldn't play songs purchased from Apple's (AAPL) iTunes store.

It was a common complaint from owners of Sonos' ZonePlayer products, who had spent several hundred dollars to unlock the music stored on their computers so it could be played on stereo systems around the house over a wireless network. 'I wouldn't say we lost customers because of the lack of compatibility,' says Cullen, a Sonos co-founder. 'But we sure spent a lot of time explaining why the songs wouldn't work on support calls. We just blamed Apple.'

No DRM for EMI

But now the problem is fixed"”at least partially. Apple's plan to offer EMI's music via iTunes with no digital rights management (DRM) software to restrict the conditions under which songs can be copied will automatically give Sonos the compatibility it has wanted so long with at least some of the music sold on iTunes. Cullen says with luck, more labels will follow EMI's lead.

Sonos, like so many other companies that have long struggled with Apple's refusal to license its FairPlay DRM technology to any third parties"”except Motorola (MOT) for the Rokr wireless phone"”had approached Apple several times seeking some kind of cooperation. Apple's response was always the same: It didn't want to get into the business of supporting a bunch of hardware partners on behalf of the record labels.

This made the Apr. 2 joint announcement between Apple and EMI all the more surprising. When Apple CEO Steve Jobs formally suggested that recording labels should allow online music to be distributed without DRM protection, it seemed less likely that any would go along and more likely that DRM would remain a linchpin of digital music distribution for the foreseeable future. Still, some labels, including EMI, conducted market tests to see how unprotected songs would fare.

Interesting timing

News of their agreement came just a few hours before European Commission regulators announced that they would launch an antitrust probe against Apple and the major recording labels. The Brussels body alleges that DRM rules"”which are to be changed in about a month in Europe"”under which the songs are sold through iTunes violate competitive rules. The regulators sent Apple, Universal Music (V), Warner Music (WMG), EMI, and Sony BMG (SNE) a confidential statement of objections outlining the charges last week.

News of the antitrust probe clouded what was otherwise seen as a winning play for Apple: The timing of the announcement suggests that Apple rushed to be ahead of the news of an investigation it knew was imminent.

Still, by cutting the chains of DRM, EMI and Apple are moving toward the day when a song sold from a digital store is as universally playable as a CD is today. And for some suppliers of MP3 players that don't bear the iPod name, the fact that soon they'll be compatible with at least some of the content sold in the iTunes Store will give them some added benefits to crow about.

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