Another Nail in the Coffin

Business Week reports that SonyBMG is on the verge of dropping DRM, following in the festive season footsteps of Warner Music. (I’d been eager to post on this for a little while but couldn’t betray confidences of my sources.) So now all of the majors have followed EMI’s lead, just like we said they would. The news comes as the EU Commission announces it plans to encourage the introduction a standard for DRM across all of Europe.

Unfortunately the EU is acting too late. The horse bolted long ago.

The great irony though is that a whole new era is opening up for DRM. With DRM poised to disappear from premium download stores it can play a strong differentiation role for ad-supported and subsidized services. The next wave of DRM-free is the premium subscription services (Napster, Rhapsody, Yahoo). To successfully differentiate from the likes of Comes With Music these services need to be able to offer DRM free unlimited music. Complete access to unlimited catalogue with no usage restrictions. Sounds crazy? Well it has to happen if they’re not going to be killed off by Nokia et al.

So the next big step for DRM is DRM-free premium subscription services. You heard it here first.

EDIT: with DRM dropping from premium stores, and Apple currently absent from ad-supported, the digital music codec landscape could easily become:

Premium – MP3 / AAC
Ad-supported / subsidized – WMA

So Microsoft becomes the codec of choice for free.

But of course this assumes Apple doesn’t innovate. Which they will. To date their innovative focus has been on the hardware, they simply haven’t needed to innovate with download store due to the lack of competitive pressure. Amazon, Nokia etc will collectively compel Apple to respond. And when Apple innovate, they innovate hard. It should be an exciting 2008 to follow a disappointing 2007.