Apple: Steve Jobs Still Carries a Large Stick

By Ryan Barnes of 24/7 Wall St.

Not that he was one to ever speak softly, but Jobs’ calling for the major record labels to offer their content “DRM-free” (no Digital Rights Management software) surprised many of us by actually producing fruit this morning.  EMI, the #3 label worldwide, today announced that their complete library would be available on Apple’s (AAPL) iTunes program DRM-free, beginning in May. 

This is a huge departure from the general stance of the RIAA, which has been to laugh in the face of Jobs’ request.  We discussed the likelihood of this scenario back in February when Job’s first called for DRM-free music to be offered on iTunes, and frankly we didn’t think the odds were good.

The general feeling has been that if users can buy songs without any portability restrictions in place, sales would drop precipitously as we snapped back to the early days of Napster when digital music was a free-for-all experiment in social networking. 

EMI actually plans to sell the DRM-free songs for a 30% premium, so they will be priced at $1.29 on iTunes rather than the standard $.99; EMI will, however, keep a version of their library as-is (with DRM) available for $.99 concurrently. 

Again, while this is a surprise, it doesn’t represent a capitulation by the recording industry.  We all have to accept that we’re still in the experimental stages of new types of business models.  There will be iterations, some good, some massive failures, before the optimal way to do business is found. 

The fact that EMI has been working with iTunes for a while should make this a good test case, and you can bet that every other label will be watching EMI’s sales figures like their own wallets for the next few quarters.  Apple could find itself with a nice margin boost if the DRM-free format’s sales start off (and remain) solid. 

If anything, this morning’s news is a sign of one thing – Apple (and Jobs) is still the undeniable 800 lb. gorilla in digital music.  Microsoft and others, you have a long way to go before being able to impart your will on the industry. 

Ryan Barnes

April 2, 2007