Thursday, May 17, 2007

Amazon to Sell Music Without Copy Protection, the biggest online seller of CDs, is joining the movement against copy-protection software for digital music. It plans to sell songs that can be freely copied to any computer, cellphone or music player, including the iPod from Apple.

The move could be another step toward the demise of the copy-protection systems that have frustrated some online music buyers and created confusion about compatibility between digital players and downloaded songs. Critics charge that the software has slowed the public embrace of legal digital downloads while failing to stop illicit copying, at a time when the music industry is desperate for ways to make up for declining CD sales.

Amazon announced plans yesterday to add a music download store to its Web site this year. It will sell songs and albums in the MP3 format without the layer of software for digital rights management, or D.R.M., that is used by most other online music retailers.

Amazon said its service would include music from one major label, EMI, and from 12,000 independent music companies that have chosen not to use copy-restricting software.

“We are offering a great selection of music that our customers love in a way they clearly desire, which is D.R.M.-free, so they can play it on any device they own today or in the future,” said Bill Carr, Amazon’s vice president for digital media.

Amazon’s announcement comes three months after Steven P. Jobs, Apple’s chief executive, wrote an open letter to the music industry arguing that it should stop using D.R.M. He noted that consumers get unprotected music anyway when they buy CDs and copy the songs to their computers.

Last month, Apple followed up on that letter, striking a similar deal with EMI to sell songs without copy protection through its iTunes store. Apple, which controls more than 85 percent of the United States market for music downloads, will charge $1.29 for unprotected songs that will also have improved sound quality, versus 99 cents for a protected track. Apple plans to start selling those songs this month.

If the unprotected tracks from Apple and Amazon prove popular, other labels could feel pressure to follow EMI’s example.

“More than 50 percent of the entire music catalog is going be available without D.R.M. before Christmas,” said David Goldberg, the former general manager of Yahoo Music and now an entrepreneur in residence at the venture capital firm Benchmark Capital. “The music labels do not want Apple to have control of the download space, and although they won’t say it, they are very, very concerned about the lack of growth of digital music.”

Among the four major record companies, EMI has the smallest share of the United States market, and it has been struggling, posting two profit warnings this year and fielding takeover proposals from private equity investors. It potentially has the most to gain from experimenting with new digital music formats as a way to increase online sales.

Other major music labels, like Sony BMG Music Entertainment and Warner Music Group, have appeared reluctant to join EMI in forgoing copy protection. But Universal Music Group, which is the world’s largest label with about one-third of the United States market, may be getting ready to make the leap. It has been dabbling with unprotected files in Europe, where it is selling new recordings from artists like the French singer Émilie Simon in the MP3 format.

According to music executives briefed on the company’s discussions, Universal has recently devised a broader set of offerings meant to test the market for unprotected songs through Amazon and other outlets.

In addition to the likely sale of classical music in MP3 form, these executives said the company was discussing selling unprotected recordings by stars like Gwen Stefani and Fergie, the lead singer from the Black Eyed Peas.

Universal has also talked about possible MP3 sales through Google, which has been studying the music market, the executives said. A spokesman for Universal declined to comment.

Several analysts noted that the major labels could easily just stand back and watch EMI’s progress. “The other labels will all wait to see how the EMI experiment goes,” said James L. McQuivey, a vice president at Forrester Research. “They have the luxury of knowing good data is just around the corner.”

Amazon’s service could lead to a shift in the record labels’ relationship with Apple. Four years after the iTunes service established the market for paid downloads, the music corporations have become unsettled by the company’s clout in determining pricing and other terms.

Many label executives say a successful entrance by Amazon could provide them with needed leverage in their current talks with Apple over renewing their contracts. Of course, even if the iTunes service faces new competition, Apple retains great power thanks to the popularity of the iPod, which has 70 percent of the music player market and works smoothly with the iTunes store.

Amazon did not announce many details of its new service, and it would not comment on its planned pricing for songs and albums. Executives who have talked with Amazon said they expected the service to sell D.R.M.-free songs for 99 cents — less than Apple’s $1.29 — though they noted the terms could still change.

Yesterday’s announcement puts to an end several years of industry speculation about Amazon’s plans for the digital music business. Last year, for example, there were reports that the company was on the verge of selling its own music players that would be linked to a subscription service. But the company later changed course, reportedly after Microsoft unveiled its own Zune player.

Despite the long wait, David Card, an analyst at JupiterResearch, said Amazon’s new store would immediately position the company as a credible rival to Apple and Microsoft. “We’ve been waiting for Amazon to be a serious player in digital music for some time,” Mr. Card said. “They know how to sell music, and this is a powerful endorsement of the MP3 strategy.”

Not everyone thinks selling unprotected music can offset the decline in CD sales and save the music business. Many industry watchers are urging the industry to experiment with other approaches, including wholesale changes in its business model, like introducing music services that are free and supported by advertising.

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