It's no secret that the digital age is redefining the value of music and challenging traditional distribution models. In a world where songs can be purchased either on an $18 CD or downloaded for free from a P2P client, consumers are increasingly turning to illegal file-sharing. Many digital music vendors have tried to combat the convenience of P2P by setting up online music stores, but because of restrictive copyright contracts, these files have generally been crippled by DRM.
DRM, or digital rights management, is a technology that allows vendors to limit access rights to digital music. Not surprisingly, it's an extraordinarily controversial technology. On one hand, music labels say DRM curbs file-sharing and prevents unauthorized distribution. On the other, consumers argue that DRM unfairly restricts their ability to use the product they have purchased -- it often prevents users from uploading to portable devices or sharing a new song with a friend.
However, the tides may be turning in the favor of these consumers -- DRM appears to be on its way out. In the first week of January, major online music vendor Napster announced that it had convinced all four major labels (Universal, Sony, Warner and BMI) to allow protection-free MP3 downloads. Previously, the company had offered DRM-protected Windows Media files, which couldn't be played on other computers or uploaded to iPods.
Napster is just one of many companies that have made the leap to the MP3 format. iTunes recently launched a service that allows users to buy higher-quality MP3 files for a little extra cash. Online retail giant Amazon.com also struck a deal with major labels recently allowing for MP3 distribution. Even Wal-Mart has gotten in on the action -- the mega-corporation now sells protection-free songs for as low as 80 cents from its Web site.
The idea is hardly a revolutionary one. In fact, these companies are lagging far behind online services such as eMusic, which has offered protection-free MP3 downloads since the late '90s. However, this marks the first time that major labels have willingly allowed royalty-free downloads. Major labels currently control about 80 percent of the American music market and own the rights to virtually all popular music. Thus, these deals mark a serious development in online music.
It is not yet clear how Napster is going to handle a pricing model for these MP3s, or whether its venture will end up turning a profit. It also remains to be seen whether iTunes, Amazon.com or eMusic will be able to make much money as MP3 vendors. Even with the answers to these questions in the air, however, it's refreshing to see these companies at the forefront of another baby step from slow-to-adapt major labels. In fact, other promising developments are cropping up throughout the Internet. Most recently, social networking site Last.fm has convinced major labels to allow the streaming of an entire song on demand. Previously, Last.fm users could only preview 30-second snippets of any given song. Though CD prices have yet to fall to a reasonable level and major labels have yet to take advantage of P2P's communal muscle, it appears that the record industry is finally lumbering in the right direction.
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