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Wal-Mart Selling DRM-Free Music from EMI and Universal
Posted August 21, 2007
Wal-Mart Selling DRM-Free Music from EMI and Universal
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By Richard Koman. Updated August 21, 2007 11:38AM

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Wal-Mart announced Tuesday that it is selling music downloads that are free from digital rights management (DRM) limitations. The world's largest retailer will sell unprotected MP3 files from EMI and Universal Music Group for 94 cents per track, or $9.22 per album.

"Our new 'DRM-free' MP3 digital tracks give (consumers) the ease and flexibility to play music on virtually any device at a great value," Kevin Swint, Wal-Mart's senior director and divisional manager for digital media, said in a press statement.

The move comes in the aftermath of Apple CEO Steve Jobs' manifesto calling for an end to DRM restrictions on music downloads. In a DRM-free world, he wrote in February, "any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers."

Jobs' appeal was answered by EMI, which announced it would release its entire catalog in a DRM-free version. Apple's iTunes sells EMI's DRM-free songs for a 30-cent premium -- $1.29 instead of 99 cents. Wal-Mart's offerings will be substantially less expensive.

Labels Seek iTunes Alternatives

On August 10, Universal announced it would experiment with DRM-free sales, but would not include Apple in the tests. Music industry analysts said Wal-Mart's announcement is directly related to Universal's move.

"Wal-Mart is doing this mainly because UMG is participating," said Bill Rosenblatt, editor of the DRM Watch Newsletter. "We all expected that Wal-Mart would be part of UMG's plans, even though UMG didn't explicitly name Wal-Mart in their announcement," he added.

Wal-Mart's inclusion -- and Apple's exclusion -- in Universal's test underscores the labels' intention to "create credible alternatives in the market to Apple's iTunes," Rosenblatt went on to say. "The major labels are all dying to do this, but EMI put a crimp in that ambition." The only other "obvious alternative" to Wal-Mart and Apple is Amazon.com, he added, which has the necessary global reach.

Pressure on Remaining Labels

Tim Bajarin, principal analyst for Creative Strategies, said he is doubtful that Wal-Mart will provide serious competition for Apple. While Wal-Mart is "a serious competitor," he said, "the key for Wal-Mart to be successful is to create a fool-proof environment for music sales."

Unlike Apple's tightly integrated environment in which Apple sells one music player that is managed by the same software that customers use to buy music, "Wal-Mart sells multiple MP3 players," he said. "The Apple approach is a proven entity that customers have voted on with their dollars."

With EMI and Universal onboard the DRM-free train, will the other major labels follow along? Rosenblatt and Bajarin said they will. "The fact Wal-Mart is doing this around the DRM-free environment makes a very strong statement," Bajarin said. "Wal-Mart is telling the labels, this is what our customers want. Wal-Mart puts a lot of pressure on them to follow suit."

How DRM-free music will impact piracy remains to be seen, Rosenblatt said. "The research I've seen strongly suggests that DRM on iTunes and other such sites does not affect piracy on P2P networks," he said, adding that DRM's impact on other forms of "content misuse" -- such as e-mailing tracks to "your 50,000 best friends" -- is unknown. Rosenblatt pointed out that DRM still will apply to subscription services.

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