Universal to sell songs without DRM

Author: Phil Cogar
Published: 10th August 2007
Comments (20) Stumble
I bet the RIAA is hoping that this project will fail.

I bet the RIAA is hoping that this project will fail.

Just last month, Universal Music Group decided to not renew its contract with Apple to sell music through the iTune music store.

Now, it appears that it will instead sell its music online through other existing music retail services such as RealNetworks, Walmart, and artists' web sites - without any DRM.

Whoa. A record label selling music with no DRM? Now that one is a shocker.

Apparently, Universal is now jumping on the no-DRM bandwagon in order to help drive sales away from iTunes and create competition. Currently, iTunes has such a large portion of the digital music distribution marketplace that it can keep prices locked in at current levels which goes against the wanting of many record labels wanting to charge more.

This is only a trial, however, and Universal will study the impact on consumer demand and music piracy. Should the trial go well, expect to see permanent practices set into place after January and possibly other record labels following suit.

So is this truly a move for the greater good or is everyone just trying to knock the legs out from under iTunes? Hopefully we won't see an increase in prices if they succeed to take away Apple's major share and influence of the marketplace.

Let us know what you think in the comments below or over in the forums.
Quote DougEdey 10th August 2007, 08:42
So RealNetworks will be the most bloated piece of software on your machine, with loads of really annoying pop-ups when you load up. AKA: Adware.

Walmart will be US only.

And the rest will also be US only. Way to share the love UMG!
Quote bilbothebaggins 10th August 2007, 08:56
Do I get this correctly?
They want to create competition so that prices are allowed to RISE???

:(
Quote bloodcar 10th August 2007, 09:03
Quote:
Originally Posted by bilbothebaggins
Do I get this correctly?
They want to create competition so that prices are allowed to RISE???

:(

Basically, yes. One of the big battles a year or so back was various record companies wanting iTunes to raise the prices per song but Steve Jobs told them that he wouldn't do it.

They're reporting losses in physical disc sales so they're wanting to make that up somewhere else. There's a higher profit margin in digital distribution then in disc sales so naturally that's going to be their big tarket for the time coming.
Quote iwog 10th August 2007, 09:15
But consumers dont want to pay more, they want to pay less than what iTunes is charging.

And this strategy will never work, you can steal away market share by charging a higher price for the same service. The only way they would gain market share from iTunes is by charging a lower price which is the opposite of what they want. Then supposedly once they are the monopoly they can start charging higher prices again and watch music piracy sky rocket again.
Quote bloodcar 10th August 2007, 09:29
These new DRM-free songs will be available at the current price that you can buy music from iTunes for but if they manage to grab a large portion of market share away from iTunes, don't be shocked if prices start increasing. Who knows, maybe Universal will eventually put their DRM-free catalog over on iTunes.
Quote iwog 10th August 2007, 10:06
But its economically unsound. Consumers aren't happy atm with the high prices so what makes Universal think it can make more money by charging more? For most people music is an elastic good which means that when you increase the price you loose money as you loose more customers than is offset by the increased revenue.

The only reason music piracy is so prevalent is because the market is failing to give us what we want so we operate outside the market. If the range of legal DRM free music was as great as the illegal, in qualities and artists, and the price was low enough so that hunting around on torrent sites wasn't economically viable (the time spent hunting costs more than the price paid legally). Then and only then would you see a major reduction in music piracy. Until the music companies offer a better product at a more sensible price it will have no significant impact upon the level of piracy.

They could also have take preventative measures during the fledling days of the internet, just like the film industry should have done a few years ago, but thats for another rant.
Quote Paradigm Shifter 10th August 2007, 10:43
When they start selling digital music in non-DRM Lossless formats (FLAC), then I might start buying music online. Until then? I'll stick to CDs, thanks. :D I like having the physical media... and besides, half the stuff I listen to is next to impossible to find on CD - finding it online is impossible.
Quote mikeuk2004 10th August 2007, 11:47
If I buy music I want to have something physical to show I own it. Also, how does one sell downloads onto somebody else. I mean if you get board of a CD it ends up on ebay or in your local cash generator. What do you do with a download???? delete it and get nothing back??

I dont like the idea paying for downloads becase what happens when your hard drive crashes and you loose it?? Can you re-download them with no charge???
Quote steveo_mcg 10th August 2007, 12:02
Music really needs a steam like service, where all your purchased songs are stored and allow you download them again even if you delete them.
Quote Phil Rhodes 10th August 2007, 13:50
Oh, fer chrissake. It's a zero-sum game, guys. You can't keep your disc sales exactly the same and make more money out of selling online. If this is obvious to me, why isn't it obvious to Universal? You'd have thought they'd be happy just with the online sales reducing their fixed costs.

Phil
Quote iwog 10th August 2007, 14:14
Quote:
Originally Posted by Phil Rhodes
Oh, fer chrissake. It's a zero-sum game, guys. You can't keep your disc sales exactly the same and make more money out of selling online. If this is obvious to me, why isn't it obvious to Universal? You'd have thought they'd be happy just with the online sales reducing their fixed costs.

Phil

Its not a zero sum game because they are targeting two different sectors of the market. They have cross elasticities but unless they are exactly equal to 1 its not zero sum. Zero sum implies that what ever one looses the other gains, but there could be a large increase in online sales without the same decrease in CD sales. Ok?
Quote Da Dego 10th August 2007, 15:14
Quote:
Originally Posted by iwog
But its economically unsound. Consumers aren't happy atm with the high prices so what makes Universal think it can make more money by charging more? For most people music is an elastic good which means that when you increase the price you loose money as you loose more customers than is offset by the increased revenue.

The only reason music piracy is so prevalent is because the market is failing to give us what we want so we operate outside the market. If the range of legal DRM free music was as great as the illegal, in qualities and artists, and the price was low enough so that hunting around on torrent sites wasn't economically viable (the time spent hunting costs more than the price paid legally). Then and only then would you see a major reduction in music piracy. Until the music companies offer a better product at a more sensible price it will have no significant impact upon the level of piracy.

They could also have take preventative measures during the fledling days of the internet, just like the film industry should have done a few years ago, but thats for another rant.

Stop looking for reason in the mind of madmen. It doesn't work :p When common, proven and sensible economic theory doesn't favour big businesses, they don't go looking to fit their business models to the theory - they write a new theory to fit their business model.
Quote iwog 10th August 2007, 16:01
yeah but as an economic student its my nature. And it pains me when business make decisions that fly in the face of economic reasoning. Yes the theories aren't perfect but they give give a good enough representation of what will happen.
Quote completemadness 10th August 2007, 16:07
Quote:
Originally Posted by iwog
But consumers dont want to pay more, they want to pay less than what iTunes is charging.
q f t

I dont know about you but i still think the ITunes price is too high, it still practically costs the same as the CD, yet you dont get any of the stuff that should cost money (disc, case, artwork, etc)
Quote Phil Rhodes 10th August 2007, 16:35
Er, yes, thanks, I'm fully aware of what a zero-sum game is, and I maintain my contention that the music business is (approximately) one, but:

> but there could be a large increase in online sales without the same decrease in CD sales. Ok?

No, not OK. What makes you say that; what information is it based on?

Phil
Quote bloodcar 10th August 2007, 18:23
Quote:
Originally Posted by Phil Rhodes
Er, yes, thanks, I'm fully aware of what a zero-sum game is, and I maintain my contention that the music business is (approximately) one, but:

> but there could be a large increase in online sales without the same decrease in CD sales. Ok?

No, not OK. What makes you say that; what information is it based on?

Phil

There are actually some crazy people out there who will purchase downloadable copies of music they already own on disc. Don't ask me why they do it, but I know a couple of people who do.

Personally, I've not bought into paying for downloadable music. $0.99 per song is too much in my mind when I can go out and buy the cd for roughly the same price. A good chunk of my music is music I have bought the disc of...the rest, well, we all know where that came from. :o
Quote liratheal 10th August 2007, 19:38
I rarely hope things of this nature, but I hope Universal go out of business.

They want to drive consumers away from iTunes, to create competition (I understand this bit)

But they will probably end up charging more?

Won't that drive more consumers into piracy and/or iTunes?

Bunch of idiots :|
Quote Kipman725 10th August 2007, 20:23
what I don't get is why they don't sell the music at above CD quality as we almost all have broadband equal to or above 2Mb/s downloading multi GB albums would be appealing. What I would rearly like is a track pakaged as a collection of files in a zip. Each file would be what each mic in the studio recorded and the background sounds songs sometimes have (phone calls, screams etc.) and then I could make my own track which would sound awsome.
Quote Rebourne 11th August 2007, 06:09
I agree with Kipman someone should create an audio disk based on blueray tech or something so we could get a lot higher quality music.

The only problem is that no one seems to care, they want it fast and don't really care about the quality of the audio.... Damn MP3 files...
Quote Paradigm Shifter 11th August 2007, 11:28
Quote:
Originally Posted by Rebourne
I agree with Kipman someone should create an audio disk based on blueray tech or something so we could get a lot higher quality music.

The only problem is that no one seems to care, they want it fast and don't really care about the quality of the audio.... Damn MP3 files...
Non-audiophiles have a lot to answer for. :)
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