EMI-iTunes deal divides music industry

Last week’s announcement by Apple and EMI that the UK record company will start selling its catalogue without copyright protection on iTunes, the digital music retailer, has split the industry in two.

EMI said it would offer higher quality tracks which will be free of digital rights management at a higher price alongside its existing catalogue with DRM. DRM helps prevent piracy but stops the use of music downloaded from iTunes on devices other than iPods.

Those who support the move – to be implemented on iTunes next month – have applauded Apple’s decision to bring in higher pricing. For Apple, music has been a loss leader to promote the sale of its iPod MP3 players, and record companies in their negotiations with Apple have long been calling for variable pricing.

“You shouldn’t have the latest hit from Madonna selling at the same price as an old song from a catalogue,” says one music industry specialist.

Eric Nicoli, chief executive of EMI, said that the agreement would enable it to raise its wholesale price to Apple. EMI added that the price for high- quality DRM-free albums would be set at the same price, in a move to try and reinvigorate album downloads. Digital sales have been led by the downloading of single tracks, which has accelerated the decline of CD album sales.

However, some music executives worry that raising prices could stifle the digital download market which still only accounts for less than 12 per cent of the whole music market.

Rather than dropping DRM, which would make the music vulnerable to piracy, music industry executives had wanted Apple to share with other hardware makers its own copyright protection system Fair Play, which only allows music downloaded from iTunes to be played on Apple’s iPod.