This is a watershed moment? The Wall Street Journal ran a story on B1 Wednesday about EMI releasing a song in the MP3 format. Not one collection, one LP, one EP -- one track. Granted, it's by Norah Jones, a big seller for EMI's Blue Note label. But the experiment in DRM-free distribution won't tell EMI (or any of its competitors) anything about the relationship between MP3 and piracy.
Since the original Napster turned MP3 into an obscenity for the major record companies, their executives have clung to the belief that people who buy music in the MP3 format will pass it freely to all their friends, eviscerating sales. This is an act of faith, not something that's prone to verification. The only difference between and MP3 and a song on a CD, in terms of sharing, is that it's ready to be e-mailed. A CD has to be ripped first. But then, a download bought from iTunes or Rhapsody just has to be burned and re-ripped, which doesn't seem like much of a hurdle.
That's why I don't think EMI can really judge the impact of dropping DRM from the Jones single. Sure, the song will quickly find its way to file-sharing networks, but then, every song does regardless of DRM. And if it's popular, it will be downloaded massively for free, just like any other popular song. Remember, the tracks in highest demand on file-sharing networks are also the ones with the biggest sales. You can speculate about how much more a song would have sold if there had been no file-sharing, but that's just speculation.
A better question -- and one more easily tested -- is whether the MP3 format might increase sales by eliminating the annoyance of DRM (in particular, the mutually incompatible DRMs used by Apple, Microsoft, RealNetworks and Sony that raise their ugly heads when consumers switch brands of MP3 player, buy a new computer, or try to move music through a home network). I say "more easily tested" because actual sales are measurable, while lost sales (due to sharing) are always hypothetical. Today, the major record companies sell downloads for about the same price as songs on a CD, but the downloads are less valuable because they're wrapped in DRM and CDs aren't. Sure, several of the labels have tried to close that gap by adding copy protection to CDs, but the Sony BMG rootkit fiasco appears to have turned the public against such discs. So for the time being, at least, the CD remains unencrypted.
As many a tech company has argued over the years, DRM works best when it's enabling consumers to do new things, not trying to stop them from doing something. That's why the major labels would be better off using DRM to enable all-you-can-eat subscription services like Rhapsody, Yahoo! Music Unlimited and Napster, rather than slapping limits on 99 cent downloads. I still think that music fans will gravitate toward subscriptions once Wi-Fi is ubiquitous and portable devices are always connected to the Net. That's when DRM will become a route to a better value proposition, not something consumers resent because it's forced on them.
In the meantime, the major labels should stop dipping toes into the water and do some tests of real magnitude. For starters, why not take up the longstanding invitation from David Pakman at eMusic and let him offer hundreds of niche titles through his MP3-based bulk-buying service? Make the same tracks available through iTunes and other online stores -- some with DRM, some without -- and see what happens. If the titles aren't selling today, what's the harm? (Personal request: EMI, dig the Fingerprintz catalog out of the vaults, starting with Beat Noir.) Such a move wouldn't be a watershed moment, either, but it would be closer to the real thing.