deal to put the
music catalog on its iTunes store without antipiracy software is a master stroke that should cement Apple's dominance -- and could lead the change in how most consumers get their music.
The Digital Rights Management-free tracks from EMI will be priced higher -- at $1.29 a song -- than their protected counterparts, but will come at a higher quality.
iTunes customers can upgrade their entire library of all previously purchased EMI content to the higher-quality DRM-free versions for just 30 cents a song, says Apple.
The lack of restrictions and the higher-quality sound could potentially make iTunes the clear choice for music distribution, as users get rid of the intermediary step of buying CDs from retailers and "ripping" tunes onto their iPod.
The deal shouldn't come as a surprise to Apple watchers.
In February, Apple CEO Steve Jobs
wrote an essay posted on the company's Web site saying that a truly open music retail system is "clearly the best alternative for consumers, and Apple would embrace it in a heartbeat."
By opening up the iTunes system, Apple has turned itself into the most important link in the music distribution business and has turned up the heat on subscription-based digital music rivals like
( NAPS), and
. Apple expects about half of the 5 million songs currently on iTunes to be offered DRM-free by the end of the year.
"DRM is an embedded feature of the subscription services and they can't run their business without it," says Phil Leigh, senior analyst with Inside Digital Media, a Web site that focuses on the digital music business. "Now they are stuck with it for the bulk of their services and the disadvantages of DRM are going to plague them."
Meanwhile, Apple's partnership with EMI, could shift consumer buying patterns when it comes to music, say some analysts.
Though consumers have embraced digital music players, they still buy CDs because they want higher-quality music and no restrictions. Now, instead of purchasing CDs at their local retailer and then ripping them onto their iPods, users could directly download high-quality music from iTunes.
Monday's announcement of the partnership with EMI for DRM-free tracks could also help Apple in its
ongoing tussle with some European countries over what was earlier perceived as a closed iTunes system.
Cupertino, Calif.,-based Apple has been battling concerns from some European countries that iTunes could be potentially anticompetitive. Opening up iTunes eases that pressure on Apple and helps it keep away legal action of the kind that has mired
in Europe with its Windows operating system.
Shares of Apple were up 72 cents, or 0.7%, to $93.63.
The DRM restrictions on songs from iTunes also had led to a thriving system of illegal music downloads that made tools and tracks available to users who wanted their music without restrictions. "DRMs haven't worked, and may never work, to halt music piracy," Jobs had acknowledged.
Even attempts by music companies related to DRM-protected CDs haven't worked. In some cases, like with
, it backfired badly. Sony's DRM-protected CD was actually denounced as spyware, and resulted in class-action lawsuits.
But any fears that consumers could take music from iTunes and put it on rival digital players like Microsoft's Zune may be overblown, according to Gene Munster, senior research analyst with Piper Jaffray.
"While this enables savvy users to put iTunes downloads on their MP3 player of choice, it will not sync as simply as an iPod does with iTunes," he wrote in a research report. "We believe this will keep most users from using their MP3 players other than iPods with iTunes." Piper Jaffray makes a market in Apple shares.
Jobs agrees with this. Just about 3% of the music on the average iPod is purchased from the iTunes store and protected with DRM, he has said.
For Apple, this move could signal the next evolutionary change in the iPod/iTunes empire.