Warner Music has announced that it will begin to sell non-DRM'ed MP3 music files on Amazon, making it the third (of four) major labels to sign up for DRM-free distribution of their music, Universal and EMI being the other two. Only Sony BMG have held out — and that's the same label that gave us the infamous Sony Rootkit, a dangerous hacker-tool that Sony infected millions of PCs with in a failed bid to prevent copying of its music.
Warner will not sell its music in DRM-free form on iTunes, which is in keeping with the general tenor of the move to DRM-free music. Apple's dominance in online music sales has been reinforced by the fact that nearly all the music it has sold is locked to Apple's players with a DRM scheme called FairPlay. Thanks to laws like the Digital Millennium Copyright Act, it's illegal for competitors of Apple to break this DRM and offer competing products that will play the music you bought from Apple. This lock-in gives Apple a Wal-Mart-like degree of control over the business-practices of the labels, since Apple customers who make a substantial investment in iTunes music face the prospect of losing their money should they switch to competing players.
The only way to maneuver around this is by offering DRM-free MP3 tracks, which can be played on iPods and their competitors. Apple CEO Steve Jobs called on the labels to deliver DRM-free music last year, even as several European nations were considering legislation, regulation or court action to force Apple to open up its DRM to competitors.
Warner's move to sell its music in the superior DRM-free form only through Apple's competitors seems like petty gamesmanship, since MP3s are MP3s, no matter where you buy them, and an Apple customer who buys an MP3 in the iTunes Store is every bit as able to shop somewhere else for music and players as is someone who buys music from Amazon. This is a move that pits Warner's long-term corporate strategy — punishing Apple to reduce its market power — against the needs of its artists, who benefit from having the largest possible pool of retail outlets for their music in its most superior form.
Of course, the labels — Warner included — already shamelessly steal from their artists in the realm of digital downloads, through a crooked accounting process. Here's how it works: artists are generally entitled to a seven percent royalty on "sales," but are contractually guaranteed a fifty percent royalty on "licensing." When the labels "sell" you a song online, they actually claim that they're only giving you a license to the music (and that's why they can attach all kinds of unreasonable conditions to the transaction — see next paragraph for more). If you're only getting a license — rather than making a purchase — then 49.5 cents from every $0.99 track should go straight to the artist. Instead, they get a measly seven cents.
What kind of unreasonable conditions are attached to the "license" you get when you buy online music? Well, of course Sony made you "agree" to let them install spyware and a rootkit on your computer in order to listen to your music. But they're hardly alone — Amazon's "license agreement" tells you you're not allowed to loan, re-sell, or make other uses of your music that would be consistent with a sale. If you buy a CD from Amazon, they not only don't try to stop you from selling it used — they encourage you to do so, and will even broker the transaction. But if you "buy" (sorry, license) the same album from Amazon as a download — often at a higher cost than the used CD will run you — they make you "agree" that you won't even loan it to your kid brother, or give it away to the school library when you get tired of it.
A music distribution startup founder emailed me last week and asked what kind of terms and conditions I would consider reasonable for digital music sales. The answer was easy: "Don't violate copyright law." Anything more than that is just picking your customers' pockets by confiscating the rights that copyright law grants them — the right to loan, sell, give away, format-shift, time-shift, etc.
But it's still good news that Warner has joined the war on DRM, even if they're screwing their artists (and the rest of us) to do so. At this rate, all four labels will go DRM-free by 2008, and by 2010, they'll finally start offering us a fair shake on their products, just as the last music fan and the last new artist defects to P2P, convinced that buying or selling music through the labels only gets you screwed, one way or another.