EMI/Amazon execs unplugged: Will Amazon's DRM-free downloads dent Apple?

Right about now, the question is whether or not Steve Jobs wishes he never penned the open letter that he did in February 2007. The one where he eschewed Digital Rights Management technology (the same anti-piracy technology that preserves the dominance of Apple' iPods and well as of iTunes' downloadable audio sales), admonishing the recording industry to give up on the idea of technologically protecting their content.

That's because today, Amazon and EMI jointly announced that Amazon would be launching a 100 percent DRM-free music store with EMI being the first major record label to supply DRM-free MP3's to the e-commerce giant. Before the other big record labels follow, they will no doubt watch to see if EMI gets a big boost from the change in business model, or if it ends up devastated for having tried. Jobs of course led the anti-DRM charge. On April 2, 2007, EMI followed suit by jointly announcing with Apple that DRM-free downloads from its artists would be available on iTunes. So far, so good, right? Jobs has the record industry in the palm of its hands.

But now that Jobs "done it," he may be wishing he could undo it. That's because of how Amazon will be integrating the sales of Mp3 downloads with the MP3 playback devices and other relevant merchandise for which Amazon is already an outlet. Compared to what Apple or Microsoft has to offer where you might be able to get MP3s, but only one brand of devices (iPod or Zune, respectively), the Amazon store will end up with the same "shelf of music," but with a more diverse range of compatible devices including the iPod and the Zune.

Perhaps Apple is confident that people will pick iPods anyway.

To find out more about the announcement, I had an opportunity to speak with Amazon's vice president of digital media Bill Carr and is counterpart at EMI WorldWide Music, Barney Wragg. We captured the entire interview as a downloadable podcast that you can stream to your desktop, manually download, or, if you're subscribed to the IT Matters series of podcasts, it should turn up on your PC or MP3 player automatically (and unprotected by any DRM!).

After Amazon's Carr gave a top-level summary of the news, I questioned both executives for more details (many of which are apparently still secret), about the importance of the announcement to both companies given their current portfolios and business models, and what it means in terms of overall trends in the digital content marketplace. Here are the questions I asked:

• What are the licensing restrictions once I buy a song, an mp3 version of a song on this new Amazon service? (for example, can I buy a song for someone else?)
• [Can buyers] make as many copies as they need to make so they can play it in their car, on the other devices they own...that sort of thing?
• How is it that this is going to be good for EMI's business moving forward. Just the same way I can copy music to any one of my existing devices, I can also copy it to my friend's devices.
• So, EMI's business model is going to be built on the honor system?
• [Has Amazon] looked at pricing and decided how much [it is] going to be selling the music for on [its] service?
• How soon will it be before the other big record labels follow suit?
• Most people think of Amazon as a bookseller and one of the neat things about buying books on Amazon is that you can find out different things about the books. For example, you can get reviews from other people who are Amazon customers. You can find out what other books people are buying based on your interests, and maybe you might be interested in those books as well. Do you plan on layering the same sort of technology on top of your music store?
• Do you foresee any variable pricing to maybe drum up demand?...Let's say it's a dollar for a very hot song, something that's on the top of the charts today, but maybe it's 25 or 50 cents for something that's not quite so popular.
• Is the music industry is still after variable pricing?
• [Will Amazon] keep a record of who'se downloading what [music]? That way in the event that I need to go back and get that same music that I bought maybe a year ago, I don't have to pay for it again?
• Any plans to investigate other DRM-free formats (in addition to MP3, eg: FLAC) ?
• How did [Amazon's experience running] UnBox, the video service affect the decision making in terms of launching this service?
• Does Amazon look at [its UnBox service] and say, "you know, [anti-piracy measures are] really not worth it. Let's get our partners, particularly in the movie industry to rethink how their business is going and maybe reconsider the same kind of move that EMI is making here?"
• Will you be looking to integrate the commerce-side of devices with the music store? (Amazon sells a lot of different MP3 players)
• One question that comes up from our readers often is the whole idea of music downloads vs. ringtones. How do you view that? I know it's unrelated to the announcement, but it is related in some ways because if you go to buy a phone from some cellular phone provider, they may disable the ability to play MP3's even though the phone has that capability built into it. You end up having to buy ringtones from that telecom provider. I go and buy an MP3 song from [a service like the one being announced today] and here I have this telephone that has the MP3 [ringtone] capability natively built into it but the [cellco] I bought it from disables [the MP3-playing functionality]. I have to go their service and download a ringtone for $2.99, way more than I would pay for the song to begin with and plus on top of that the song isn't the entire song, nor is it the quality of an MP3. How do you look at something like that and reconcile that for your customers?

I also asked Carr if they had a name for the service or a launch date. The answer to both was "No."