With Apple's iTunes update, the DRM-free era officially begins. The big question is what comes next for Apple?
Apple move to sell DRM-free tunes from EMI may be a boon initially since other rivals are still saddled with clunky copyright protection schemes. Amazon plans to go DRM-free, but not until later in the year.
The longer-term picture is a little more unsettled. Here are a few items we're about to find out about:
- Will music buyers pay more to ditch DRM? Apple is selling DRM-free music for $1.29. The DRM-free music sounds better due to a higher encoding rate, but ditching evil software is the big sell here. Will folks buy it?
- How many people will upgrade an entire DRM library to DRM-free with one click? Will some iTunes customers upgrade by accident?
- Will Apple's dominance be weakened without DRM? Copyright protection software helped tether iTunes customers to the iPod. As the world goes DRM-free that lock-in effect erodes. It won't happen overnight, but it is a risk. "While today's news is a positive for consumers, we believe it weakens one of Apple's long-term competitive advantages in the digital content segment. As we have noted previously, DRM-free content reduces the switching costs for consumers wishing to exit the iPod-iTunes ecosystem, which reduces barriers to entry for Apple's potential competitors," wrote J.P. Morgan analyst Bill Shope in a research note.
There won't be answers to those questions initially, but it does bear watching. For now, it's clear sailing for Apple--especially ahead of its developers forum the week of June 11. Morgan Stanley upped its stock target for Apple shares to $150 from $110.