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Will DRM-free tunes turbocharge music sales?

John McFarlane, is chief executive and founder of the consumer electronics company, Sonos Inc. Contrary to most of his peers, McFarlane believes that his company, and the entire digital music industry, stands to benefit from the DRM free music movement.

Apple and Amazon were the among the first to jump on the DRM free bandwagon. There are some who believe that by end of 2007, nearly 50% of music for sale online will be free of messy DRM software. The “download anywhere – play anywhere” approach, McFarlane argues, will make the notion of “digital music” redundant.

“Music will be music again,” he says.

While online music downloads have grown rapidly, DRM (regardless of the flavor) has added more friction than security to the process, often slowing total sales, especially amongst the non-techie music fans.

“DRM free music is going to help digital music expand from the iPod generation to the mainstream market,” McFarlane says. Many non-techie consumers still buy their music in CD format from retailers like Amazon, WalMart, and BestBuy. Then they rip the tunes to load them onto their mobile devices or home entertainment systems.

Sonos, based in Santa Barbara, is one of few companies to establish a sizeable enough customer base to survive in the shadow of Apple’s all dominating iPod/iTunes. Sonos has done this by integrating consumer-friendly music services into its devices.

Sonos was the first device maker to support Real’s Rhapsody subscription service. Other music services followed, and the company is about to begin supporting Pandora ($36 a year after initial free trial.)

“Pandora, is like terrestrial radio 2.0,” McFarlane says. Sonos owners can now listen to Pandora-powered personalized radio on their hi-fi systems instead of being tethered to the computer—a major upgrade to Pandora’s services.
pandora on sonos

Soon music fans will be able to do the same on their Sprint Mobile phones, for just $3 a month. “This service basically allows you to get Pandora everywhere – on your [mobile] devices and on your computer,” says Tim Westergren, Pandora’s CEO. “We are really trying to redefine the company, as next evolution of radio.”

One hurdle: the Emeryville, Calif.-based start-up faces a serious challenge due to some draconian changes in the Internet radio royalty structure. That problem, despite some recent developments, isn’t likely to go away.

17 Responses to “Will DRM-free tunes turbocharge music sales?”

  1. moritz

    I bought a couple of tracks from iTunes and every time I did, I only did because I could not find the CD at my local store. Everytime I wondered later, why I did not just order the CD.

    Count me in the crowd buying much more music on Itunes when DRM free. And you can for sure also count me in the crowd which stops to buy DRMed music on iTunes completely.

  2. Lionel Hutz

    The average consumer really doesn’t care. They would rather watch American Idol then get the new Daughtry/Yamin/McPhee/Clarkson single the easiest way possible.

    All of this super anti-DRM talk has really just been fodder for the techies and bloggers (whoa are one in the same).

    It’s bad for the music business. It’s bad for the artists.

    Why don’t you journalist folks tell Steve Jobs to play fair with Fairplay? That would solve 90% of the issues. But no, most of you guys would rather suckle the teet of Jobs instead of taking him to task for destroying DRM’s acceptance.

    The European courts knew what they were doing by putting his a$$ to the fire. Why are you being so nice?

    Oh, I know, because you all use Macs. Friggin sheep, all of you.

  3. Interesting comments from “Daniel on May 23rd, 2007 at 5:30 AM”. An entire generation has not paid for music and will likely continue to find ways to avoid doing so.

    But might the rest of us pay a little extra for DRM free music? (30 cents extra on iTunes, I believe). I don’t like being locked down and do my best to strip off DRM from purchased music. I may be willing to purchase DRM free music for slightly more rather than resorting to the gaunlet of P2P networks…

  4. Phillip Ridlen

    I think it’s really interesting that you label the non-techie crowd as the ones who don’t want to deal with DRM.

    From my personal experience, it’s the non-techies who buy the DRM-laden music–they don’t even know what DRM really is.

    As a techie, I can say I don’t buy DRM songs. I’d rather buy my music on CD and encode them at the bitrate I want in the format I want–Not what the record label decides is best for me.

  5. Daniel

    “What, but music is FREE… its always been FREE, no one actually pays for music, do they? " Thats my 17 year old cousin talking, thats at least one generation lost, a generation that has NEVER paid for music and NEVER will, I wonder how much longer the music industry will survive, as far as Im concerned they deserve everything they get.

  6. I don’t know if you’re going to see a large jump in music sales. Most of the people I know that buy music off of iTunes would balk at paying more for a song that really has no value add to them. If they’re only listening to songs on their iPod or laptop, then they really don’t care what format their music is in if it works.

    The freedom from DRM in music will never trump the fact that there’s a lot of people who will get their music through the wonders of torrents.

    You might see a slight bump in sales, but I don’t see people getting rich(er) off of this.

  7. Disagree largely with above….DRM is an attempt to wrest control from assets people have bought and transform them into a rental model.

    By and large users don’t like rental models, and will avoid / get around / etc. Take it away and you will entice people back.

    As for MP3 being a lousy format compared to iTunes…we’re hardly talking hi fidelity playout devices here in the main!

  8. Sonos actually gave me a loaner system to review last month and I can tell you I now have a great appreciation for subscription music services like Rhapsody/Pandora. They’re so powerful – literally any song you want at your fingertips.

    I talk about Rhapsody a bit more indepth here:
    http://paulstamatiou.com/2007/05/07/review-sonos-digital-music-system/

    At the moment though, I am playing with a loaner Squeezebox and it’s almost as potent as the Sonos because it also supports Rhapsody/Pandora. These music services are the “killer apps” of new music devices.

  9. Lionel Hutz

    Making DRM free music available will show no significant increase in music sales past the standard percentages we have been seeing lately.

    The average person who buys music will still get it from ITunes in whatever format their favorite song comes in. If AAC is cheaper then that’s what they will go with. If they want a higher quality then they will pay for it even if it comes wrapped in Fairplay. MP3 as a format sucks and people will care more about that than if they can play their songs on 8 players and 4 extra computers they don’t have.

    All of the talk that DRM free music “will create thousands of stores to sell the music so digital music” Sure, labels taking DRM requirements off of music will give a lot of stores the opportunity to sell music but it doesn’t mean people are going to leave ITunes to go buy from all these new stores. They wont. At least not in any numbers that matters.

    Include the fact that the labels are still charging highway robbery licensing/advance fees (Million$) to enable a store to sell their music and you have an automatically crippled digital retail marketplace. Big stores like Amazon will come into the marketplace and add nothing new that would make people leave ITunes. The innovative stores will never get a chance to flourish thanks to those fees. If you think about it the slim margins of selling music a’la carte makes it unappealing to anyone that can’t sell it as a loss leader. Outside of Apple only subscription services can thrive under these conditions if you are a pure music play.

    The only stores we will see significant sales from over the next few years will be Sprint’s, Verizon’s, T-Mobile’s and AT&T’s on deck mobile music stores… oh and of course ITunes. I bet all of them will use DRM for the mobile sales. If they don’t people will be bluetoothing & MMS’ing tracks to each other like crazy. It will make Bittorrent look like child’s play.

    Thanks for being so shortsighted EMI. Did the fee Amazon and the other fools pay you pad your bottom line enough to make it worth killing your industry?