Steve Jobs blinks
IN THE STANDOFF between the music industry and Apple Inc., someone blinked Monday. Apple would like you to think it was EMI Group, the fourth-largest seller of CDs in the U.S., which agreed to sell its digital music without electronic locks. Yet EMI accomplished something the music industry has long been trying to do: It persuaded Apple to pay a higher price for downloadable singles.
The largest labels have required retailers for years to put electronic locks on downloadable music to deter piracy. Several months ago, however, British-based EMI floated a proposal to drop the locks in exchange for higher wholesale prices. Apple Chief Executive Steve Jobs chimed in last month, saying the locks hurt consumers and challenging the industry to abandon them.
On Monday, EMI announced that Apple would be the first retailer to offer shoppers a choice: They can continue paying 99 cents for songs with locks, or they can pay $1.29 for versions with better sound quality and no locks. It’s a sweet deal for EMI -- the premium versions cost no more to produce yet deliver 30% more revenue.
Beyond that, the electronic locks haven’t made a real difference in piracy. The main effect of slapping locks on 99-cent downloads has been to make songs less valuable to the people who buy them, largely because the locks used by Apple and other stores don’t work with competing products and services. If all the labels stopped using locks on songs sold online, consumers would no longer have to worry about compatibility with their mobile phone, home network or portable player.
It remains to be seen whether music fans are willing to pay more for unlocked tracks. If not, other major labels are likely to dismiss EMI’s move as a desperate gamble by a struggling company. Some executives already suspect that EMI’s new chief executive, Eric Nicoli, was sold a bill of goods by Jobs, whose company’s profits come from selling iPods and computers, not songs (and who faces pressure from European regulators to stop using proprietary locks). Regardless of its motivation, though, EMI is heading in the right direction.