Warner Music deal fortifies Apple rival

Times Staff Writer

One of the strongest rivals to Apple Inc.'s iTunes Store got stronger Thursday when Warner Music Group said it would sell digital songs without anti-piracy protection through Inc.

The move is an about-face for Warner Music, which became the third of the big four record labels to start selling digital downloads in the unencrypted MP3 format that lets songs be played on any portable device and copied onto multiple computers.

Warner Music, whose artists include Madonna, the Red Hot Chili Peppers and Led Zeppelin, had positioned itself as one of the staunchest defenders of the digital locks that were designed to deter people from making copies of copyrighted songs and illegally swapping them over the Internet.

The music industry has been squeezed by falling CD sales and the active trade of music illegally copied and shared online. In November, Warner Music reported that its fiscal fourth-quarter profit had plunged 58%, which the New York-based company attributed to slipping CD sales.


In a memo to employees Thursday, Warner Music Chief Executive Edgar M. Bronfman Jr. said the record label would still take steps to protect its artists’ copyrights. But he said the debate over anti-copying technology had produced no consensus between the music industry and technology companies on a standard.

Meanwhile, the stalemate only frustrated consumers who want to listen to digital music on any device they own; copy-protected songs that are purchased through iTunes won’t work with Microsoft Corp.'s Zune players or other rivals to Apple’s iPod, just as songs bought through many rival music stores haven’t been playable on the iPod.

The music industry should be cultivating the online market, Bronfman wrote, and joining Amazon’s digital store could help that happen. Amazon refuses to sell digital music that has anti-copying restrictions, and its store already features music from Universal Music Group and EMI Group.

“We bring an energy-sapping debate to a close and allow ourselves to refocus on opportunities,” Bronfman wrote.


Warner Music will still sell encrypted music via music subscription services and plans to announce a variety of online retail arrangements in coming months, he said.

But the company’s decision to join forces with Amazon was as much about helping to create a viable challenger to Apple, which dominates the digital entertainment market. Music companies have balked at renegotiating contracts with Apple, complaining about iTunes pricing and other issues.

An Apple spokeswoman declined to comment Thursday.

Amazon has benefited from the music industry’s effort to kick-start competition. In September, Universal, the world’s largest record label, chose the Seattle-based retailer to sell some unencrypted music. Universal also began selling unprotected music through Wal-Mart Stores Inc. and Best Buy Co. -- but not Apple.


Amazon says it offers nearly 3 million songs in the unprotected format for download and is undercutting Apple by pricing one-third of those, including most of the top 100 bestsellers, at 89 cents. Others cost up to 99 cents.

“Warner joining Amazon is a sign that Amazon is doing well,” said Ross Rubin, director of industry analysis at NPD Group.

But Amazon, which declined to release sales figures, faces a tough challenger. With a catalog of more than 6 million songs, iTunes is the No. 3 music seller in the U.S., after Wal-Mart and Best Buy. A song on iTunes costs 99 cents.

Apple began selling unprotected music before Amazon did but has signed up only one major record label for that format.


In February, Apple CEO Steve Jobs posted an essay on the company’s website titled “Thoughts on Music,” which said the music industry needed to rethink its insistence that music come with copyright protection.

Music piracy has flourished anyway, he wrote, in part because of CDs, whose content is easy to copy and transmit digitally.

The essay angered some in the music industry who believed that Jobs was saying music didn’t deserve the protection that TV shows and movies enjoy. Others thought that he knew the industry was about to push heavily into unprotected music and simply wanted to get ahead of the trend.

In May, Apple began to sell unencrypted music from EMI for a 30-cent-per-song premium. But in October, a month after Amazon opened its store, Apple dropped the price of unprotected songs from $1.29 to 99 cents, which analysts said was an acknowledgment that consumers aren’t necessarily willing to pay more for the ability to do more with their music.