www.drmwatch.com/ocr/article.php/3693316.
By Bill Rosenblatt August 8, 2007 The first financial figures have been published that provide an indication of EMI's success with its DRM-free content licensing strategy. EMI, Warner Music Group (WMG), and Universal Music Group (UMG) have all released earnings from the quarter ending June 30. EMI launched its DRM-free strategy on iTunes (iTunes Plus) in late May, so the quarter's results include a "honeymoon" period of about five weeks of press hype that should have temporarily boosted traffic to iTunes Plus. The results are not good news for EMI. Although EMI's digital revenues were up 26% over the same quarter last year, WMG's comparable increase in digital revenues was 29%, and UMG's was a staggering 49%. This is as close as possible to an apples-to-apples comparison of digital growth among the majors, and iTunes revenue is a first approximation to overall digital revenues. (Analogous revenue figures are not publicly available for SonyBMG Music, the fourth major.) As for the effect of DRM-free on content misuse: the online media measurement firm BigChampagne has been keeping a close eye on EMI-owned content since the DRM-free launch, and its CEO Eric Garland says that the effect on P2P traffic has been statistically insignificant. He adds that there is little overlap between people who purchase content on iTunes and people who upload files to P2P networks like LimeWire, so therefore P2P piracy is not likely to be affected one way or another by content protection methods used in the iTunes/iPod universe. This means that the effect of DRM-free track availability on iTunes content misuse depends more on what users actually do with their files once they have purchased them -- use them on their own non-iPod devices, email them to friends, etc., factors that are much harder to measure and fall into longstanding gray areas of trust and fair use. So, despite the company's claim that initial revenues from the DRM-free iTunes Plus are "encouraging," these results show that the DRM-free strategy is neutral at best. Digital revenue is growing at a slower pace than other major music companies, indicating that with the higher prices for DRM-free tracks, the increase in volume of purchases is slowing down; and there is no measurable effect on piracy. All this seems to mean that other major record labels need not bother changing their DRM strategies, except perhaps as a public relations move. Instead, in order to maximize digital revenues, they need better data on price elasticity -- which they cannot currently get through iTunes.
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