More on Apple/EMI and DRM-Free Music

[Editor’s Note: We weren’t able to touch base with Editor-at-Large Geoff Duncan in time for last week’s “Apple and EMI Offer DRM-Free Music via iTunes” (2007-04-02), but his extensive experience in the recording industry makes his commentary essential reading for anyone following the situation. -Adam]

For folks who aren’t regular watchers of the music industry: EMI is the third largest of the “big four” major music labels, and home to popular acts like Robbie Williams, Pink Floyd, The Rolling Stones, Norah Jones, Coldplay, and (of course) The Beatles. (If you’re wondering when The Beatles music might be available for download purchase, there’s still no timetable, although EMI CEO Eric Nicoli did say, “We’re working on it.”) EMI has always had a UK bent, but its roster also includes a number of well-known American artists like Bonnie Raitt, Lenny Kravitz, Liz Phair, and Wynton Marsalis.

So what about the remaining big record labels? Right now, all indications are that they plan to let EMI set sail alone into the unchartered waters of offering unprotected music, then wait to see what happens. And no one knows what’s going to happen: major labels’ market research is essentially limited to a handful of tracks (many released by EMI) intended to promote specific artists or album releases. EMI obviously believes the results of those tests were positive enough to warrant making their entire catalog available without DRM, albeit at a premium.

Right now, none of the other major labels feel so confident, but Steve Jobs has boldly predicted as much as half the music sold on iTunes may be DRM-free by the end of the year: that probably indicates he expects at least one other major label to come on board.

EMI will be offering other digital music services the option to sell non-DRM content in AAC, Windows Media, and standard MP3 formats. Although the iTunes Store will be the first to offer EMI music without DRM, there’s nothing exclusive about the deal. (A Microsoft spokesperson noted last week that the company is also in talks with other unnamed publishers.)

As a side note, yes, EMI’s wholesale price to distributors for unprotected tracks is higher than for DRM-laden tracks, but EMI is offering the same wholesale price for complete albums regardless of whether they carry DRM protection. Music labels are seeing revenue from traditional CD sales declining sharply, and revenues from digital sales are failing to make up the difference. Industry analysis seems to indicate online music stores’ a la carte purchasing systems are a contributing factor, encouraging customers to purchase just the handful of tracks they want rather than buying an entire collection. While consumers love being able to purchase individual tracks, the result is that, on an album-by-album basis, labels earn less money from
digital sales than traditional CD sales – even from artists’ fans. So both online music stores and music labels are looking for ways to encourage consumers to purchase entire albums – Apple’s new “Complete My Album” feature is another example (see “iTunes, You Complete Me,” 2007-04-02).

But the bottom line here will be the bottom line. EMI believes it can increase digital sales and overall revenue by offering its music catalog without digital rights management – increasing the encoding rate on iTunes offerings from 128 Kbps to 256 Kbps is a value-added feature to sweeten/justify that 30 cents/.30 Euros premium. If the expected revenue fails to materialize, we can probably expect EMI to put a swift end to this experiment.

When unprotected AAC tracks become available via iTunes, I’ll be curious to see what turns up as they’re inevitably deconstructed and analyzed. I wouldn’t be surprised if Apple encodes purchase identifiers or other watermarks to monitor piracy and trace tracks as they promulgate to file sharing services… but my gut tells me they won’t bother. Remember, it’s all about the bottom line: at this point, it’s no surprise that music is being copied and shared widely, and it doesn’t matter much whether it comes from traditional audio CDs, unprotected tracks offered for sale, or other sources. The question is whether offering non-DRM tracks encourages more people to tap into legal, revenue-generating sources of music. EMI and Apple apparently
believe the answer will be “yes.”

Hear Hear! Speaking of that encoding rate improvement, Glenn Fleishman suggested in the Staff Roundtable section of last week’s article that 256 Kbps AAC files “should be indistinguishable from the data encoded in a typical audio CD.” Between “should be” and “will be” are an essentially infinite number of variables, but yes, generally speaking, if you can hear the sort of artifacts and soundstage compression that happens with typical 128 Kbps AAC encoding, in most cases you’ll probably be happier with 256 Kbps AAC encoding.

However, if you fall into this category, you’ve just separated yourself from 99.5 percent of the music listening public, and you’ve probably put a lot of time and money into your gear. Although there are many variables – not the least of which is the nature of the recorded material – most musicians I know can’t tell the difference between a 128 Kbps MP3 and an audio CD until I start pointing things out. That said, once things are pointed out, musicians generally can hear them, which often isn’t true of non-musicians.

Glenn also postulated that optimizing the quality from the original digital masters could produce even better results. There are two main variables here: the encoding software and the masters. I haven’t compared AAC encoders, but I’m told there are significant differences between them. MP3 encoders are still highly variable. So, yes: let’s hope whatever third party does the encoding picks a good one and knows how to use it.

As for the masters… for the time being, most listeners only have the possibility of seeing high-res masters on specialized releases; for instance, some material mastered for surround, DVD-Audio, or SACD. Those generally aren’t the masters which will be used by EMI for iTunes or other music vendors. In the future, we may see digital services offering audiophile audio from high resolution masters, but the EMI non-DRM releases won’t fall into that category – they’re all about mainstream music. Audiophiles won’t be happy with anything but high-res lossless formats anyway, and then they’ll complain about the mastering gear (“At exactly 4:16.35 I can hear that characteristic 6072A tube ring in the left channel! Argh! The phasing is
intolerable!”) so I doubt it will happen.

Even if you’re able to acquire 256 Kbps AAC files with greater fidelity than 44.1/16-bit audio CDs, again, you won’t be able to hear the difference without putting time and money into your gear and having good ears. Most consumers stand little chance of hearing the difference because the DACs – the digital-to-analog converter chips in Macs and other digital music players – just aren’t up to the task. Without good ears and years of experience, users will have to get into systems with considerably better specs than what’s available in even high-end consumer gear before they can reliably detect a quality difference.