Ars Technica profiles eMusic, the world’s #2 online music retailer, and the only ‘major’ online retailer that sells music without DRM. Ars notes that eMusic’s labels – generally indie – don’t have the big label fear of piracy:
The majors are terrified of piracy and so insist on strict DRM controls to safeguard their music. The indie labels that eMusic works with generally don’t have that fear. “The indies have always viewed the world differently,†says Pakman. “You know, the indies struggle for attention, for customers, so the notion of someone actually digging a track and e-mailing it to 10 of their best friends—doing self-promotion—that’s music to the ears of the indie record labels. Whereas an RIAA member says, ‘We’ve got to sue that guy.’
Tim Lee picks up the story from there and looks closer at the business model implications of piracy:
But in a world in which there are a hundred major labels instead of 6, you worry more about obscurity than you do about piracy. A certain amount of casual piracy might actually be good for you, because it brings your artists’ work to the attention of a larger audience. And you don’t have the luxury of dictating to your customers how they’ll consume the music they buy, because if you don’t cater to their needs they’ll buy from somebody else with a more customer-friendly service.
I’d go further than that. To my mind, the large labels have trapped themselves with DRM – they believe they need it because they’ve built their models on the rare success – because of the high production and distribution costs of their traditional bricks and mortar businesses, and the low likelihood of success in that model of their scattershot approach to selecting backable artists, I suspect that the vast majority of their releases lose money. They need the rare wild success – just as VCs do – to fund those losses and give them their return. But without DRM, they believe they won’t be able to exploit those rare successes.
But online distribution radically changes the economics of the game, and opens up the feasibility of making the long tail profitable. And the key seems to be managing that obscurity – creating the demand in the long tail. So, distributing without DRM begins to look like an awfully smart way to exploit the opportunity of online distribution by turning the traditional model on its head – by making the long tail profitable, and forgoing the high costs of searching for and creating the next ‘sure thing’.
And perhaps, if there’s less need for that next sure thing, and if the eMusics and Magnatunes of the world have success selling interesting, unique and authentic music without DRM, we’ll see competitive pressures on the major labels to occasionally resist the impulse to homogenize the culture – hopefully, slightly less need for them to push highly produced, focus-grouped, cross-marketed ‘product’ out the door – less need for them to try to put top-spin on their product by synthesizing quality.