EMI joins Apple: says no to DRM

1st Apr 2007 | 23:00

EMI joins Apple: says no to DRM

A landmark development in the history of the music industry

EMI Group CEO Eric Nicoli has outlined the record company's vision for a DRM-free music future - at a press conference held at 1pm today with Apple CEO Steve Jobs. You can read the full transcript below...

Eric Nicoli [EN]: "Ladies and Gentlemen good afternoon. Welcome to EMI's staff canteen. It doesn't always look like this. We've dressed it up a bit for this special occasion, and I've never before seen people hanging from the rafters. Not entirely sure that those balconies have been stress-tested for that many people. [laughter]

EN: "I'm delighted that you've been able to join us here for an important and exciting announcement - an initiative that represents a major step in our quest to provide consumers with the best possible digital music experience. And it comes at a very important time for our industry, which has faced massive challenges and undergone dramatic changes in the past few years.

EN: "We were acutely aware that the invitations were issued on April Fool's Day. That was, I'm afraid, unavoidable. And we're aware that the invitations have provoke considerable speculation over the last 24 hours. We are, of course, a company well used to dealing with speculation. And normally we don't comment on it, but clearly we wouldn't have got you over here just to tell you that we have no comment to make. I know you're all eager to know what we're going to be announcing, but I'm going to ask you to be patient for just a bit longer.

Live music and more

EN: "We felt that we couldn't invite you to EMI without treating you to some live music. Indeed it would have been rude not to do so. So before we get to the announcement we're going to hear a couple of tracks from one of EMI's most exciting bands. Then the stage will be cleared and we will show you just 90 seconds of a video with some new music from the Chemical Brothers, and then we'll get to the main business of the day.

EN: "So now I want to introduce the band, which represents the latest project from the peerless Damon Albarn of Blur and Gorillaz fame; which also features Paul Simonon, bassist from The Clash; former Verve guitarist Simon Tong; and Afro-beat pioneer and Africa 70 drummer Tony Allen.

EN: "This is an extraordinary live band. It's won rave reviews, not least for their gig on Saturday night at the much-loved Hammersmith Palais. It was, sadly, one of the last performances at that venue before it gets knocked down. Clearly the planners of Hammersmith feel they need more over-priced flats and fewer live-music venues, which is tragic.

EN: "Incidentally when we took Damon through what we're about to announce, he gave us a typically eloquent reaction. Never known to use two words when one will do, Damon actually did use two - and the second was 'brilliant'. You can decide for yourselves what the first one was, but it wasn't 'jolly'.

EN: "He certainly boosted my confidence that we were doing the right thing. So without further ado, please welcome the guys onstage to perform two tracks from The Good, The Bad & The Queen."

[The Good, The Bad & The Queen are now performing live]

EN: "How to clear a set in 90 seconds. Damon, Paul, Simon, Tony and, indeed the girls in the string section, thank you very much. Can we hear it one more time for the band. Thank you. [applause] And I think a timely reminder of the awesome talent that populates the EMI labels worldwide.

EMI embraces change

EN: "As those of you who've followed Damon's career will know, he has shown an unrivalled ability to evolve and to explore new ground, to reinvent and to push creative boundaries.

EN: "EMI's philosophy and, indeed, strategy echoes that spirit. We're committed to embracing change and to developing products and services that consumers really want to buy, in our determination to drive our digital music business. In short, we're focusing on giving consumers a compelling experience. Such a proposition in digital music we believe has three important components:

  • "First, it needs to be good value for money
  • "Secondly, it needs to offer choice
  • "Thirdly, it needs to be simple to understand and easy to use

EN: "At EMI we are guided by these three principles as we strive to build robust, effective and successful digital music services, to connect fans with our artists' music.

Interoperability is key

EN: "Now the new product I'm about to unveil embodies these principles, and most importantly gives consumers what they want. In all of our research consumers have said overwhelmingly that they're prepared to pay a higher price for a digital music file that they could use on any player. It's clear to us that interoperability is important to music buyers and is a key to unlocking and energising the digital business.

EN: "In January we ran a number of tests with DRM-free downloads of music from selected leading artists. In these tests we made available standard quality downloads and higher quality downloads at a premium price. The results were resoundingly clear, with the higher quality tracks outselling standard by ten to one, reaffirming our belief that sound fidelity is, for many, an important factor.

EN: "So ladies and gentlemen, it gives me great pleasure to announce a new offering of premium digital downloads. New premium downloads will have two key features that distinguish them from our standard downloads:

  • "First, they will be free from digital rights management or DRM-free, for short.
  • "Secondly, they will have vastly improved sound quality.

Tracks, albums and videos too

EN: "The higher quality, DRM-free downloads will be sold at a wholesale price premium to standard downloads when delivered individually, while premium albums - also in higher quality and DRM-free - will be supplied at the same wholesale price at the standard downloads currently.

EN: "Since the digital download business started, many people have talked about the device of the album, that customers will cherry-pick their favourite tracks and will no longer want to buy full albums. At EMI we believe the body of work an artist produces is still very important for many fans. Our experience to date tells us that there remains a high interest in full albums. At the same time many do indeed prefer to buy individual tracks.

EN: "So EMI's new premium digital downloads will sit alongside our existing standard offerings, and consumers can choose according to their preferences. And if their preference is for the premium product, we also want to provide them with a facility to upgrade the EMI tracks they've already bought.

EN: "In addition to the premium audio products, we'll be removing DRM from video downloads.

First downloads available today

EN: "These new products will allow fans to buy new music from any retail location that stocks them and, crucially, listen to that music on the device and platform of their choice. As a shining example, and to get the ball rolling, the brand new single from The Good, The Bad & The Queen album - along with the album - will be available from today on the band's website in high quality MP3 format. The MP3 files purchased from The Good, The Bad & The Queen can be used on any digital music device, including music-enabled mobile phones.

EN: "So today we'll be making our entire catalogue of digitally available songs, albums and new releases accessible to our retail partners worldwide in both the standard and premium versions.
EN: "I'm delighted to announce that the first partner to support these products is Apple's iTunes.

EN: "Apple has a long history of developing ground-breaking products and services. The introduction of iTunes just under four years ago changed the landscape of the music business forever.

EN: "Steve Jobs has been rightly hailed as a pioneer and a visionary whose courage and imagination have brought the digital music dream to reality. His obsession is to develop products and services that consumers really want to buy, his product ranges certainly live up to the three principle tests of value for money, choice and simplicity. And they have the added advantage of being absolutely beautiful.

Enter Apple CEO Steve Jobs

EN: "This is a man who takes aesthetics very seriously indeed. He once said about a new product that they'd made the buttons on it so good that you'll want to lick them. Now standing well back so my buttons are safe, I'm delighted that Steve has made the journey to London to be with us today. Ladies and gentlemen, please welcome Steve Jobs. [applause]

Steve Jobs [SJ]: "Thank you very much. I just wrote things I wanted to say and then we're going to ask a few questions, right?

SJ: "So today EMI and Apple are announcing the next big step forward in the digital music revolution: the movement to completely interoperable DRM-free music.

SJ: "EMI is the first of the big four music companies to take this step and they're entire digital music catalogue will be available DRM-free on iTunes in May.

SJ: "Today we offer more than five million song on iTunes for 99 cents, 99 Euro cents, 79 pence. They all have digital rights management, DRM, and they're all encoded at 128kbps AAC. iTunes has sold over 2.5 million songs to date, earning the record companies over 1.5 billion in revenues, which is highly profitable as there are no manufacturing costs, no product returns, no marketing fees or other costs like those associated with distributing physical CDs. It's all worked out very well for music lovers, for the music companies and for Apple.

SJ: "To take things to the next level we need to address two issues:

  • "The first is interoperability: Although most users have never bumped up against the DRM, the music they have bought from iTunes will not play on portable music players other than iPods unless they burn it on to a CD and then read that CD back into the computer. It is interoperable, but it is a bit of a hassle. Even though users may not want to play their music back on devices other than iPods today, they want to know that they have that choice in the future.
  • "The second issue for some users is audio quality. While the current 128kbps AAC encoding is the best audio quality offered by any mainstream digital music store, audiophiles can still tell the difference between it and the original source material. As portable music players have increased their storage while at the same time coming down in price, it is time to reconsider delivering even higher audio quality than is currently available.

DRM-free on iTunes

SJ: "We're going to address both of these issues by introducing new versions of our songs and albums that will be sold alongside our existing versions. The new versions will be DRM-free so that they are completely interoperable. They will be encoded in 256kbps AAC for audio quality that is virtually indistinguishable from the original source material.

SJ: "The new versions offering these added values will be priced at a $1.29 per song. That's 1.29 Euros and 99 pence. That's just 30 cents more than the original versions, or just 20 pence more than the original versions here.

SJ: "Our sampling of users indicates the majority of them will pay the additional 30 cents for the superior audio quality and the safety net of interoperability.

SJ: "iTunes will automatically let users choose to buy these DRM-free versions whenever they are available, so that users won't need to think about it on a song-by-song basis. iTunes will offer EMI's entire catalogue of music, including all songs, albums and music videos in the new DRM-free versions starting next month. Worldwide.

Premium quality, premium pricing?

SJ: "In addition iTunes customers will easily be able to upgrade their entire library of previously purchased EMI songs and albums - the higher quality, DRM-free versions - for just 30 cents a song. We think customers are really going to appreciate this.

SJ: "Also iTunes will offer the new DRM-free versions of EMI albums at the same prices as the current DRM-protected versions, so customers can elect to purchase the DRM-free albums with even higher audio quality for the same price.

SJ: "Now users that don't want these new features - or who don't want to pay the extra 30 cents or 20 pence - can continue to buy the current DRM songs at the current prices. iTunes will continue to offer its entire catalogue - currently over five million songs - in the same versions as today: 128kbps AAC encoded with the DRM, at the same price of 99 cents per song, alongside the higher quality DRM-free versions where they are available.

SJ: "EMI has taken the first bold step in the music industry and, starting today, Apple will reach out to all the other major and independent labels to give them the same opportunity. We think our customers are going to love this and we estimate that over half of the five million tracks offered on iTunes today will also be offered in DRM-free versions by the end of this calendar year.

Doubters dumbfounded

SJ: "This is a landmark event, and is the beginning of a major shift that will take place this year, resulting in consumers being able to purchase music from any digital music store and play it on any digital music player.

SJ: "Some doubted Apple's sincerity when we proposed this solution to the interoperability problem earlier this year - saying that as the number one digital music store and the number one maker of digital music players - we had too much to lose by breaking the proprietary bond between the iTunes Music Store [sic] and iPod music players.

SJ: "Hopefully by our actions here today and over the coming months they will conclude that we're continuing to do exactly what has earned us these number one positions: doing the right thing for the customer. And the right thing for the customer going forward is to tear down the walls that preclude interoperability by going DRM-free. And that starts here today. So thank you. [applause]

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