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Will others follow EMI?

April 5, 2007

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EMI is taking a risk in becoming the first music major to ditch anti-piracy software on its digital music, but its larger rivals could be better placed to ultimately reap any rewards.

The music industry has used Digital Rights Management (DRM) as the cornerstone in its fight against illegal downloading but its critics argue that it imposes too many restrictions on the consumer and therefore hinders legal digital sales.

In response, EMI, which has already issued two profit warnings this year, said it would put an improved sound quality version of its music online without protection.

One industry source said labels would watch the move closely but pointed out that EMI has struggled with a lack of album hits recently, meaning any potential benefit would be reduced.

“You have to have the hits that people want to buy, then you can look at the platform or choice of DRM or no DRM,” the source said.

However Jupiter analyst Mark Mulligan said the decision would change the game completely and expected other labels to follow.

“This is something that all the labels are having to consider … because of the state of the overall market. But EMI has been hit harder than anyone else.

“It doesn’t have the benefit of a big parent company and it doesn’t have a strong footprint in the U.S.. It has to be innovative. It wants to be ahead of the curve.”

Warner Music Group has said it sees no logic to dropping DRM but is still testing without it while Vivendi’s Universal Music has said it, too, is testing.

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