Yahoo Exec Plugs DRM-Free Music Downloads

Yahoo (Nasdaq: YHOO) has engaged in a battle with the Recording Industry Association of America (RIAA), at least indirectly.

Yahoo's digital music service executive on Thursday boldly suggested to Music 2.0 conference attendees that music labels sell their songs online without digital rights management (DRM) software.

Dave Goldberg, Yahoo Music vice president and general manager, said DRM hinders the digital music marketplace more than it helps. "There is a cost associated with DRM, and that is lost sales of content," he said.

The Apple Connection

First-time digital music buyers are not becoming repeat visitors, in part, because of usage restrictions, Goldberg argued. His timing was perhaps poor, however, with Apple's (Nasdaq: AAPL) announcement Thursday that it has sold over 1 billion songs through its iTunes store.

ITunes uses Fairplay DRM for its music. Since Apple does not license its DRM technology to the music labels, it gives the iPod maker a competitive advantage because ITunes music only plays on the iPod.

That means Yahoo's initiative not only comes against the RIAA, it also comes against Apple's dominance in the MP3 player industry. It may be too little, too late to change the momentum, according to analysts.

Rolling Back the Calendar

Yahoo is about five years late, said Richard Doherty, an analyst at Envisioneering Group. The time for Yahoo to leverage its community and develop a new DRM-free business model was about five years ago, during the Napster transition, he opined.

"This is a nice gesture, but it's naive in business given all the progress that's been made, especially after the billion iTunes announcement yesterday," Doherty told TechNewsWorld. "The calendar is on the wrong year for this."

Envisioneering Group's surveys with artists, producers, lawyers and labels indicate that, even with a DRM-free policy, Yahoo might pick up only a meager 10 to 15 percent of the music business over the next three years.

"Yahoo of course would probably use some linkage that would keep the ability to play the music tied to Yahoo," Doherty predicted. "So it's self serving if you have to stay with Yahoo in order to enjoy the music. Yahoo would become the virtual DRM."

Battling the RIAA

Still, 10 to 15 percent of a US$1.1 billion global market is worth fighting for -- and that may be what Yahoo is doing. The RIAA has taken an aggressive stance in support of copyright protection because it makes it more difficult for consumers to share files illegally. The association has also taken an aggressive stance against violators.

In fact, the RIAA filed a new round of copyright infringement lawsuits against 750 individuals just a few weeks ago. The new "John Doe" suits cite individuals for illegally distributing copyrighted music on the Internet via unauthorized peer-to-peer services like LimeWire and Kazaa.

"Prosecuting songlifting is integral to helping protect the ability of record companies to invest in the up-and-coming bands of tomorrow and level the playing field for legal online services," said Cary Sherman, President, RIAA. "The illegal downloading of music is just as wrong as shoplifting from a local store. It's against the law, and breaking the law must carry consequences."