DRM May Die? Yahoo!

Many consumers hate the music industry's approach to digital rights management (DRM), and in recent weeks, the major labels have faced increasing pressure to lighten up or ditch it altogether. Apple's (Nasdaq: AAPL  ) Steve Jobs issued a manifesto arguing for DRM's abolishment last week. Now Yahoo! (Nasdaq: YHOO  ) is chiming in with tidings for a big change in digital music distribution.

In a recent USA TODAY article about major label EMI considering offering DRM-free music, Yahoo! Music's general manager Dave Goldberg predicted that Yahoo!'s music store should be DRM-free by the 2007 holiday season.

DRM limits the way consumers use the music they purchase, and it's proven to be annoying, if not onerous, to many consumers. For example, if music fans buy songs on Apple's iTunes, they can only burn those tunes to CD a limited number of times; can only play their music on a limited number of different computers; and can only play iTunes songs on the iPod. Similarly, people who buy music from rival services can't play their songs on an iPod if they wish. The unrestricted MP3 format, on the other hand, works seamlessly on every digital device.

The music industry's argument for DRM has always been the ease with which people can illegally copy and share unrestricted music online. Piracy has been a serious concern to the music companies as physical CD sales drop, and the industry has often employed heavy-handed tactics in addressing big changes in the ways consumers consume music.

Think of the lawsuits targeting supposed illegal downloaders from the RIAA, the industry association that represents the big labels: EMI, Sony's (NYSE: SNE  ) Sony BMG, Warner Music (NYSE: WMG  ) , and Vivendi's (NYSE: V  ) Universal. And don't forget the furor that ensued when Sony BMG sold music CDs containing DRM software that planted itself on consumers' PCs without their permission or knowledge (yep, just like spyware). These strategies have done little to curb piracy, but they've had considerable success in fomenting consumer distrust and outrage.

It's interesting that Yahoo! is making these comments; not too long ago, news broke that its music service was distributing unrestricted MP3s for a few EMI artists on an experimental basis. (Back in December, that made me wonder whether the recording industry is finally getting it.) On the death of DRM, Goldberg said: "The labels understand that DRM has to go. It's nothing but a tax on digital consumers. There's good momentum behind DRM going away."

Major music companies have faced dramatic changes in the last decade, as the digital lifestyle disrupted what had previously been a predictable and mature industry. The Internet has been a tremendous distribution model, exposing more people to more choices in media. Yet the music industry's response to the challenges the Internet poses has given it an increasingly greedy and ham-fisted reputation among consumers. I've long believed that the industry should innovate, rather than fight the future. Maybe the current controversy -- and discussion -- will lead the industry to start rethinking some of its tactics. When it comes to DRM and the major labels' relationship with their customers, I think the "us vs. them" approach has got to go.

The following articles may be music to your ears:

Yahoo! is a Motley Fool Stock Advisor pick. To find out what other companies David and Tom Gardner have recommended to subscribers, click here for a 30-day free trial.

Alyce Lomax does not own shares of any of the companies mentioned.

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