Napster Drops DRM -- With a Catch; Sony BMG Does as Well

The Wall Street Journal reports today that Napster is soon to announce that it will offer unrestricted MP3 downloads.

This news is a bit ironic, considering Napster was once synonymous with “unrestricted,” “MP3,” and “download.” Ah, how the digital music landscape has changed.

Napster is now a struggling subscription-based company that relies heavily on digital-rights-management, or DRM, software. DRM is what makes it nearly impossible to download music from a variety of sources and play it on a single device. (In other words, DRM is why it was easier just to buy the damn iPod.)

Napster is the latest competitor to try to end the dominance of Apple’s iTunes. In May, Amazon.com teamed with EMI to offer unrestricted downloads, and other major labels have followed suit. Now Businessweek.com reports that Sony BMG will become the fourth major to relax its grip on a good chunk of its catalog. (Details are still forthcoming as to where one can purchase these DRM-free Sony MP3s.)

Napster CEO Chris Gorog tells the Journal that his company will offer DRM-free downloads starting between April and June. Reading further, we discover, “The shift doesn’t affect Napster’s subscription music service, which will continue to work only with a handful of specialized devices.”

Hm, so the subscribers, the folks who shell out good money to effectively lease music, get fewer benefits. Should we be surprised, then, that according to the Journal, Napster has about 750,000 subscribers? (In comparison, eMusic has just over 400,000.)

Commentator Silicon Alley Insider says individual downloads are such a low-margin business, this move won’t likely help Napster’s bottom line. Meanwhile, the more lucrative subscription business is slow to catch on.

Gorog tells the Journal that Napster’s main goal in offering unrestricted MP3s is to break down Apple’s dominance. Counters the Alley Insider: “We worry that by the time AAPL’s dominance is over, Napster will be long gone.”

For more on DRM and music subscriptions, check out the Electronic Frontier Foundation’s guide.

For a thorough guide to digital music alternatives, check out Randall Roberts’ review here.

-- Kathleen McLaughlin