The reports that EMI has been in talks with some leading digital music services to license a lot of its catalog in the unprotected MP3 format has caused lots of excitement, especially on the heels of Steve Jobs' anti-DRM manifesto.  At any rate, my thoughts on this are that:

• EMI in some ways has the least to lose and should be considering this more seriously than the others.  It recently restructured amid warnings of a lower than expected 2nd half (of their fiscal year, which ends on March 31st) and guidance of revenues to be 6-10% lower than previous estimates.  The growth of digital revenues is not offsetting the erosion of physical revenues.  What to do?  Some combo of accelerating digital's growth, slowing physical from deterioration and cutting costs.  They're doing the 3rd and have no doubt been looking at all sorts of ways of doing the first two.  Their digital market share, at 10%, is by far the lowest of their peers and so they may as well take some riskier moves to boost share.
• They would likely release their back catalog as MP3 first.  It would represent a lower risk than releasing their priority artists in unrestricted formats.  Of course they may still hold off on the crown jewels of their catalog, which includes the Beatles, Van Morrison and the Beatie Boys.
• This would give a boost to the music services like Napster and Rhapsody, however, in the absence of the other majors following suit, it would be awkward to promote just a portion of their catalog as being 'iPod compatible'.
• It could all be posturing ahead of the upcoming renewal negotiations with Apple, which apparently begin in March.

The rumors are that the services are balking at the high advances being asked by EMI.  We'll know soon enough.  If it happens, the first one of my digital music predictions for this year would come true.

[Cross-posted from www.ragsgupta.com]