Labels Mull Options Post EMI/Apple; Renegotiations Loom

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Apple will soon position DRM-free catalog from EMI, though speculation continues to surround possible next steps from rivals Universal Music Group, Warner Music Group, and Sony BMG.

All three majors have been decidedly protectionist, according to numerous sources and public statements by company executives.  That includes recent, pro-DRM declarations from Universal Music Group president and COO Zach Horowitz, Warner Music Group chairman and CEO Edgar Bronfman, Jr., and Sony BMG president of Global Digital Business and US Sales Thomas Hesse.  That ice could thaw at some point, though label insiders continue to point to a pro-protection stance.  Just recently, numerous sources both inside and outside of Warner Music Group noted that the mood has not shifted, thanks to a top-down philosophy engendered by Bronfman.  And Sony BMG has traditionally been the most in favor of DRM protections, an approach that was reinforced by the recent promotion of Hesse in January, despite his central role in the rootkit disaster.

But other variables are worth considering, and the outcome remains unpredictable.  One source to Digital Music News pointed to a multi-million dollar transfer from Apple to EMI for the privilege of positioning the DRM-free tracks, a figure that was pegged at $5 million by Billboard earlier this week.  EMI declined to discuss specifics, though information strongly suggests that earlier negotiations with iTunes rivals involving DRM-free catalog disintegrated based on unreasonable upfront payment demands.  EMI requested the payments as an insurance guarantee against potentially increased levels of piracy, and subsequent revenue losses.  The recent announcement involving Apple changes that dynamic somewhat, and Microsoft now appears ready to bite first following the iTunes exclusivity window.  Meanwhile, major label contracts with iTunes are set to expire at the tail end of this month, a situation that could set the stage for a more contentious, complicated interplay.