Apple, Amazon set to squeeze music labels over DRM

Following its landmark deal with EMI this month to banish digital rights management from the label's iTunes tracks, Apple is said to be flush with confidence and is pushing the other three major labels into an unenviable negotiating position, according to clandestine sources within the organizations.

Though Sony-BMG, Universal, and Warner have all to date successfully resisted calls to end the use of DRM — with Warner CEO Edgar Bronfman infamously questioning the mind of Apple's Steve Jobs for even hinting at the change — the companies now find themselves on the defensive. The iTunes operator is allegedly using the clout gained from the EMI contract to push for DRM-free music when royalties and variable pricing had been the focal points until April.

"EMI struck a deal that puts all of us [negotiators] at a disadvantage," claimed an anonymous executive from one of the holdout labels, who complained that EMI had signed the Apple deal in fear of seeming slow to investors.

The situation was made all the worse on Monday when Britain's paper The Times caught word of a potential Amazon deal that would also have the web retailer sell music without digital padlocks, but choosing MP3 files over Apple's preferred AAC formats.

Taking an even more bullish stance than its prospective rival, Amazon is reportedly drawing on the momentum of the EMI decision in hopes that it can secure ideal terms for its store's May debut — even if it means dropping most major-label music in favor of EMI and independents, as the company doesn't have the safety net of protected but lower-quality DRM should talks end in failure.

In spite of how many music download stores raise the copy protection issue with the progressively isolated label trio, however, the group's greatest fear may be that one of its own will turn traitor, forcing the remaining agencies to follow suit if they don't want to be seen as lagging behind. Universal Music is especially worrisome to Sony-BMG and Warner as hints of a possible Amazon contract, combined with its lead in world music sales, could shift the battle almost entirely in favor of Amazon, Apple, and existing MP3-only shops such as eMusic.

"If Universal goes, then everyone has to follow," groused the unknown music executive.