DRM deathwatch: Sony, Wal-Mart

According to an article in today's Billboard, Sony BMG is considering offering its catalog in the MP3 format, and Wal-Mart may demand all labels offer MP3s.

A rather sprawling article in Billboard today suggests that the MP3 format, which has been around since the 1990s, is finally reaching a tipping point among major labels, supplanting DRM-protected formats that the labels have favored.

The article focuses mostly on a planned Pepsi promotion that will offer MP3 downloads via the Amazon MP3 store. However, two other points stuck out to me as spelling imminent doom for DRM in music.

First, Sony is reportedly considering offering its catalog as MP3s, joining EMI and Universal Music Group. That would make Warner Music the last holdout among the Big Four. I'm not sure how long Warner could hold out if it saw its competitors selling more digital files thanks to the universality of the MP3 format.

Second, retail giant Wal-Mart may be moving to an all-MP3 format on its online store as soon as December, and has reportedly threatened to pull all WMA-formatted files from labels who aren't willing to offer those same files as MP3s. Wal-Mart's a pipsqueak in the digital world, but accounts for a whopping 22 percent of all physical CD sales in the U.S. So, the speculation runs, if the labels don't accede to Wal-Mart's digital demands, they may find Wal-Mart underpromoting their physical wares. I'm not sure this argument makes sense--I can't imagine Wal-Mart burying a popular artist like Britney Spears (it pained me to write that) simply because her label doesn't want to sell MP3s--but the company has legendary clout with its suppliers, so perhaps there's an element of truth there.

And speaking of Wal-Mart, the retailer apparentlyagreed to buy 3 million copies of the Eagles' new album, Long Road Out of Eden, up front. (That detail's revealed toward the end of a 60 Minutes online interview.) That's the exact opposite of the way a major label deal usually works, in which the label withholds all proceeds from the band until costs (including recording and promotion) are recovered.

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About the author

    Matt Rosoff is an analyst with Directions on Microsoft, where he covers Microsoft's consumer products and corporate news. He's written about the technology industry since 1995, and reviewed the first Rio MP3 player for CNET.com in 1998. He is a member of the CNET Blog Network. Disclosure. You can follow Matt on Twitter @mattrosoff.

     

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