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EMI to Sell Unrestricted Music Through Apple's iTunes

Apple CEO Steve Jobs and EMI, the Beatles' record label, pulled a neat bait-and-switch on music lovers Monday morning, as an announcement expected to be about the Fab Four becoming available on iTunes turned out to be about something else.

That something else might be even more significant to the record industry, as the EMI Group, one of the world's Big Four record companies, announced that it would begin selling unprotected, unrestricted songs through Apple's iTunes Store.

For the first time, music bought through Apple's service will be able to play on non-Apple personal media players, including Microsoft's (MSFT) Zune and SanDisk's (SNDK) Sansa.

• Click here to read EMI's press release, and here to read Apple's.

The songs, free of the digital-rights-management (DRM) encryption that limits reproduction of media files purchased from Apple (AAPL) or most other online music retailers, will come as Advanced Audio Coding (AAC) files encoded at the maximum 256 kbps bit-rate.

"By providing DRM-free downloads, we aim to address the lack of interoperability which is frustrating for many music fans," said EMI CEO Eric Nicoli in the prepared statement. "We believe that offering consumers the opportunity to buy higher quality tracks and listen to them on the device or platform of their choice will boost sales of digital music."

"Selling digital music DRM-free is the right step forward for the music industry," said Jobs. "EMI has been a great partner for iTunes and is once again leading the industry as the first major music company to offer its entire digital catalogue DRM-free."

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AAC files offer greater compression than the older MP3 format. A song encoded as a 256k AAC file would be about the same size as the same piece of music encoded as a 128k MP3 file, but would sound much better.

Most personal media players manufactured in the past few years can play AAC files, but only Apple's iPods can play AAC files purchased from the iTunes Store, thanks to Apple's FairPlay encryption software.

The iTunes store will begin selling DRM-free songs from EMI "in May," according to Apple's Web site, for $1.29 per song.

That price is a significant departure for Apple, which since the debut of the iTunes store in 2003 has kept all songs priced at 99 cents, despite pressure from record labels to raise the price.

Albums in the new DRM-free format will still cost $9.99, and iTunes customers can "upgrade" previously purchased EMI songs to the new format for 30 cents each.

Every DRM-free song will also still be available as a DRM-protected AAC file for the standard price of 99 cents.

Apple, which dominates both the digital-music-download and personal-media-player markets worldwide, has been criticized for not allowing iTunes purchases to play on anything other than Apple products (with the exception of Motorola's poorly selling ROKR cell phone), and likewise for not allowing iPods to play DRM-protected music and movie files purchased anywhere other than the iTunes Store.

A French law that would have forced Apple to "open up" both iTunes and iPods was defanged at the last minute in mid-2006, but other European countries have been threatening legal action on antitrust grounds.

In early February, Steve Jobs posted a startling manifesto entitled "Thoughts on Music" on the Apple Web site, suggesting that DRM had run its course and should be dropped for all music files.

Jobs pointed out that CDs essentially consist of unrestricted digital music files — Apple's own figures indicated that 90 percent of all music on iPods consisted of files "ripped" from CD — and hoped that unrestricted digital music sold online could reverse the current decline in overall music sales.

A spokesman for the Recording Industry Association of America, which represents EMI along with Warner Music Group (WMG), Universal Music Group and Sony BMG Music Entertainment, rejected Jobs' suggestions.

Despite defenses of DRM by the other three major companies, EMI had already experimented with releasing songs by Norah Jones and Lily Allen in unrestricted MP3 format.

The second-largest online music retailer by volume, eMusic, sells all its songs, most of which come from independent labels unaffiliated with the Big Four, as unrestricted MP3s.

Apple's iTunes Store will be the first online retailer to sell the unrestricted files, EMI's press statement said, but the record company will make all its digital catalog — which excludes the Beatles and Radiohead — available to all online retailers for sale in any digital file format.

Apple and EMI had made sure Monday's annoucement would get maximum media attention by stating over the weekend that the two companies would be unveiling "an exciting new digital offering."

The Beatles, still EMI's biggest act, have never made their music available for sale through digital download. Apple's overtures to put the music online had been stymied by a long-running trademark dispute with The Beatles' commercial guardian, Apple Corps. Ltd.

Steve Jobs is an admitted huge Beatles fan, and the trademark chord that accompanies an Apple computer's bootload is eerily reminiscent of the crashing piano chord that closes the Beatles' "A Day in the Life."

In February, Apple Inc. and Apple Corps resolved their legal feud over use of the apple logo and name, paving the way for an agreement for online access to the Fab Four's songs.

Apple Corps was founded by the Fab Four in 1968 and is still owned by Paul McCartney, Ringo Starr, John Lennon's widow Yoko Ono and the estate of George Harrison.

The Associated Press contributed to this report.