Does Apple Music Deal Mean Labels Are Learning?

At its last MacWorld, Apple announced new lower pricing on some music in its iTunes store – and an end to digital rights management (DRM) on all tracks. Forget about the state of Steve Jobs or who gave the keynote address. This is real news, as it is yet another bit of information suggesting that perhaps the recording industry has finally come to grips with the new market realities.

This isn’t an Apple story because the company could not, on its own, end the practice because the music is owned by the recording companies. Only by convincing them to give up the protections they thought they wanted could Apple finally drop the shackles that kept music from being moved from one machine to another.

Heaven knows the evidence has been mounting that trying to restrict consumers was doing more economic harm than good. The Recording Industry Association of America has said that it plans to wind down its legal efforts to sue tens of thousands of individuals for copyright infringement. That doesn’t mean anything goes, but clearly intimidation hasn’t worked.

Nor has DRM. Those who want to illegally duplicate files have found ways to do so. The people really hamstrung by the technology have largely been consumers who only get annoyed and resentful. In the U.S., total album sales in 2008 fell by nearly 20 percent from the levels of 2007. But digital sales actually showed growth of 32 percent. People clearly want to cherry pick tracks they like and avoid having to pay additional amounts for the music that doesn’t interest them. Goodbye concept album.

Other numbers give at least anecdotal support. Amazon’s best selling downloadable album, Ghosts I-IV by Trent Reznor’s Nine Inch Nails, was actually available for free and legal downloads. Another top seller at Amazon, Radiohead’s In Rainbows, was available earlier in the year for download at whatever price people wanted to pay, even if that was free.

Trent Reznor himself questioned the viability of the ‘free’ music model earlier this year, but clearly, his own band has been able to make it work. While overall album sales were down last year (even when accounting for digital downloads), bands like the Nine Inch Nails have been able to leverage their fanbase and bypass the traditional music industry channels, while still making a profit.

And maybe that is the real issue. More and more, musicians can skip distribution –- and even the record labels themselves. For example, a profoundly talented and interesting musician in my area, Peter Blanchette, plays an intriguing array of music from Bach to themes from the Italian cinema on specially-designed guitars that have from 9 to 11 strings. You can’t get most of his music on Amazon.com, but you can at his site.

Blanchette is hardly the only musician taking this route. Others at all levels of fame are now broadly exploring what is possible in connecting directly to listeners. When customers are annoyed and musicians independent, commercial labels face the choice of becoming more amenable or being shown to the dust bin of history. Now the question is whether they are acting in time, or will it be too little, too late.