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There is a profound shakeup coming in the delivery of music over the Internet, and the BlackBerry, the wireless e-mail device of choice among most businesses, will soon become the music player of choice for consumers, says the head of Research In Motion Ltd.
The entertainment industry's efforts to protect its content online are holding up development of the wireless industry, Jim Balsillie, RIM's chairman and co-chief executive officer, said yesterday.
The digital rights management (DRM) software that controls how consumers access and use the tracks they buy online has become a messy process that essentially charges people twice for the same music if they use incompatible devices and discourages the wider adoption of portable digital music, he said.
“I think [DRM is] just going to break down with the normal proliferation of the Internet,” Mr. Balsillie told analysts and investors at an RBC Dominion Securities Inc. conference in Toronto. “It's going to be tough. I think [content providers] are going to have to shift their business models. But they will go down swinging.”
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RIM has positioned itself as a company that primarily sells wireless technology to businesses and government, even after rolling out its first consumer device, the Pearl, in September. But yesterday, Mr. Balsillie depicted a company more consumer focused than ever before, saying RIM has a natural advantage over companies like Apple Inc., which is expanding beyond its line of iPod portable music players with the launch of its iPhone in June.
“Apple has done us an enormous favour by saying you should expect music on your cellphone,” he said. “[But] I think it's 10 if not 100 times harder to do the communications aspect onto an MP3 player than to do the mass media player onto a communications framework. I think we'll absolutely nail it before some new entrant comes even close. You know, everyone's brave in the locker room. Let's get it done.”
Mike Abramsky, an RBC Dominion Securities Inc. analyst, expects RIM to add one million new BlackBerry users this quarter and says the company will likely announce deals to bring music and other content, such as picture messaging, to its new consumer BlackBerrys before the end of this year.
RIM's decision to publicly criticize DRM won't please the four largest music companies that sell more than 70 per cent of the world's music. Universal Music Group, Sony BMG, Warner Music Group Corp. and EMI Group PLC say the technology is essential for combatting online piracy.
But RIM's position is one of several indications that the tide may have begun to turn against DRM. And it signals that RIM is not interested in joining the increasingly complicated world of proprietary DRM technologies, which include Apple's FairPlay used to sell iTunes, a new mobile technology from Microsoft called PlayReady, and various offerings from phone companies that are trying to sell music to cellphone customers.
Only a small amount of downloaded music is transferred to mobile phones today. Applying DRM to portable digital music is akin to “three-dimensional chess” because the handset makers as well as the carriers regularly add their own proprietary software, Alistair Mitchell, president and CEO of Puretracks Inc., said in an interview.
Yesterday, his online music store began selling more than 50,000 tracks without DRM, partnering with several independent labels, including Nettwerkv Music Group, whose artists include the Barenaked Ladies and Sarah McLachlan.
By the end of the year, the site will list about one million DRM-free tracks, as well as continuing to sell protected music from the major labels, he said.
“When you buy a piece of music you should be able to do what you want with it,” said Ricv Arboit, president of Nettwerk Music. “The big corporations have lived by an old model that works very well for them, and it's all been based on who controls distribution.”
DRM is not attached to music CDs, which still represent the bulk of the music industry's sales. “The logic to me is baffling,” Mr. Arboit said.
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