Apple, EMI Ink DRM-Free Music Plan

For a premium, iTunes users will be able to buy songs by EMI artists that can be played on all MP3 players, not just the iPod. Other major record labels may follow

Apple and EMI have announced they have taken the first steps towards DRM-free digital music - but only for those who are prepared to pay extra.

Today in EMI's staff canteen in London, Apple CEO Steve Jobs and Eric Nicoli, CEO of EMI Group, unveiled the two-tier iTunes system that will be introduced from May, meaning some songs brought from Apple's online shop will be able to be played on rival MP3 players - including Microsoft's Zune - for the first time.

Individual restriction-free songs will be available for 99p in the UK, €1.29 in Europe and $1.29 in the US, alongside the previously available DRM versions for 79p, €0.99 and $0.99 respectively. Albums will be available in both formats for the same price as before.

Apple has thrown in an extra sweetener for those choosing to buy the premium offering - better sound quality. For their additional 20p, shoppers will get their tunes encoded in AAC at 256Kbps, twice the current bit rate of 128Kbps.

EMI is the first record label to embrace the unencumbered downloads but it's unlikely to be the last, as Jobs revealed the iPod maker is in talks with other majors. While declining to give further details on who is likely to be the next seller of DRM-free downloads, Jobs did say he expects half of all songs on iTunes to be available in the 'premium' version by the end of this year.

According to Jobs, the decision to sell songs free of DRM is something of a return to the former licensing model the music industry is used to with CDs - where content is sold without DRM. "Sony tried [using DRM on CDs] and it didn't work out so well," said Jobs. "It's not something radically new. Ninety per cent of music shipped has no DRMs."

Simon Dyson, analyst at Informa Telecoms & Media, told Apple has made a wise move as the digital music market matures. "Apple has done well to be associated with the first major company to break away from DRM... It's a bit of a coup," he said.

But the Apple boss has no intention of dumping digital rights management in its entirety, saying the cheaper, DRM-hobbled songs are necessary for those with shallower pockets. "If consumers are price-sensitive, we don't want to raise the prices on anybody," Jobs said.

However, for those convinced of the value of DRM, selling songs without restrictions will encourage users to pirate music. EMI's Nicoli said: "We take the view that you have to trust consumers... some will continue to disappoint us, it's inevitable."

Whether everyone will be so embracing of the change remains to be seen. iTunes' DRM system has drawn the ire of consumer groups, which see the lack of interoperability as unfair and have been campaigning for all songs bought from Apple to be compatible with rival manufacturers' MP3 players.

Industry watchers had speculated such openness could eventually hurt sales of iPods by giving consumers the ability to choose any MP3 player and have it work with the iTunes Store, which is currently the world's biggest online song shop with some 70 per cent market share globally.

Jobs denied it: "Our success will be based on the best and easiest to use music player and the best and easiest to use music store. Hopefully consumers will agree." If they don't, he said, Apple "will get a message back from the market we have to work harder".

Torgeir Waterhouse, senior advisor to the Consumer Council of Norway, said he watched the announcement with interest.

"No matter how the digital music market develops, today will always stand out a very important date, the day when two of the really big market players finally took responsibility that follows from the position and made an interoperable solution available to consumers. I applaud their move, and encourage all the other contenders in the digital music business to make the same important move," he told

    Before it's here, it's on the Bloomberg Terminal.