Warner's Bronfman gives ground on DRM-free music

By | September 18, 2007 at 10:06 PM

Warner Music Group Chief Executive Edgar Bronfman on Tuesday raised the possibility of selling digital music without copy protection, in what appeared to be a softening of his previous outright opposition. Bronfman told an investor conference that while he did not see a world without digital rights management (DRM), there was a possibility of certain business models working without DRM software, which prevents music fans from sharing songs.

“DRM is here to stay, whether it’s here to stay on every business model in the music business is open to question,” he said at the Goldman Sachs Communacopia conference.

Bronfman has been the most vocal of the major record company executives in his stance against dropping DRM. In February, he said selling digital music without protection was not logical as it would be the only media category to do so.

But so far this year, CD album sales have fallen faster than expected and sales of digital music downloads via stores like Apple Inc’s iTunes have failed to fully make up for the shortfall.

This has forced music companies to explore different ways to market and distribute music to fans.

In April, EMI Group became the first major label to agree to drop DRM. The largest music company, Universal Music Group, announced a broad experiment with a range of retailers last month.

While Warner has not dropped DRM, it is experimenting with a company called Lala.com to sell songs without DRM that can be directly uploaded to Apple’s iPod. Once music is uploaded to an iPod, it can not not be transferred to any other player or PC.

Warner, the third-largest music company, is majority owned by private equity firms and its shares trade on the New York Stock Exchange. According to a source last month, it is considering ways to reduce its exposure to negative Wall Street sentiment on the music industry.

Warner is said to be considering several options including securitizing the publishing assets of its Warner/Chappell unit, a stock buyback, or even taking the company entirely private.

“We need to figure out how to deliver value to our shareholders,” said Bronfman.

Warner Music is trying to expand the company as a ‘360-degree’ music business by investing in artist management, touring and merchandising among other areas alongside its traditional recorded music and song publishing business.

“Right now we’re set up to exploit artist rights,” said Bronfman. “We need to be in position to exploit other rights.”

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