Dave Goldberg to Record Labels: No DRM, Please

By now you’ve probably seen the news that Yahoo! Music’s General Manager (that makes him my bossman’s bossman), Dave Goldberg, urged record labels to ease back their insistence on DRM yesterday at the Music 2.0 conference. I was in the audience and quite proud to hear such a statement come from the head of the business unit for which I work as I agree wholeheartedly with him (note my post “On DRM” from last June). You can read about Dave’s statements elsewhere (Slashdot, c|net, Digital Music News, Digital Music Weblog, A VC, etc), but here’s a few interesting points/quotes from my notes:

On-demand (digital downloads and subscriptions) are not the entirety of the “music business” online. The business of buying CDs, cassettes, digital downloads, etc is about $30B globally, while media supported music businesses (radio, music videos with ads, etc) is about a $40B business globally. Yahoo! Music is in both businesses.
Despite tremendous progress of legal, for-pay music services, the mainstream digital media consumer today is still listening to CDs, Internet radio, and using P2P services. 80+ percent of the music on iPods is from ripping and 3% or less is from legal digital services.
The playlist is key to Yahoo! adding value to digital music; it’s a unit of currency for users to create and share music with each other. Dave also gave a nod to Web 2.0 at Music 2.0, pointing to Web services as a way we will go “beyond the media player” with our music offerings this year.
Exploring ways the music industry could help move the pay market forward, Dave asks the labels to lighten the DRM requirements. “DRM is not a consumer value proposition, it’s a consumer cost. It creates a nice barrier of entry for the tech companies, rather than something that’s beneficial to labels, artists, or consumers.” In the Q/A session after his keynote Dave pointed to eMusic as a service which offers MP3 files as part of their subscription, files which are easily burnable and play just fine on the iPod. Due to restrictions from the major labels we aren’t able to offer hit content in a similar fashion with Yahoo! Music Unlimited. He reminds us that the major labels are selling DRM-free content every day in the form of CDs. I agree with Dave. DRM definitely has a cost, and eMusic is showing that consumers are willing to pay a premium price for unfettered access to digital media. What value is DRM providing in our service? What is the cost? Is it worth this cost?
What Dave is really asking the labels to do is to experiment along with us to grow legal music services as a category. Legal services are a very small percentage of the downloading activity on the Web, yet studies tell us people *are* willing to pay for high-value content and services. The larger subtext of the “No DRM” message that got headlines is: help us build great legal services for users, don’t hold us back.
Yahoo! Music served 4 billion videos last year (which, if you believe another figure that 17B videos were served on the Web last year, Yahoo! Music videos were fully 20% of the Internet’s video traffic in 2005).
Ironically, I went from Music 2.0 to UCLA’s Anderson’s school to participate in a panel about DRM, where I talked way too much. Like Jack White said, “Any man with a microphone can tell you what he loves the most.” That was me. Sorry, y’all.

Oh, and, sorry this damn post took so long. I had to fly up to the Yahoo! offices in Sunnyvale for some meetings today which, after the UCLA thing last night, left me no time to post about this. My loss, I missed a whole day of net buzz and maybe even a /.-ing for ymusicblog. That is teh suck. Damn day job.