DRM, lock-ins, and piracy: all red herrings for a music industry in trouble: "A British media research company has peered into the music industry's crystal ball, and the outlook for the next couple of years isn't so hot. Global music sales will drop to $23 billion in 2009, just over half of 1997's $45 billion and down 16 percent from 2006. The biggest reason for the steep decline is a drop in CD sales, which Enders Analysis believes will not be fully offset by digital sales in the next five years.

Is piracy to blame? Is DRM the solution? Enders Analysis says no, instead laying the blame for the industry's sliding sales at the feet of the record labels. 'As we analyze the industry's core challenges... we consistently find that the industry has lost the ability to influence and control its future,' reads the report's executive summary. 'Worse, the industry has often appeared caught short, and its reactions accordingly wrong-footed.'

Where did the industry go wrong? At the height of the rush to DRM, the record labels decided to put their money behind expensive and ultimately unattractive subscription services at a time when Napster 1.0's popularity was it its peak. The industry favored an approach where consumers would be locked into monthly subscription deals that control how you used content.

Yet the writing was already on the wall, courtesy of P2P. Users prefer to pick and choose their favorite songs from among the sea of (sometimes free) content. It wasn't until 2003 that the iTunes Music Store opened, marking the music industry's first serious attempt at an online distribution model consumers would like. Yet by this time the industry had spent the previous years trying to fight the direction that the market was heading, which is a bit like trying to change the flow of a river. It can be done, but it's rarely easy and rarely worth it.

Speaking of Apple, Enders Analysis has some harsh words for the iPod-iTunes ecosystem. The report's authors believe that Apple's dominance of the digital music industry is hurting the market's evolution. Apple's insistence on a single, fixed price for all content hurts potential long-tail sales of older, back-catalog music. In addition, they're not impressed with the iPod-iTunes cycle, saying that Apple's reliance on iPod sales and resulting music pricing model may be squeezing both other players and music-only stores out of the market.

Of course, the recent move by EMI to liberate its catalog from the shackles of DRM will change the iTunes-iPod equation, as any player capable of playing AAC files will be able to play non-DRMed tracks purchased at the iTunes Store."

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