Splitting the Apple Online

Memo to Steve Jobs: You win some, you lose some.

On a day when Apple should be celebrating a its long sought-after deal to offer movie rentals from 20th Century Fox on iTunes, the company instead took a jujitsu chop to the temple as rival Amazon.com scored the right to offer music from Warner Music Group - without digital rights management (DRM) copy protection.

Fox joins Disney in offering new releases on iTunes, but unlike the Mouse - which offers movies for sale - Fox's deal with iTunes only allows users to rent a copy of the film for a limited period of time. The linkup, which Apple had been seeking for months, is expected to be announced at the MacWorld Expo in San Francisco next month.

The two deals underscore the intense jockeying underway as the movie studios and major record labels scramble to figure out a way to make money selling their content online. While the Fox deal is a win for Apple, the Amazon/WMG tie-up has ominous implications for the iPod maker, which currently dominates the online music market.

Amazon.com's announcement that Warner Music Group will allow it to offer the record label's huge catalog for sale without DRM protection means that users will be able to copy songs and play them on virtually any MP3 player.

The move is a direct assault on Apple's dominance of the online music market through iTunes, which uses copy protection in an effort to keep people effectively quarantined inside the Apple digital music "ecosystem." Apple currently offers higher-quality DRM-free tracks from EMI, but the bulk of its six million song-catalog is still controlled by DRM software.

"Our customers are delighted with our DRM-free MP3 service," Bill Carr, Amazon.com Vice President of Digital Music , said. "With the addition of great Warner Music Group content, our customers will discover even more of the music they love on Amazon MP3."

For Warner Music Group, the deal reflects the record label's growing acceptance of digital music distribution. Like the other major labels, WMG has basically been dragged kicking and screaming into the digital age by the force of consumer demand. WMG honcho Edgar Bronfman Jr. spoke out in favor of DRM as recently as February, so the move is a remarkable about face for the company.

"Consumers want flexibility with respect to what they can do with music once they purchase it, and we want them to have that flexibility, which is why we're pleased to offer our artists' music on Amazon MP3," said Michael Nash, Senior Vice President, Digital Strategy and Business Development for Warner Music Group.

Amazon says its music store has more than 2.9 million songs, completely free of DRM protection, allowing users to play their music on any device they choose.

by Sam Gustin