AMZN, Pepsi To Give Away 1B Songs; Sony to Drop DRM?

Amazon and Pepsi are gearing up to give away 1 billion digital songs in a year-long “bottle-cap” promotion starting next February, Billboard’s Ed Christman reports. (That’s a lot of songs: For context, Apple has only sold 3 billion songs since 2003, and 1 billion in the first six months of this year). More interesting is Ed’s assertion that the giveaway, coupled with Wal-Mart online’s insistence that record labels only provide it with music in MP3 format, has Sony-BMG (SNE) thinking about ditching DRM/copy protection for its downloads.

Sony has been the most dogmatic in its public proclamations about hanging on to DRM and copy protection, so it’d be a real surprise to see them drop DRM altogether. Ed says the label “is now considering an MP3 test,” but doesn’t provide much more detail…

He does offer a lot of details about the billion-song promotion though: It’s supposed to kick off during the Super Bowl, and is a repeat of a 2004 stunt where Pepsi (PEP) offered to give away up to 100 million tracks. The big  difference: The first promotion used Apple’s (AAPL) iTunes store as the retail outlet, and this time it’s going through Amazon (AMZN), which sells DRM-free tracks that can be used on any software or player.

So is this a tipping point for DRM? Maybe. Billboard estimates that Amazon has already carved out 3% of the digital download market since launching its store in late September, and it only has a partial catalogue: Only two of the major record labels (EMI and Universal Music Group) are selling their music via Amazon, and Universal has yet to offer its entire catalogue. The labels desperately want to see real competition for Apple, and if Amazon can build some momentum it will get harder for Sony and Warner Music Group (WMG) to hold out. 

Wal-Mart’s demands may make it even harder: Wal-Mart is insisting that the labels provide it with DRM-free tracks by January. In theory, Sony and WMG could just refuse to play along, and just not sell via online songs at Wal-Mart, which has been a non-player in digital downloads. But Billboard theorizes that the two labels may be so worried about pissing off the retail giant, which controls 22% of physical CD sales, that they may capitulate.

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