Everyone knows the MP3 format is used by more devices and people than any other file-based digital-audio format. Most also know that record labels prefer DRMed alternatives such as the ones sold by Apple's iTunes, because they make it harder for people to share music.
But wait -- was that a pig flying past my window just now? Evidence is mounting that major labels may start to prefer the MP3 format, as impossible as that used to seem.
Here are seven reasons why MP3 is the future of the music industry: 1. The labels don't have a choice
When CD sales finally tank completely, record labels will be faced with a tough decision: distributing music nearly exclusively through Apple's iTunes store or rethinking their approach to digital-rights management, or DRM, from the ground up.
Already feeling hamstrung by Apple, there's no way they're going to let Steve Jobs completely monopolize the distribution of their music. Labels that survive the CD-sales nosedive to come could decide it's time to treat music fans like paying customers, rather than like high-level pirates. Instead of launching another PressPlay or MusicNet, partnering with multiple MP3 stores would make more sense.
EMusic is the number two digital music retailer behind Apple -- even without access to the massive and popular major label catalogs -- because it sells digital music rather than digital rights. The labels want Apple's dominance to end, and MP3 looks like the only way to make that happen. 2. Apple might be forced into interoperability
A class-action lawsuit accuses Apple of antitrust behavior due to the fact that songs bought from iTunes can only be played by iPods or iTunes (as well as cell phones made in partnership with Apple). Apple tried to have the suit dismissed, claiming that forced interoperability would inhibit innovation, but the judge wouldn't dismiss the case, which is now headed to a "case management conference" on Jan. 22nd.
Apple's recent SEC filing shows (bottom of page 26) Apple admitting the possibility of being forced to react to legislation demanding that iTunes-purchased music play on other MP3 players. If this happens, perhaps Apple would go with Sun Microsystem's open-source DRM plan.
But that would involve new devices, as well as a third party exercising influence over the iPod. Steve Jobs would hate that for sure. A switch to the MP3 format would work with existing devices and let Apple keep control. Sure, a lack of DRM would upset the labels, but then again, they don't have a choice (see above). 3. Thomson has endorsed selling watermarked MP3s
The labels' switch to the MP3 format wouldn't necessarily mean losing the ability to track unprotected files sold by online music stores. The Digital Watermarking Alliance (including Thomson Multimedia, which owns the right to license the MP3 codec), recently made a statement in support of the idea of major labels selling watermarked MP3s. This would let labels sell non-DRMed music without losing the ability to track the files.
Ideally, these serial, unique watermarks would be used not to sue people who release a purchased MP3 into file sharing networks (sophisticated users would probably figure out a way to strip the watermark before doing this anyway). Instead, the watermarks could be used to monitor playback in order to determine how to pay artists out of a shared revenue pool, tracking not only what was bought, but how much it was played.
Such a shift would automate accounting in the recording industry to an unprecedented degree -- another bitter pill it may have to swallow. They're suspected of using dodgy accounting to rip off artists (many of whom can't pay for prohibitively expensive accounting audits) for a long time.