Yahoo Music to Shut Down Service, Issue Refunds to Customers

Yahoo Music has advised its customers that it will be shutting down its digital rights management ("DRM") service on September 30, 2008, but will be issuing refunds to customers who request them, reported Techspot.

According to Techspot, Yahoo Music has decided to shut down its DRM licensing service in order to become part of Real Networks' Rhapsody Service. Techspot reports that this move will not affect subscribers to its unlimited music service, whose accounts will simply be moved over to the new service, but it will affect subscribers on an individual tracks basis, whose music will only play on the original authorized computer (and not a new computer).

Yahoo's move follows a similar move by Microsoft, which recently announced that it is shutting down its DRM music service after August 31st; however, Microsoft has announced that it will keep its DRM servers up and running until 2011.

The moves by both Yahoo and Microsoft to close down their DRM licensing services highlight a key problem posed by DRM licensing--the fact that you obtain very limited rights in the music you "purchase" from the services. Unlike with compact disc purchases, DRM licensing purchases are made pursuant to terms and conditions that can be changed at any time, the downloaded music often has compatability limitations, and the ability to continue listening to the music is somewhat dependent on the continued existence of the particular DRM server. While DRM licensing has certain advantages such as convenience and the ability to purchase rights to particular songs as opposed to a whole album of songs, there is no doubt that consumers obtain fewer rights with their purchases than they did with standard compact disc format. The Electronic Frontier Foundation has published a consumer guide on its website, which describes some of the DRM limitations in detail.

Will these recent problems with DRM licensing result in a resurgence of compact disc purchases? My guess is that this will probably not happen--the high cost of gas alone will probably push consumers to buy their music online rather than in stores. Besides, many of the consumers buying music today have grown up on downloadable music and perhaps do not even own a compact disc player.

What these incidents may do, however, is push more consumers toward iTunes, given the fact that its service is perhaps the least likely to get shut down in the near future. Apple has made a significant investment into its iphone and ipod technologies, and my suspicion is that the company has a solid enough following that iTunes is likely to remain alive and well long after its competitors' services have become only a distant memory.