Yahoo’s been getting a lot of attention this week because they’re selling a Jessica Simpson single for download. It’s not just any single, though, there’s hundreds of customized versions of the track, and users can download the one that’s got their name in it. But that’s not what’s generating all the interest — the big news is that the tracks don’t have any DRM. Yahoo’s saying all the right things, that they want to sell more unrestricted tracks, but can’t because of the labels, and so on. I think their sentiment is pretty genuine, if for no other reason than they realize that unrestricted tracks are worth more to consumers, so they can theoretically charge a higher price (they do admit $1.99 for the Jessica Simpson songs are steep, but it’s because of the personalization, not the lack of DRM). It’s doubly great for them that skipping over the DRM also reduces their costs.

Where this gets a little interesting is that by selling these songs DRM-free, they’re selling not just the full-track, but they’re selling a ringtone, too. There are plenty of “personalized” tones available from ringtone sellers, and what could be better for some teenager infatuated with Ms. Simpson than a ringtone where she’s singing to them?

That’s the rub. Now, by selling the kid a $1.99 full track they can copy to their phone and use as a ringtone, Yahoo’s pre-empted the label, or a ringtone vendor, from selling them a $4 version to play on their phone. This illustrates not only why the ringtone market is about to implode because of phones that can play MP3s as ringers, but also illustrates why the labels are reluctant to abandon DRM: it undermines their strategy of making consumers pay multiple times for the same content.

It’s easy to see that this is a short-sighted strategy that isn’t sustainable. In the case of ringtones, it worked just fine back in the day of monophonic tones that couldn’t get on a phone any other way than by SMS. But if people can just put an MP3 on a memory card and set it as their ringer, they’ll be hard pressed to cough up another $4 or whatever for a legit version if the version they’ve legitimately purchased is copy-protected — particularly when it’s so easy to just go download an MP3. And it’s not a much further step to just forget the whole purchasing thing to begin with, and download an MP3 from a P2P service.

So what’s the right long-term strategy? Quit ripping off consumers by selling them restricted files that will only work on certain devices, or for certain applications. Change the strategy from one that’s based on selling people content based on compatibility and control to one that’s based on value. Sell a user an unrestricted track for $1.25, making it clear that it can be used anywhere that can play MP3s, or bundle in special ringtone versions. Don’t worry that unprotected files will end up on file-sharing sites: they’re already there.

If mobile operators really wanted to hasten the end of standalone MP3 players and take a leading role as music vendors, they’d beat this drum — of course they, too, are paralyzed by the fear that users will trade around content among their friends. Newsflash: they’re already doing it.

[tags]mobile, mobile music, drm, jessica simpson, yahoo, yahoo music[/tags]