When music label EMI announced Monday that it would offer high-quality digital music downloads free of copy protection, Apple CEO Steve Jobs basked in the early public relations glow, thanks to his canny call a month ago for the labels to abandon digital rights management technologies.

But while Apple scored a public relations coup by offering EMI's DRM-free tracks through iTunes, the company has also struck a major blow against Microsoft in a less obvious arena: music encoding standards.

In an early morning press release, EMI announced the immediate availability of its "digital repertoire" in high-quality, DRM-free AAC format. The new tracks will be encoded at 256 Kbps, EMI officials said, instead of the 128 Kbps that most iTunes tracks use.

"By providing DRM-free downloads, we aim to address the lack of interoperability which is frustrating for many music fans," said EMI Group CEO Eric Nicoli in the press release.

Apple's iTunes Store is the first to receive the new premium downloads, which will be priced at $1.30. Apple will continue to offer DRM-shackled tunes from EMI at the lower rate of 128 Kbps for the usual price of $1. EMI stressed that DRM would remain on music bought under monthly flat-fee-based services such as Rhapsody, Napster and Yahoo Music Unlimited.

A large part of the news has to do with consumers' excitement over the "unprotected" part of the equation, since DRM restrictions are often seen as onerous, unfair and contrary to the fair-use provisions of U.S. copyright law. In fact, many observers, including Wired News, have predicted that 2007 would be the year that music labels begin offering higher-quality, DRM-free music. This week's announcement will surely cheer the champions of music sold without copy restrictions.

Still, the removal of DRM is just one piece of the puzzle; of equal significance to the online music industry is EMI's choice of AAC encoding.

Many onlookers had assumed that the company would go with the widely supported MP3 format. The decision to use AAC represents a crack in the wall that has separated services and devices that use Microsoft's WMA from those that use AAC.

All digital audio players support MP3, but users who want a more efficient audio compression than MP3 and/or the ability to buy music online have had to choose between AAC and WMA.

While AAC is an industry standard, Apple has been its primary champion. (AAC is part of the MPEG suite of standards, which includes MP3, and is based on patents owned by AT&T, Fraunhofer, Dolby Laboratories and Sony, and is licensed by a Dolby subsidiary).

Apple's iPod has long supported the AAC format, which is used by the ITunes Store. Apple normally adds a layer of DRM copy protection, called FairPlay, to the music files sold there.

In the past year, several other manufacturers have added AAC support to their players, including Microsoft, SanDisk and Sony. However, the software used to load these players with music from CDs doesn't default to AAC, the way Apple's iTunes does, and no store has existed where owners of those devices can buy music in the AAC format, the way iPod owners have been able to at the iTunes Store.

That's about to change, now that Apple and EMI have doubled down on AAC as their unprotected format of choice. Once Apple starts selling music from EMI – and possibly other labels – in the unprotected AAC format, manufacturers will scramble to add AAC support to their devices, because consumers will need their devices to play music purchased from iTunes. Other music stores could start adopting the AAC format as well, as EMI implied when it called iTunes "the first online music store to sell EMI's new downloads."

"This is an opportunity for manufacturers to make devices that could be compatible with major media services including iTunes," said Susan Kevorkian, an audio analyst for IDC. "That process becomes more and more appealing with every major label that chooses to go that route, and we expect that others will."

MP3 took a black eye in February when a federal jury hit Microsoft with a $1.52 billion patent-infringement award, to the benefit of Alcatel-Lucent, which holds patents on key components of the MP3 encoding and decoding process used by Microsoft and many other companies. The case has raised a cloud of uncertainty over the format, raising the fortunes of alternatives such as AAC.

Luckily for consumers and manufacturers, the audio decoder chips found in most MP3 players are already able to decode the AAC format, even if they don't support it out of the box. By installing a simple firmware upgrade, users of most music players can upgrade their gadgets to support the files.

Where does this leave Microsoft and its partners? Stores and devices that support WMA suffered a serious blow when Microsoft launched its Zune music player without PlaysForSure support.

A Microsoft representative indicated that the company was willing to listen to consumers, even if it wasn't ready to announce its own DRM-free music solution.

"Consumers have indicated this is important to them, so Zune has been working with a variety of partners to head in this direction," the Microsoft rep said. "This is a time of transition for the music industry and Microsoft is committed to striking a balance between delivering the best consumer experience while still protecting the rights of the content owners."

Now, developers and manufacturers have a big incentive to go with AAC rather than WMA, which could cut WMA out of the larger digital music ecosystem. Apple and EMI's embrace of AAC spells an unlikely defeat for Microsoft at the hands of a technology that consumers didn't really use until Jobs got his hands on it.

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