East and West

Steve Jobs: DRM

It's everywhere … very fast. And that's hardly surprising … Steve Jobs' statement on DRM needs to be read in its entirety, but it begins:

Apple does not own or control any music itself, it must license the rights to distribute music from others, primarily the “big four” music companies: Universal, Sony BMG, Warner and EMI. These four companies control the distribution of over 70% of the world’s music. When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.

And concludes:

Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music. 

Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player. 

In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free  and unprotected on CDs by the music companies themselves. The music companies sell the vast majority of their music DRM-free, and show no signs of changing this behavior, since the overwhelming majority of their revenues depend on selling CDs which must play in CD players that support no DRM system. 

So if the music companies are selling over 90 percent of their music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system? There appear to be none. If anything, the technical expertise and overhead required to create, operate and update a DRM system has limited the number of participants selling DRM protected music. If such requirements were removed, the music industry might experience an influx of new companies willing to invest in innovative new stores and players. This can only be seen as a positive by the music companies. 

Much of the concern over DRM systems has arisen in European countries.  Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free.  For Europeans, two and a half of the big four music companies are located right in their backyard.  The largest, Universal, is 100% owned by Vivendi, a French company.  EMI is a British company, and Sony BMG is 50% owned by Bertelsmann, a German company.  Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace.  Apple will embrace this wholeheartedly.

Commentary/reaction/notable reports thus far: 

Apple Inc. CEO Steve Jobs called on major music companies to stop requiring Apple and other companies to sell songs over the Internet with antipiracy software, calling the technology ineffective at deterring illicit copying of music. WSJ 

He calls it Thoughts on Music but it’s more like the Jobs Manifesto. I’ve never seen anything like this from him but Apple-ologists will know better.

Steve Jobs just shot a cannon ball across the music industry's bow.... Stunning! Somewhere Cory Doctorow is smiling! Jason Calacanis

(I'd love to have Cory's take on this.) 

In an open letter, the Apple CEO said his company is the wrong target for people who are concerned about DRM. "Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free", he writes. It is the record labels who insist on making Apple's iTunes store and other online stores resell their music encumbered with DRM - and yet ninety per cent of the music they sell themselves via CDs is free of restrictions, he notes. In recent weeks, Apple has come under fire from consumer groups and regulators in Norway, the Netherlands, Germany and France for its refusal to unlock the iTunes store so that its songs can be used on other MP3 players besides Apple's iPods. But Jobs thinks this is unfair: customers are served well in the current market, by competing manufacturers, each with their own "top-to-bottom" proprietary systems, he argues. As for consumer lock, the vast majority of songs on MP3 players are DRM-free. Only three per cent of songs on iPods have actually been purchased from iTunes, Jobs says. The Register

In effect (and Apple fans please don't get upset with this phrasing of words), this article is a piece of propaganda from Apple. The position is that Apple and Steve Jobs hate DRM just as much as you and I, so they will gladly support the abolition of DRM - if the big record companies choose to do so. Apple is positioning itself on our side, in the war against DRM. This is all very well, and a very commendable stance from Jobs and Apple. But I'm left feeling that surely there's more Apple can do to fight DRM than to simply give a hospital pass to the record companies? Apple is after all totally dominant in the online music industry, so it now has considerable power of its own. They are not totally at the mercy of record labels.... are they?! Because that's what this article from Steve Jobs makes it out to be. Read/Write Web 

The reason Jobs has taken this unusual step is, one assumes, because Apple is under increasing pressure from European and other governments to "open up" its iPod/iTunes system. There have even been threats to ban the system if it remains closed. Over the last few months, the stakes have gone up as antitrust lawsuits have been filed against the company in the US. For Apple, DRM's strategic costs have simply come to outweigh its benefits. So Jobs is formally whacking the ball into the record companies' court. It's their system, he's saying, not ours. One hopes that this may finally get them to realize that DRM is simply a millstone around the neck of their business. Nick Carr

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