In a rare open letter from CEO Steve Jobs on Tuesday, Apple urged
record companies to abandon digital rights management technologies.
The letter, posted on Apple’s Web site and titled “Thoughts on Music,”
is a long examination of Apple’s iTunes and what the future may hold
for the online distribution of copy-protected music. In the letter,
Jobs says Apple was forced to create a DRM system to get the world’s
four largest record companies on board with the iTunes Store.
But there are alternatives, Jobs wrote. Apple and the rest of the
online music distributors could continue down a DRM path; Apple could
license the FairPlay technology to others; or record companies could be
persuaded to license music without DRM technology. The company clearly
favors the third option.
“Imagine a world where every online store sells DRM-free music encoded
in open licensable formats,” Jobs wrote. “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.”
Jobs’ letter is a bit surprising in that Apple, with the most
successful online music store on the planet, has profited by including
DRM technology in its products, said Mike McGuire, an analyst with
Gartner. “I think it’s really interesting that the company that’s the
greatest beneficiary of DRM systems is basically telling the industry,
‘This is a problem, you need to fix this,'” he said.
RealNetworks saw Jobs’ letter as a vindication of its efforts to
encourage interoperability between music services, which led as far as
the Harmony software that allowed songs bought from other online stores
to play on the iPod.
“We’ve been talking about the need for open formats for a very long
time,” said Dan Sheeran, senior vice president for digital music at
RealNetworks.
The letter appears to address critics of the iTunes Store in Europe,
most recently evidenced by a decision in Norway, where regulators
deemed the iTunes Store illegal. An Apple representative said the
letter was not written in response to those recent legal decisions.
“Much of the concern over DRM systems has arisen in European
countries,” Jobs wrote. “Perhaps those unhappy with the current
situation should redirect their energies towards persuading the music
companies to sell their music DRM-free.”
“You’ve got to hand it to Steve Jobs; he knows how to attract attention
and how to deflect attention,” said James McQuivey, an analyst with
Forrester Research. “He turned the whole European DRM question on its
ear. ‘You want me to open up FairPlay? Well, I don’t even want
FairPlay.'”
The Recording Industry Association of America, however, issued a
statement interpreting Jobs’ letter as an offer to license the FairPlay
technology.
“Apple’s offer to license FairPlay to other technology companies is a
welcome breakthrough and would be a real victory for fans, artists and
labels. There have been many services seeking a license to the Apple
DRM. This would enable the interoperability that we have been urging
for a very long time,” it said in an e-mailed statement.
Opening the FairPlay DRM technology wouldn’t be a wise strategy because
Apple would have to give up the secrets of how that technology works,
and it’s likely that a hack for the technology would appear very
quickly, Jobs wrote. Under its agreement with the record companies,
Apple has just a few weeks to fix FairPlay if a breach is
detected–otherwise the record company can pull all of its songs from
the iTunes Store, he wrote.
“Apple has concluded that if it licenses FairPlay to others, it can no
longer guarantee to protect the music it licenses from the big four
music companies,” Jobs wrote in his letter.
An Apple representative declined to comment on the RIAA’s interpretation of the letter.
Jobs countered arguments made by regulators in Europe that iPod users
are locked into iTunes by noting that Apple believes only about 3
percent of songs on any given iPod were purchased from the iTunes
store. The rest were ripped from CDs that have no copy-protection
technology and can be freely shared between computers and other MP3
players, he said.
“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,” Jobs wrote.
Jobs didn’t acknowledge this, but even FairPlay has its limitations,
McQuivey said. A song bought from iTunes and burned onto a CD, then
ripped back onto a computer, loses its DRM protection in the process.
Most people don’t want to take all those steps, but it illustrates the
elusive nature of DRM protections, he said.
Jason Reindorp, marketing director for Microsoft’s Zune unit, said that
Jobs’ call for the “abolition” of DRM “seems to be kind of
irresponsible” as well as an about-face.
“DRM is not necessarily the bad guy,” Reindorp said, noting that the
value of protected content is determined by how the technology is
applied and which business models are employed in distributing content.
“DRM enables a lot of cool scenarios like subscription music. If you
didn’t have DRM, those wouldn’t be possible.”
Another benefit of DRM is that songwriters and publishers can track the
sales of their work and not have to depend on compensation coming back
to them through the record labels, McGuire said.
Many record company executives are unlikely to be thrilled by the
letter, McGuire said. However, there’s also the possibility that others
within the record industry who have been calling for a change could
seize upon the letter as evidence that the current system is broken.
The New York Times reported in January that music industry executives
at Midem, an annual industry conference, were openly discussing the
sale of DRM-free music via the MP3 format.
Getting consumers to buy music online
Record executives are coming to the sinking realization that while
digital music growth is still fairly strong, it’s not growing fast
enough to offset plummeting sales of CDs, RealNetwork’s Sheeran said.
Something needs to be done to get consumers interested in buying music
online, he said, and labels appear to be caught between the old ways of
doing business and the new reality of the Digital Age.
“That’s where the interesting negotiations happen, what happens within
the labels,” McGuire said. But negotiations are also likely under way
between Apple and the record companies for an extension to their iTunes
licensing deal, and Jobs’ letter could be positioning Apple for the
next round of talks, he said.
A representative for EMI Group noted that the company has been
experimenting with MP3 files for sale through outlets like Yahoo Music,
featuring songs from artists like Norah Jones and Relient K. But he
declined to comment beyond that, when asked if EMI was planning to sell
more songs without DRM in the MP3 format.
“The lack of operability between a proliferating range of digital
platforms and devices is increasingly becoming an issue for music
consumers. EMI has been engaging with our various partners to find a
solution,” the company said later on in a statement.
Other record labels are likely to make similar overtures with DRM-free
music, but it’s going to be very, very hard for the recording industry
to walk away from all the legal arguments it has used justifying DRM
and lawsuits filed against file-sharing teenagers, McQuivey said.
A Sony BMG representative had no immediate comment on Jobs’ letter, and
representatives for Warner Music and Universal could not be reached for
comment.
