End of DRM?

[Halyanne]

Apple: Record Labels Should Drop DRM

Tuesday February 6, 9:19 PM EST

SAN FRANCISCO (AP) — Apple Inc. indicated it would open its iTunes store to other portable players besides its ubiquitous iPod if the world's major record labels abandoned the anti-piracy technology that serves as the industry's security blanket.

Steve Jobs, Apple's chief executive, made the case for abolishing the protections known as "Digital Rights Management," or DRM, in an open letter posted Tuesday on the Cupertino-based company's Web site. He also explained why Apple had decided against licensing its own DRM technology, known as "FairPlay," as an alternative method for making iTunes accessible to all portable players.

Like many things the trendsetting Jobs does, his call for change created an almost immediate buzz.

Supporters hailed Jobs for leveraging Apple's growing clout as one of the world's largest music sellers in an attempt to remove restrictions that annoy many consumers. Critics, though, derided the message as a disingenuous maneuver designed to soften a recent backlash in Europe, where iTunes' incompatibility with other portable music devices besides the iPod has been branded has anticompetitive.

Jobs' essay, dubbed "Thoughts on Music," cited the recording labels' anti-piracy technology as the main reason music sold through iTunes can't be transferred to other portable players besides the iPod.

Those same DRM protections also prevent the iPod from playing music bought from many other competing online stores.

If not for the DRM safeguards, Jobs asserted that Apple would be able to create a more flexible system that would allow iTunes music to work on other devices, such as Microsoft Corp.'s recently introduced Zune.

Jobs suggested that consumers unhappy with the status quo should urge the world's four largest labels — Universal Music Group, EMI, Sony BMG Music Entertainment and Warner Music Group — to sell their online catalogs without the DRM restrictions. Those four labels distribute more than 70 percent of the world's music.

"Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace," Jobs wrote. "Apple will embrace this wholeheartedly."

EMI began selling a handful of songs in an MP3-file format that isn't shielded and has been encouraged by the consumer response to the experiment, spokeswoman Jeanne Murphy said. She declined to comment on Jobs' call to end all DRM protections.

"I think Steve is finally saying something he has wanted to say for a long time," said Forrester Research analyst James McQuivey. "He is not saying this just to grandstand. He really thinks this could open up the market."

The tremendous reach of the iTunes store makes it difficult for the music industry to ignore or ridicule Jobs.

Since its debut nearly four years ago, iTunes has sold more than 2 billion songs, mostly for 99 cents apiece. With sales of about 5 million songs per day, Apple now rank ranks behind only Wal-Mart Stores Inc., Best Buy Co. and Target Inc. as a music retailer.

Apple's music sales have flowed largely from iTunes' compatibility with the iPod, whose immense popularity prompted the company to recently drop "computer" from its name. With about 90 million iPods sold so far, Apple accounts for about 70 percent of the portable players on the U.S. market.

That dominance has convinced some observers that Apple won't mind at all if the iPod remains the only device designed to play songs bought at iTunes.

Jobs "could open that platform up tomorrow if he really wanted to," insisted Mike Bebel, chief executive of Ruckus Networks, a Herndon, Va., service that offers more than 2.5 million DRM-protected song titles to college students. "It's great PR (for Jobs) and a nice way to turn the tables, but it's not really working toward a solution."

In his Tuesday posting, Jobs said Apple can't risk opening up the iTunes store to other portable players as long as DRM technology remains in place.

Going down that road would require licensing its FairPlay technology, requiring sensitive secrets to be shared, Jobs wrote. "And history tells us those secrets will leak. The Internet has made such leaks far more damaging, since a single leak can spread worldwide in less than a minute."

ITunes' incompatibility with other music players has drawn fire in Europe. Over the past eight months, consumer rights and protection groups in Germany, France, Norway and the Netherlands have lodged complaints against Apple.

The attacks have to be especially painful for Jobs, who has long positioned Apple's Macintosh computers as a more consumer-friendly alternative to the personal computers that depend on Microsoft's dominant Windows operating system, said Chris Castle, a music rights lawyer.

Europeans are "painting (Jobs) out to be as bad as Bill Gates and that is not exactly what he wants," Castle said. "Steve is used to being seen as a the cool guy."

Raising a bit of irony in his dissertation, Jobs noted that three of the four largest music labels are owned by European interests.

Even if iTunes remains incompatible with other players, Jobs argued that most consumers can still easily load virtually all of their digital music on just about any computing device that they desire.

That's because most consumers already own a library of CDs unencumbered by DRM restrictions or acquire other music files, either legally or illegally, that aren't copyright protected.

Based on Apple research released for the first time Tuesday, Jobs estimated that just 22 out of every 1,000 songs stored on an iPod were purchased from iTunes.

SOURCE

[Gesslar]

I loved this article! I read it today, too.

[anthson]

Awesome news.

[Rosuav]

Once again, Microsoft and Apple are adopting opposite points of view. It's up to the community to decide which way to go. Whereever the majority of consumers go, there the record labels will have to follow - *and vice versa*.

[Gesslar]

I think the whole DRM thing proves that last statement to be false. I don't think the people were crying out for technology to limit their enjoyment of their own purchases.

[Rosuav]

Originally posted by karahd
I think the whole DRM thing proves that last statement to be false. I don't think the people were crying out for technology to limit their enjoyment of their own purchases.

Perhaps not explicitly. But by flouting copyright they strongly encouraged copyright owners to do something about it. It's like telling a child to stay inside the playground - it's well known that children will wander if nothing stops them, so most public playgrounds have a fence around them and a gate which (theoretically!!) can only be opened by adults. If someone says to you, "Pay for this or don't play it", and you seek technological mechanisms to play it without paying, then naturally the owner is going to look for technological mechanisms to stop you.

But, experiments may succeed and experiments may fail. DRM was an experiment - to see if this, that, and the other technique, working together, will produce more money than they cost. Steve Jobs is now saying that the experiment has failed, and therefore should be abandoned. The only valid counterargument is that the experiment's not over yet, that either more time or more work will prove that DRM is worthwhile.

Note, by the way, that I said "and vice versa". If the four mentioned in the original post, together commanding 70% of music sales, all stick with DRM, consumers will have to accept this. (It's actually a case of "as you make your bed, so lie in it" - working both ways.) It'll take a significant action to break a deadlock.

[Rosuav]

Effectively, the way to eliminate DRM headaches is for everyone to pay for the music they listen to. Call it "positive reinforcement" if you like - if a company that sells unrestricted music, they get more sales than one that puts heaps of restrictions on.

[Grantref]

DRM as Apple does it is about preventing piracy. DRM as the labels and the movie studios want to do it is about making sure they can charge you for every format you want to listen to music or watch a program or movie in.

[Bael]

Originally posted by Grantref
DRM as Apple does it is about preventing piracy. DRM as the labels and the movie studios want to do it is about making sure they can charge you for every format you want to listen to music or watch a program or movie in.

Wow, understanding that this is posted by someone who hasn't had a look at and had to study the guts of the music industry, this view makes sense... but it's also wrong. For the RIAA, it's about protecting an investment... for Sony, Universal and company the *ONLY* way they make money is for selling their product... I'll repeat that... the *ONLY* way record companies make money is by selling their product. They pay the band (a good small band is probably getting paid $50-100k if they're incredibly lucky, to make an album), they pay to record the band (this runs around $200-300k for a "good" recording, the more successful the band, the more money they're going to get... this figure includes paying the producer and the engineer their up-front fee for the recording, and any possible licensing fees the band might incure in recording the album), THEN they have to pay to have the cds mass produced... who the fuck knows how much that costs... then there's distribution, which is a nightmare unto itself, talking retailers into stocking cds... an important thing to note is that retailers only pay the record company for copies they *SELL* (so the record company still hasn't seen a single penny for every single cd you see in a Tower/Sam Goody/FYE/etc, until someone takes it to the register and pays for it)... copies that aren't bought, can be sent back to the distributer to be returned to the record company... it works much the same way for iTunes and like, they get the money once you pay for it and download it... what did it cost the record company to get that song on iTunes? For a 12 song cd, we're talking $20000+ *PER* song, and that's if iTunes doesn't charge them any kinds of fees for selling the songs through them. That means at $0.99/copy, a song has to sell at least 20000 copies for the record company to even break even on it (and believe me, you don't want to see how many songs have to sell for the artist to break even)... and I can guarentee that the Record label doesn't get that entire $0.99, I bet Apple gets a good chunk of that (or else they wouldn't be in business), so in reality we're looking at 30-40k copies of a song for the label to recoup its production costs, PER song. Now, most of this is going to be recouped through cd sales, but this is just simplifying it all.

So... needless to say, the record company looks at it as an investment. And most artists release albums at a loss to their record company, they want to minimize that loss. Which is getting more and more difficult with home/project studios getting better and better results for people, the theories are that bands might start trying to circumvent the majors and just record their own stuff and sell straight through iTunes and other services. There are other reasons to stick with a major over the do it yourself approach (tour funding, wider exposure/advertising, physical distribution, etc), but the threat is there, and as it becomes easier and easier to replicate exact copies of a product, they're concerned about losing money. I know (and want to smack) lots of people who claim they're never going to pay for another cd again, and I know people like me who buy 3+ cds a month, easily. The bands have a big stake in how their music sells, better sales get them more touring money and a higher studio budget (so they can make a better cd for their next effort), so it doesn't just hurt the RIAA when stuff gets stolen, it really hurts the bands you listen to, because sales is the measuring stick of the labels. It sucks, but it's how it works.

Everyone wants to protect their investment. Imagine if you made something neat that cost you like $500k and people kept walking off with exact replicas of it that you didn't get a cent for... it sucks

[Rosuav]

Originally posted by Bael
Everyone wants to protect their investment. Imagine if you made something neat that cost you like $500k and people kept walking off with exact replicas of it that you didn't get a cent for... it sucks

Aye. But add to all the costs you mentioned: The cost of security.

Everyone pays something for security. In a retail store, this could be as little as placing your checkout near the door and having an intelligent eye cast over everyone who leaves, or it could be as elaborate as multiple security guards wandering around, cameras everywhere, tags on the products, etc, etc. In an online shop, this will be fraud protection mechanisms, double-handshakes to reduce spoof purchases, etc. All this security costs money - the idea is that it should cost less than it saves in reduced theft.

These techniques, just like the techniques used to protect music, annoy both vendors and end users. There's more work for legitimate buyers. (In the electronic world a lot of that might be done by your computer rather than by you yourself, but it still has to be done.) The sum of the financial cost and the customer annoyance has to be significantly below the savings in unpaidfor duplication or theft, or the security scheme is impractical.

There is a massive investment required to make a CD. And those concerned are prepared to make that investment a little larger, if necessary, to ensure that they get it all back. But spending time, money, and effort on DRM is not financially viable unless it encourages sales.