Perspective: Parsing Steve Jobs' alternative views of the future

In an open letter last week, Apple CEO Steve Jobs encouraged the Big Four record companies to allow their music to be sold free of digital rights management. Interesting news from an always interesting man.

Jobs wrote that Apple has been asked to open its FairPlay DRM system. That would mean music purchased from the iTunes Store could be played on non-Apple digital devices, while protected music bought from other online music stores could work on iPods.

Jobs deflected criticism of Apple by pointing out that the company does not own or control any music itself. Instead, it must license the rights to distribute music primarily from the four companies that control the distribution of more than 70 percent of the world's music: Universal, Sony BMG, Warner and EMI.

When Apple approached these companies to license and distribute their music online, Jobs said they required Apple to protect their content from being illegally copied. The solution arrived at 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.

Jobs then presented three alternative visions for the future of digital music:

1) Continue on the current course
Each manufacturer will compete aggressively and use its own proprietary systems.

Jobs notes that some people have argued that once a consumer purchases a song from one of the proprietary music stores, they are forever locked into only using music players from that one company; and, if they buy a specific player, they are locked into buying titles only from that company's music store. But Jobs also questions whether these notions are true.

Music companies might, as a matter of contract, be willing to accept less than a full guarantee from Apple.

According to his data, on average, 22 songs have been purchased from the iTunes Store for each iPod ever sold. Given that the most popular iPod holds 1,000 songs and that the average iPod is nearly full; under 3 percent of the music on the average iPod is purchased from the iTunes Store and protected with DRM. Thus, according to Jobs, the remaining 97 percent of the music is unprotected and playable on any player that can play the open formats.

Jobs concludes with respect to this first alternative that it is difficult to believe that just 3 percent of the music on the average iPod is enough to lock users into buying only iPods in the future, and that because 97 percent of the music on the average iPod was not purchased from the iTunes Store, iPod users are not locked into the iTunes Store to acquire their music.

These numbers on their own are fairly convincing, although it might be more useful to ascertain empirically the actual loyalty of consumers to particular devices, software and brands.

2) Apple licenses FairPlay to rivals
The goal would be to achieve "interoperability between different company's players and music stores." While on its face this may seem positive in terms of offering choice, Jobs points out what he considers to be a serious problem.

Namely, licensing a DRM involves disclosing secrets to people in many companies, and inevitably such secrets are leaked. And with the Internet, leaks can be spread around the world in the blink of an eye. Such leaks, according to Jobs, ultimately can lead to free downloads of software programs that disable DRM protection.

As a result, Jobs states that Apple has concluded that if it licenses FairPlay to others, it cannot guarantee to protect the music it licenses from the Big Four music companies. While this may be true, it is possible that music companies might, as a matter of contract, be willing to accept less than a full guarantee from Apple.

3) Abolish DRM in its entirety
Jobs asks us to imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, he predicts that any digital music device would be able to play songs purchased from any store. At the same time, any store would be able to sell music that worked on all players.

Jobs considers this to be the best alternative for consumers, and says Apple "would embrace it in a heartbeat." He goes on to say that if the Big Four licensed their music to Apple without requiring DRM protection, "we would switch to selling only DRM-free music on our iTunes store." Every iPod ever made would then play this DRM-free music.

Jobs supports this view by underscoring the fact that DRM technologies have not stopped music piracy. While the big music companies require that all their music sold online be protected with DRM technologies, they continue each year to sell billions of CDs that contain completely unprotected music. (Good point. CDs easily can be uploaded to the Internet, and then downloaded and played on computers and players.)

Driving a stake further into the heart of any counterargument, Jobs notes that worldwide in 2006, fewer than 2 billion DRM-protected songs were sold by online stores, whereas more than 20 billion songs were sold DRM-free and unprotected on CDs by the music companies.

Because those music companies sell more than 90 percent of their titles free of DRM, Jobs believes that they truly do not benefit by selling the remaining small percentage of their music with a DRM system.

It could be that he feels safe proposing a DRM-free world because he suspects that the music companies will not go for the proposal. That might shift the focus away from Apple when it comes to attacks on DRM.

Nevertheless, Jobs certainly has joined the issue. No doubt the debate about whether the music companies should dispense with DRMs will unfold. If nothing else, his ideas should resonate with the anti-DRM community and could serve to further pressure the music companies.

Biography
Eric J. Sinrod is a partner in the San Francisco office of Duane Morris. His focus includes information technology and intellectual-property disputes. To receive his weekly columns, send an e-mail to [e-mail] with "Subscribe" in the subject line. This column is prepared and published for informational purposes only, and it should not be construed as legal advice. The views expressed in this column are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.

More Perspectives

[bond co. stooge]

Nonsense is abundant

Good article, but two things really bother me about this whole deal.

First, nobody seems to be willing to talk about what this quest for interoperability really is--lowdown dirty grubbing by the also-rans. That's all. Make a better product, and people will buy it.

Second, and forgive the crudeness of this, but someone should ask the porn industry if selling downloads without DRM has hurt them. I'm guessing not.

I have a hard time deciding which industry is dirtier--music or skin. Probably music.

[dclaryjr]

What about subscription music?

Does a DRM-free world doom the subscription model or would providers have to maintain sometype of protected contact as well as the DRM-free tracks?

[jones_8099]

Has subscription music?

Has subscription music services been successful at all? I honestly
don't know. I'm asking because I would never consider subscription
over purchase. So I guess my real question is, is there enough
money in subscription music services to even worry about those
companies?

[open-mind]

Second Paragraph Almost Completely Wrong

"Jobs wrote that Apple has been asked to open its FairPlay DRM system."

Correct.


"That would mean music purchased from the iTunes Store could be played on non-Apple digital devices,..."

Incorrect. Music purchased from iTunes store can ALREADY be played on non-Apple digital devices. It can play on any Windows PC. With an inexpensive transmitter/sender you can stream that music from your PC to any radio in your house. Burn that music to CD, and you can play it on any CD/DVD player. Rip the music from CD back to MP3, and it can be played on any MP3 player. That's billions of non-Apple devices.

"...while protected music bought from other online music stores could work on iPods."

Incorrect. Licensing Fairplay would allow other players to play music from iTunes, if (and only if) the other vendors subscribe to that license. Music protected by other DRM systems (Plays For Sure, Zune, etc) will still not play on iPod.

[stupid_browner]

You are actually the one who is incorrect

On your first point please focus on the word "digital". The music that comes from the iTunes store is digital. What you are proposing is converting it to analogue then converting it back to digital. There are two issues with this. First of all, that process involves changing the format of the music, which then changes it so that it is not really the music that was purchased on iTunes (as well as being an illegal process). Secondly, you are converting it to analogue, loosing some of the quality provided by digital and therefore the word "digital is controversial in your procedure.

Your third point is even more incorrect. Although it would be a completely different licensing, Jobs was also talking about the possibility of licensing FairPlay for the sale of music on other websites. This would be the same DRM that Apple uses and would therefore be compatible with the iPod.

[eric.meyerson]

Why I'm still buying CD's

The current DRM system is what's keeping me from purchasing tracks for download.

Recently my iPod was stolen at the airport. If I had been purchasing music for download from iTunes, I would have basically forced myself to buy another iPod. But since all my music was ripped from CDs (or downloaded during the Napster/Morpheus/Kazaa heyday), I actually had a choice beyond the case color. I chose to purchase a Sandisk Sansa, and I'm glad for it.

Also, I can rip the CDs as many times as I want, burn a mix for a friend, and even email a track I like without having to worry about restrictions.

Until the music industry fixes the DRM system, I'll keep buying used CDs, which doesn't earn them a penny.

[RShea78]

Smart beginings, unwise endings...

I am with you purchasing CDs and so on but I would leave it at that for personal use.

Anything beyond personal usage is what lands people in trouble with the Copyright watchdogs. Now of course, publicly bragging about it, is a sure way to attract attention.