To: Apple CEO Steve Jobs
From: Greg Sandoval, CNET News
Re: Acquiring DRM-free music
Steve, give us DRM-free songs for Christmas
(Credit: James Martin/CNET Networks)The iTunes music library is looking a little shabby these days. Look around, Steve: iTunes is the last great refuge of DRM-laden downloads. Is this the image you want for Apple?
More than 18 months have passed since you signed your one and only deal to acquire music free of copy-protection software with a major recording company. And that was with EMI, which accounts for less than 9 percent of U.S. album sales and is the smallest of the four top music labels. In the meantime, Apple has continued to wrap the vast majority of major-label music in Fairplay, the company's proprietary digital rights management software, at a time when your major competitors have already signed DRM-free deals with all the big players.
If you cling to this position, iTunes is going to look stodgier than that "PC guy" you're always mocking in your commercials. Zune offers more DRM-free music, signing agreements with EMI, Warner Music Group, and just this week, Universal Music Group, the largest music label. Steve, DRM inspires hatred from all the cybergroovies, many of whom swear loyalty to Apple products. It's time to dump this loser. Even the major labels have recognized this. I'll get back to that.
You now have a golden opportunity to make things right. I've heard about your negotiations with the three largest music labels about acquiring music unburdened by copy-protection software. My sources said that no deals are final but that one top label is closing in on an agreement.
Close them, Steve. Close all of them. I'm going to point out the obvious: striking these agreements would be good for Apple, the recording industry, and certainly for Apple customers.
DRM doesn't fit with Apple image
I realize cutting a deal takes both sides to agree. But you and the music industry have blamed each other for the absence of DRM-free songs on iTunes for more than a year, certainly since you published your now famous open letter of February 2007. That's when you called for the labels to abandon DRM. I'm sure you know music execs always laughed at this and suggested that your argument was a tad disingenuous. They said your DRM fit perfectly with your plans to lock customers into buying music that played only on Apple devices.
I think I can speak for your customers here. They don't care who's responsible. What really matters to them is that it's time to do more than write letters. You must recognize that the time is perfect for you to act. The climate surrounding digital music is vastly changed since you wrote that letter. The labels admit now their DRM strategy has failed.
Check out what Edgar Bronfman, the head of Warner Music Group, said earlier this month: "We're not technology companies...We never came up with a version of DRM that did what we needed it to do."
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Doug Morris, Universal Music's CEO, called you a friend and one the smartest men in music during a recent interview. Sounds to me like these guys are ready to deal. They must know that it's in their best interest for iTunes, the country's largest music retailer online or off, to have everything it needs to move music. Sure, they want iTunes to have some competition. They fear you will grab too much control over digital sales...again.
That's likely why all four major labels have provided music sans copy-protection software to your chief rivals: Amazon.com, MySpace Music, and Wal-Mart Stores. I'm not naive enough to think that's an accident.
But all the signs point to a music industry, at least with regard to digital downloads, that wants copy-protected songs buried.
Take away competitors' advantage
Just consider the benefits to Apple if you acquire DRM-free songs from the three largest labels:
• You snatch away the most important competitive advantage that any of your rivals possess. Amazon, MySpace Music, and Napster have been touting their DRM-free libraries. Amazon appears to be the only place where DRM is making much of a difference. The Web's largest retail store doesn't break out numbers, but in April, research company NPD Group reported that Amazon's MP3 service was showing signs of growth based on consumer sampling.
• You can give iTunes' tech-savvier customers peace of mind. Sure, they represent a tiny sliver of your customer base, but they're also the most vocal. They're the ones who have been calling for an end to Fairplay for a long time and understand that one day Apple could stop issuing DRM keys and leave their music stranded.
Remember, Steve, DRM schemes were proved to be anti-consumer this year. MSN, Yahoo, and Wal-Mart all made announcements that they planned to stop issuing DRM keys. They all were widely criticized when customers realized that without the keys, songs couldn't be moved to new devices or computers. All three capitulated. Sure, Apple appears to be an immovable force now, but who knows about five years from now? Fairplay is DRM and that means it's vulnerable to this key issue.
Do you really want to follow in this group's footsteps?
• Apple also will avoid alienating customers in the case that a company develops a popular music player that people can't play their iTunes libraries on because of compatibility issues. I've always said that in this scenario, Apple could lose a lot of good will.
Apple needs to prove the naysayers wrong and show that the company was never interested in locking customers into buying its music or music players. Apple has to show that it knows the best way to build an empire is to design products people want to play their media on--not players they have to play their media on.
A year after iTunes began offering music without copy protection software from EMI, Apple is in discussions with the other three top recording companies about acquiring DRM-free songs, according to two music industry sources.
The talks are still preliminary and no deals have been finalized, but one source said one of the major labels is close to a final agreement. Rumors have been swirling on the Internet for a week that Sony would soon be offering music without the controversial digital rights management software. My sources could not confirm this.
Spokespeople for Apple and the major labels declined to comment.
Should the deals get done, the songs offered by Apple's iTunes would no longer be restricted to playing on Apple devices, such as the iPhone or iPod. This has been one of the main criticisms of iTunes music for a long time. Apple says the music labels are the ones that force Apple to adopt DRM. Music insiders say Apple has long dragged its feet about getting unprotected music. Right now, Apple uses the proprietary DRM scheme, FairPlay, to lock down its music.
Talks with at least two of the labels have taken place on and off for several months, said the sources. They cautioned that there's no guarantee Apple and the labels can close the deals. But if iTunes is successful in acquiring the rights to sell unprotected music from Universal Music Group, Warner Music Group, and Sony BMG, the deal could help bolster iTunes' dominant position in digital music, as well as send competitors scrambling to find something new to differentiate themselves.
In the past year, the four top recording companies have been moving away from DRM--at least with other music services. In that time, companies such as Amazon, MySpace Music, and Napster have all begun selling open MP3s. MP3s are the format used to compress music files. Universal Music is expected to soon announce that the label is licensing MP3s to Microsoft for Zune. EMI and Warner already have DRM-free deals with Microsoft.
The marketing efforts of these Apple rivals have played up the idea that their music is unencumbered with DRM.
Also in the past year, technological shortcomings of copy-protection software have generated a lot of public scrutiny. As some iTunes competitors have exited the market, they have taken their DRM music with them.
This year, MSN, Yahoo, and Wal-Mart outraged some customers and consumer groups by announcing they would stop issuing keys for their DRM-protected songs. This meant the music would be prevented from being transferred to an owner's other devices.
Eventually, all three music services reversed their decisions, but it convinced DRM critics that DRM software never truly surrenders control of music to a buyer. While it's inconceivable to think that Apple would ever stop issuing DRM keys, it's absolutely possible.
CNET News reporter Ina Fried contributed to this report.
See also:
• Wal-Mart to carry iPhone after holidays?
In a bid to help novice downloaders jump-start their digital-music collections, Universal Music Group is offering "curated" playlists to Dell PC buyers.
The Dell Inspiron now comes with music.
(Credit: CNET)Starting at $25, selected bundles 50 or 100 DRM-free songs can be added while building a custom PC on Dell's Web site. The songs will come preloaded on the computer, ready to play as soon as it's booted up.
The music option is available only on the Inspiron 1525, Studio 15, and XPS 1535 laptops and Inspiron 530, 530s, Studio Desktop, and XPS 420 desktops. The XPS One and Dell Mini 9 netbook are excluded from the offering.
The songs, all by Universal artists, are then playable on any device. You can see what bundles are available on Dell.com/musicandmovies. Track bundles include thematic playlists such as "Rock Titans," "The Classics," "Blues Masters," and so on. The lists will be "refreshed" on a regular basis in the future, and available for purchase on Dell's site.
Dell already does this with downloaded movies, but it's the first time a major label has struck a similar distribution deal with a PC company. Universal's tracks are already offered through a similar service on phones with Nokia and its Comes with Music program.
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