A while back I argued that the big record companies would be much better served by allowing the sale of downloadable songs without copy protection (ie, digital rights management, or DRM). Because DRM has little or no effect on piracy, the only one benefiting from the DRM schemes has been Apple, which with a dominant position in the music player market achieves at least some degree of customer lock-in through the copy protection code embedded in every song sold through the iTunes store. (Each song you buy gets you a little more invested in the iPod platform.) Today, in a long open letter posted on Apple’s web site, Steve Jobs calls on the Big 4 record companies to abandon DRM:
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 …
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 … 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 … 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.
The reason Jobs has taken this unusual step is, one assumes, because Apple is under increasing pressure from European 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. Just to drive the point home, he writes at the end of his letter, “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.”
One hopes that Jobs’s missile-like missive may finally get the big labels to realize that DRM is simply a millstone around the neck of their business.
Yup. Pure PR for Pop People.
Jobs’ statements here would sound more sincere if Apple wasn’t playing the same hardware/software lock-in games with the Mac and the iPhone.
To use the Mac OS and the ever-expanding line of Apple-brand Mac applications, you need to buy expensive Mac hardware, and only from Apple. The only Mac under $1000 is the Mini, which is not much of a value at $600 (monitor not included). If you want a computer with slots — if only to be able to upgrade the video card — the base price is $2500 for a PowerMac.
Most observers recognize that if Apple permitted its superior OS and apps to run on Wintel hardware, they would likely grab a much larger share of the software market and mount a real challenge to Microsoft, especially given the general ambivalence about Microsoft and Vista. But then they’d lose their hardware lock-in, though some argue convincingly that Apple could stay in the Mac hardware business and still do well. That Apple plays these games in a world of relentless hardware commoditization grows ever more absurd, especially as Macs have come to use the same components as Wintel PCs.
This pattern continues with the iPhone, for which third parties are not permitted to write software.
Jobs’ letter seems more like an attempt to deflect the bad PR generated by the iPod/iTunes lock-in. One wonders how many iTunes customers even realize that this lock-in exists.
Jobs’ statements here would sound more sincere if Apple wasn’t playing the same hardware/software lock-in games with the Mac and the iPhone.
Umm, no. This is in no way directly comparable to the itunes music store situation. If Apple wants to create software that increases the value of the Mac platform, that in no way prevents other companies from directly competing with them on an application-by-application basis. The iPhone is a completely different kettle of fish: first, it remains to be seen whether Apple will open up development to third parties; second, what’s the lock-in? Also, you’re talking about a product whose launch is 5 months off.
Since Apple makes all of their money selling hardware, most knowlegable observers agree that Apple would go out of business if they simply licensed their OS to any manufacturer that wanted to. Again, their software is a added value to their core business. As Steve Jobs famously said, (to paraphrase) “the OS war is over and Microsoft won.”
Why don’t you try pointing out how Jobs is wrong? DRM has been mandated by the music industry, not by Apple. Everyone seems to want an open DRM, which by definition, would be no DRM at all. The “lock-in” has been a happy by-product of the stupidity of DRM but, as Jobs says in his letter, with an average of only 22 iTunes Music Store songs on each iPod do you really think that Apple cares about this anymore? Do you think iPod users, most of whom are probably ripping their own cd’s, care about this strawman “lock-in”?
Buyers of Mac software are certainly prevented from running it on non-Apple hardware, exactly like the iTunes/iPod lock-in, and the lack of choice and higher prices in Mac hardware punish customers. It also ultimately punishes Apple because it insists on repeating the historic blunder that left the Mac unfairly consigned to an effete niche and allowed the mediocrity of Microsoft to win by default.
Can you imagine the wonderful storm that would result if Apple’s software ran on anything? Watching Microsoft shares fall would be plenty fun by itself.
Apple makes plenty of money from software too, and Microsoft has made a pretty good business of licensing software (even adjusting for its anticompetitive tactics), one that’s more profitable than Apple’s, both in absolute terms and, crucially, as a percentage of revenues.
If Apple licensed Fairplay (its DRM scheme) to other makers of music players, not only would it make the name “Fairplay” less ironic, it would also probably satisfy the content owners and European governments. It might also encourage more people to buy content from iTunes, and Apple could starting publicly releasing separate accounts for iTunes instead of being coy about its profitability.
Please, give me a break. Quality costs and most people are cheap. Everything else is hypothetical, or pure conjecture.
This pattern continues with the iPhone, for which third parties are not permitted to write software.
But that’s because Cingular is concerned that unauthorized third-party apps will crash their wireless network. Nevertheless, I expect that we’ll see the platform open up over time.
I’d launch into a passionate homily about how people who think Apple should license their software just don’t get what Apple is all about, but I’ll spare you. :)
Nick –
What is your model for how creators and their enablers (the middlemen) will get paid in a world in which free transfer is legitimated and payment becomes voluntary? I can’t see it — see http://weblog.ipcentral.info/archives/2007/02/jobs_notes.html — but I am interested in your argument.
JVD
The Fake Steve blog is on a roll with this one. I particularly liked this post.
Yeah, I guess the Mac fans who’ve commented here are right: the Mac OS couldn’t really compete with Windows and Linux if both ran on Wintel hardware. ;) There isn’t a chance that the Mac OS could gain a much larger market share and create a bigger market for third-party Mac applications… ;) And even if it were possible, it would be a nightmare — imagine buying a desktop computer with slots and drive bays that ran Mac OS and only cost $400-800. Eew! ;)