DRM-free iTunes Store to haunt Apple?

Songs the company sells are no longer wrapped in copyright protection software. It's good for consumers and record labels, but will it also be good for Apple in the long term?

Much has been said about Phil Schiller's keynote address at Macworld on Tuesday, where he announced that Apple has finally struck deals with all the major music labels, making songs sold via the iTunes Store free of digital rights management.

The crowd in attendance cheered joyfully when it heard the news, and millions of people across the globe were excited to finally know that all that crazy Apple copyright protection was finally behind them. Even Apple was excited to announce it, and the new pricing model--$0.69 and $1.29, depending on the song--seems to suit its fancy.

For years, we've been hearing about Apple's desire to make iTunes DRM-free. Steve Jobs even wrote a letter detailing his belief that DRM is bad for all of us--record labels included. And now, after years of waiting, Jobs and his minions have finally achieved their goal of eliminating it.

Does that necessarily mean that it's good for Apple, though? I don't think there's a simple answer.

Isn't it true that one of the main advantages the iPod had over any other device on the market is its link to iTunes? And isn't it true that the link was only made possible with DRM? Now that its DRM advantage is gone, what's stopping you from buying competing products from iRiver, SanDisk, and others?

As far as I can tell, nothing (other than the quality of Apple's products).

But in order to determine if Apple really cares, we first need to figure out if Apple is a hardware company or a music retailer. Some would say both, and it's difficult to argue with that logic. But if Apple really is both, that suggests that it has a vested interest in seeing its hardware do well. It also suggests that its DRM was a key to its success, since it kept people spending money in iTunes and buying iPods to listen to those songs.

Now that link has been removed, and consumers can just as easily buy songs from iTunes and put them on competing devices. And since Steve Jobs has continuously said Apple is a hardware company first and foremost, I don't think that it's a stretch to say Apple may regret its decision to remove DRM from iTunes.

Regardless, it was a necessary step. Amazon.com was making inroads because of its own DRM-free store, and Apple realized that the future of the music retail business requires no copy protection. Because of that, it had to make a judgment call: accept the possibility of losing iPod sales to remove DRM, or keep the DRM and focus on iPod and iPhone sales. Steve Jobs chose the former.

Yet we now find ourselves in an interesting arena. The dominant company in the industry may have committed a serious blunder. In an effort to make up for lost song sales by enticing more people to use its download software, it may see its device competitors gain market share. And that's something we can't forget: Apple could, conceivably, welcome more iTunes customers, now that the store is DRM-free, to offset the potential revenue loss resulting from fewer iPod sales.

I'm sure that Apple did its homework and determined that a DRM-free iTunes would prove more profitable over the long term than the alternative, but I'm still not convinced that this move won't come back to haunt the company.

After all, leading companies commit blunders all the time, and in a matter of months, they're overtaken by more nimble competitors. Sure, it hasn't happened to Apple yet, but that doesn't mean that it can't.

Remember the Walkman?

Check out Don's Digital Home podcast, Twitter feed, and FriendFeed.

 

Join the discussion

Conversation powered by Livefyre

Show Comments Hide Comments