Record companies are the ones who demand digital rights management technology, not Apple, CEO says in rare open letter.
The letter, posted on Apple's Web site and titled "Thoughts on Music," is a long examination of Apple's iTunes and what the future may hold for the online distribution of copy-protected music. In the letter, Jobs says Apple was forced to create a DRM system to get the world's four largest record companies on board with the iTunes Store.
But there are alternatives, Jobs wrote. Apple and the rest of the online music distributors could continue down a DRM path; Apple could license the FairPlay technology to others; or record companies could be persuaded to license music without DRM technology. The company clearly favors the third option.
"Imagine a world where every online store sells DRM-free music encoded in open licensable formats," Jobs wrote. "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."
Jobs' letter is a bit surprising in that Apple, with the most successful online music store on the planet, has profited by including DRM technology in its products, said Mike McGuire, an analyst with Gartner. "I think it's really interesting that the company that's the greatest beneficiary of DRM systems is basically telling the industry, 'This is a problem, you need to fix this,'" he said.
RealNetworks saw Jobs' letter as a vindication of its efforts to encourage interoperability between music services, which led as far as the Harmony software that allowed songs bought from other online stores to play on the iPod.
"We've been talking about the need for open formats for a very long time," said Dan Sheeran, senior vice president for digital music at RealNetworks.
The letter appears to address critics of the iTunes Store in Europe, most recently evidenced by a , where regulators deemed the iTunes Store illegal. An Apple representative said the letter was not written in response to those recent legal decisions.
"Much of the concern over DRM systems has arisen in European countries," Jobs wrote. "Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free."
"You've got to hand it to Steve Jobs; he knows how to attract attention and how to deflect attention," said James McQuivey, an analyst with Forrester Research. "He turned the whole European DRM question on its ear. 'You want me to open up FairPlay? Well, I don't even want FairPlay.'"
The Recording Industry Association of America, however, issued a statement interpreting Jobs' letter as an offer to license the FairPlay technology.
"Apple's offer to license FairPlay to other technology companies is a welcome breakthrough and would be a real victory for fans, artists and labels. There have been many services seeking a license to the Apple DRM. This would enable the interoperability that we have been urging for a very long time," it said in an e-mailed statement.
Opening the FairPlay DRM technology wouldn't be a wise strategy because Apple would have to give up the secrets of how that technology works, and it's likely that a hack for the technology would appear very quickly, Jobs wrote. Under its agreement with the record companies, Apple has just a few weeks to fix FairPlay if a breach is detected--otherwise the record company can pull all of its songs from the iTunes Store, he wrote.
"Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies," Jobs wrote in his letter.
An Apple representative declined to comment on the RIAA's interpretation of the letter.
Jobs countered arguments made by regulators in Europe that iPod users are locked into iTunes by noting that Apple believes only about 3 percent of songs on any given iPod were purchased from the iTunes store. The rest were ripped from CDs that have no copy-protection technology and can be freely shared between computers and other MP3 players, he said.
"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," Jobs wrote.
Jobs didn't acknowledge this, but even FairPlay has its limitations, McQuivey said. A song bought from iTunes and burned onto a CD, then ripped back onto a computer, loses its DRM protection in the process. Most people don't want to take all those steps, but it illustrates the elusive nature of DRM protections, he said.
Jason Reindorp, marketing director for Microsoft's Zune unit, said that Jobs' call for the "abolition" of DRM without any apparent consideration of the complex balance between what consumers want versus the rights of the content owners "seems to be kind of irresponsible" as well as an about-face.
"DRM is not necessarily the bad guy," Reindorp said, noting that the value of protected content is determined by how the technology is applied and which business models are employed in distributing content. "DRM enables a lot of cool scenarios like subscription music. If you didn't have DRM, those wouldn't be possible."
Another benefit of DRM is that songwriters and publishers can track the sales of their work and not have to depend on compensation coming back to them through the record labels, McGuire said.
Many record company executives are unlikely to be thrilled by the letter, McGuire said. However, there's also the possibility that others within the record industry who have been calling for a change could seize upon the letter as evidence that the current system is broken. The New York Times reported in January that music industry executives at Midem, an annual industry conference, were openly discussing the sale of DRM-free music via the MP3 format.Getting consumers to buy music online
Record executives are coming to the sinking realization that while digital music growth is still fairly strong, it's not growing fast enough to offset plummeting sales of CDs, RealNetwork's Sheeran said. Something needs to be done to get consumers interested in buying music online, he said, and labels appear to be caught between the old ways of doing business and the new reality of the Digital Age.
"That's where the interesting negotiations happen, what happens within the labels," McGuire said. But negotiations are also likely under way between Apple and the record companies for an extension to their iTunes licensing deal, and Jobs' letter could be positioning Apple for the next round of talks, he said.
A representative for EMI Group noted that the company has been experimenting with MP3 files for sale through outlets like Yahoo Music, featuring songs from artists like Norah Jones and Relient K. But he declined to comment beyond that, when asked if EMI was planning to sell more songs without DRM in the MP3 format.
"The lack of operability between a proliferating range of digital platforms and devices is increasingly becoming an issue for music consumers. EMI has been engaging with our various partners to find a solution," the company said later on in a statement.
Other record labels are likely to make similar overtures with DRM-free music, but it's going to be very, very hard for the recording industry to walk away from all the legal arguments it has used justifying DRM and lawsuits filed against file-sharing teenagers, McQuivey said.
A Sony BMG representative had no immediate comment on Jobs' letter, and representatives for Warner Music and Universal could not be reached for comment.
CNET News.com's Ina Fried contributed to this report.