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Parsing Steve Jobs' alternative views of the future

Attorney Eric J. Sinrod says Jobs' proposal for a DRM-free world is a clever gambit that puts the onus on the big music companies.

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.