Does Jobs really want to set my iPod free?

Will your music be set free? Will you be able to share your songs from iTunes, move them from machine to machine with impunity? Steve Jobs claims “he’d like nothing more.”

Yes, some of you may have read this note from Steve Jobs about the current and possible futures of digital rights management (DRM) in the music industry. For those, like me, who don’t dabble in acronyms like DRM on a regular basis, this basically refers to how online resellers like iTunes encode their music so that a) you are limited to copying it 5 times; and b) you can only play it on their proprietary system (like an iPod – ever tried playing a song from iTunes on something else… it won’t work).

Taken on its own Jobs’ note makes it look like he’s taking on the music industry unprompted, fighting for the little guy – the consumer (that’s me and you!). The truth is a little more complicated. Even this Herald Tribune piece, which has all the pieces to the puzzle, reverses cause and effect and buries the important parts at the back of the piece. The important fact is that Norway’s consumer ombudsman, Bjoern Erik Thon, told Reuters that Apple “must make iTunes music compatible with other players than the iPod by the end of September, or we will take them to court.”

Apparently, several European countries are proposing similar rulings. What makes this interesting (and my understanding of EU law could be flawed here – so please send me clarifications) are the EU’s rules around mutual recognition. Consequently, a ruling that found Apple violating consumers rights in one EU country could be quickly adopted across all the member states. If that happened, the theoretical future scenarios Jobs mentions in his memo would very quickly become the here and now options he would have to implement in a manner of weeks.

I have little doubt that Jobs would prefer to maintain the status quo. He’s got the dominant online music vendor that forces people to use his proprietary hardware. Do you really think he wants to give up this virtual monopoly? No way. Let’s be clear, this memo is the opening salvo in an effort to renegotiate iTunes agreement with the record labels in case the European regulatory environment changes (which is beginning to look very possible). Like any savvy negotiator he’d prefer to negotiate today, when he’s got options, as opposed to 7 months from now, when he’s got a gun to his head and the music labels are threatening to pull the plug unless he shares Apple’s proprietary licensing system – FairPlay – with everyone. Such an agreement would allow anyone to sell music that can play on an iPod effectively destroying his monopoly distribution arrangement.

Jobs isn’t a champion of the little guy – he just likes to look like he is. The change of heart outlined in this memo was not prompted by his concern for consumers but out of concern for the future of iTunes.

Thank you Nicolas T. for the HT link and the prompting email.

[tags]itunes, steve jobs, copyright, copyright law, music, negotiation, apple, ipod, DRM[/tags]

23 thoughts on “Does Jobs really want to set my iPod free?

  1. Mike Beltzner

    I’m actually not so sure about Jobs wanting to preserve the status quo. Maintaining FairPlay is a huge maintenance headache. Every time some enterprising/bored college teenager figures out a way around it, Apple is currently contract-bound to create a new version of the DRM system, as well as patches for their entire line of iPods (3 generations of the original iPod, 2 generations of shuffles, a line of minis and a line of nanos; even if they share the same firmware in many cases, it’s still a software maintenance nightmare in terms of packaging and distribution!) as well as for their software. They need to make sure that the new system will deprecate gracefully for things encoded in the old system. In short, it’s a huge PITA.

    Further, while the iTunes Music Store has sold over 9B songs, the Apple cut from that is estimated to be about 35%. Out of that 35% comes the costs for: maintaining FairPlay, maintaining the server infrastructure, maintaining the editorial content on the site, etc, etc. There’s a lot of evidence – not only provided by Jobs in his open letter, but from other sources as well, that people are avoiding purchasing music digitally because it’s DRM’d. I know that’s certainly true for me, and when I do buy music from iTMS, I immediately burn it to CD and re-rip in in a non-DRM’d format. I used to subscribe to eMusic, for which I paid a flat fee for a certain number of non-DRM’d music a month; I was happier to pay for it since I knew it would work anywhere I took it.

    So now, think of it from Jobs’ angle:

    - you have market dominance on the music player in terms of brand recognition, “cool” factor, penetration and mindshare; everyone else is playing catchup, and your guys aren’t stopping with line innovations (see: nano, new shuffle) or extensions (see: iPhone) anytime soon;

    - you have market dominance and the best experience in terms of an online music store (although right now it only works when using the iTunes software – more on that later!);

    - your cost per song sold includes costs of maintaining a system which all evidence shows as reducing the number of songs that can be sold;

    - evidence to date shows that DRM doesn’t work as a massive disincentive to piracy; people who want to pay for music will do so in the way that gives them the most control over what they’ve paid to receive, and those who don’t want to pay for music will find a way to not pay for music.

    From where I sit, Apple is more likely to make money if they could sell songs without DRM. The incentive to buy songs from iTMS would be higher for those looking to pay for their music, as they’d have more control. All Apple cares about is throughput in terms of songs-sold-via-iTMS. Increasing the value prop to consumers will boil down to a net win for Apple, even if it increases the risk of casual piracy. People want things that work, and that are easy. $0.99/song is easy, but right now, it doesn’t work (hard to take to your car, to move between computers, etc, etc.) Removing the DRM would make it work.

    I said I’d talk a little more about the limitation of the iTunes Music Store only working through iTunes software. I can see Apple moving away from that decision, and allowing the store to work from any web client. It’s tied right now because, well, any downloads from that store will only work with devices that can only be synchronized with the iTunes software. But if Apple can open their store to people using all other kinds of music hardware, or even to just computer users, why wouldn’t they do that to dramatically increase their potential subscriber base?

    I don’t think Jobs is being entirely up-front and genuine here, but I also don’t think he’s lying or being forced into this position. The DRM experiment has lasted a few years, and I think he’s reading the signs as saying “you can make more money without it, and now you’ve got some good reasons to try that experiment out for a while.”

    (Note: some of my ideas were inspired by John Gruber’s “Reading Between the Lines” blog post)

    Reply
  2. Mike Beltzner

    I’m actually not so sure about Jobs wanting to preserve the status quo. Maintaining FairPlay is a huge maintenance headache. Every time some enterprising/bored college teenager figures out a way around it, Apple is currently contract-bound to create a new version of the DRM system, as well as patches for their entire line of iPods (3 generations of the original iPod, 2 generations of shuffles, a line of minis and a line of nanos; even if they share the same firmware in many cases, it’s still a software maintenance nightmare in terms of packaging and distribution!) as well as for their software. They need to make sure that the new system will deprecate gracefully for things encoded in the old system. In short, it’s a huge PITA.Further, while the iTunes Music Store has sold over 9B songs, the Apple cut from that is estimated to be about 35%. Out of that 35% comes the costs for: maintaining FairPlay, maintaining the server infrastructure, maintaining the editorial content on the site, etc, etc. There’s a lot of evidence – not only provided by Jobs in his open letter, but from other sources as well, that people are avoiding purchasing music digitally because it’s DRM’d. I know that’s certainly true for me, and when I do buy music from iTMS, I immediately burn it to CD and re-rip in in a non-DRM’d format. I used to subscribe to eMusic, for which I paid a flat fee for a certain number of non-DRM’d music a month; I was happier to pay for it since I knew it would work anywhere I took it.So now, think of it from Jobs’ angle:- you have market dominance on the music player in terms of brand recognition, “cool” factor, penetration and mindshare; everyone else is playing catchup, and your guys aren’t stopping with line innovations (see: nano, new shuffle) or extensions (see: iPhone) anytime soon;- you have market dominance and the best experience in terms of an online music store (although right now it only works when using the iTunes software – more on that later!);- your cost per song sold includes costs of maintaining a system which all evidence shows as reducing the number of songs that can be sold;- evidence to date shows that DRM doesn’t work as a massive disincentive to piracy; people who want to pay for music will do so in the way that gives them the most control over what they’ve paid to receive, and those who don’t want to pay for music will find a way to not pay for music.From where I sit, Apple is more likely to make money if they could sell songs without DRM. The incentive to buy songs from iTMS would be higher for those looking to pay for their music, as they’d have more control. All Apple cares about is throughput in terms of songs-sold-via-iTMS. Increasing the value prop to consumers will boil down to a net win for Apple, even if it increases the risk of casual piracy. People want things that work, and that are easy. $0.99/song is easy, but right now, it doesn’t work (hard to take to your car, to move between computers, etc, etc.) Removing the DRM would make it work.I said I’d talk a little more about the limitation of the iTunes Music Store only working through iTunes software. I can see Apple moving away from that decision, and allowing the store to work from any web client. It’s tied right now because, well, any downloads from that store will only work with devices that can only be synchronized with the iTunes software. But if Apple can open their store to people using all other kinds of music hardware, or even to just computer users, why wouldn’t they do that to dramatically increase their potential subscriber base?I don’t think Jobs is being entirely up-front and genuine here, but I also don’t think he’s lying or being forced into this position. The DRM experiment has lasted a few years, and I think he’s reading the signs as saying “you can make more money without it, and now you’ve got some good reasons to try that experiment out for a while.”(Note: some of my ideas were inspired by John Gruber’s “Reading Between the Lines” blog post)

    Reply
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  18. free ipod

    have little doubt that Jobs would prefer to maintain the status quo. He’s got the dominant online music vendor that forces people to use his proprietary hardware

    Reply
  19. Artificial

    have little doubt that Jobs would prefer to maintain the status quo. He’s got the dominant online music vendor that forces people to use his proprietary hardware

    Reply

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