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DRM makes for a Bad Apple: Why the music biz is skeptical of Jobs’ copy-protection stand
February 14, 2007 | 9:16 pm
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By Joscha Bach
For the last few days, Apple’s Steve Jobs has set the Internet abuzz with his plea against DRM. And members of the music industry did not rejoice when they heard it.
Good Apple, understanding the customer’s needs? Backward content empires, not knowing what’s good for them and thus needing to be dragged kicking and screaming for their own good?
Well, not so fast! The empires might actually have a point.
Here’s the squashed version of Steve’s argument:
- Recently, Apple has been pressured to license its DRM (“FairPlay”) to its competitors. Since FairPlay locks music files bought at Apple’s store into Apple’s iPods and vice versa, and Apple controls most of the market both in on-line music and players, several EU countries such as France and Norway are going to court.
- Apple does not want to license FairPlay—and Steve claims that this is to maintain the security of the system by preventing leaks. Despite Jobs’ argument, please note that FairPlay has been reverse-engineered in the past, and it is not entirely clear why licensing it in a controlled way to hardware companies or music portals would make it much more open to attacks. Its principles are basically known, and its effectiveness depends largely on cryptographic methods. On the other hand, it is immediately clear that opening FairPlay would hurt Apple.
- So far, Apple has sold on average 22 tunes per iPod. Consequently, about 97 percent of all music stored on your average iPod does not use DRM. To phrase this differently, Apple makes relatively little money with content, compared to the sales of player hardware.
- Thus, Apple advocates the abolition of DRM to allow full interoperability. Apple would “embrace it wholeheartedly.” Please do not pressure Apple, but instead the major labels, to make them drop DRM.
- Apple, therefore, asks the guys threatening Apple’s monopoly to go away. Rather they should pressure the music industry to drop their copy protection agenda.
Does all of this really mean that Steve Jobs is indeed advocating a change of philosophy with respect to business models in sales of on-line content, and finally joining the ranks of DRM abolitionists, such as Cory Doctorow and the Baens? Perhaps he is.
Why DRM makes little sense for Apple…
But it seems much more likely that the reasons for Steve Jobs’ plea are slightly different:
1. Digital content that is not associated with media such as DVDs or CDs is generating comparatively little revenue.
2. Apple’s main business is hardware, and losses in content sales are easily compensated with wins in hardware sales, but not the other way around.
3. Specifically, opening the iTunes Music Store for competitors may cost more revenue from iPods then it will bring revenue from content.
4. Copy protection limits usability, more than hardware customers are willing to accept in the long run. The lack of Microsoft’s success with the Zune seems to prove that point.
5. It is true that you may use FairPlay protected content on several account, and accounts may even be ported from one machine to another. Unfortunately, however, users tend not to appreciate Apple’s attempts to make their accounts portable—they grumble that they have to port them at all. They want to synchronize the iPod with more than one computer, or with other iPods. This means that Apple is being put at a competitive disadvantage to vendors that use no DRM at all—everyone except Sony and Microsoft—and will end up losing market share to them.
…and why DRM might make sense to others
In this light, it may become more clear why Warner’s CEO, Edgar Bronfman, does not leap to embrace the abolition of DRM in the same way as Steve Jobs does.
Apple might just be suggesting that it will be happy if next generation media business is mainly hardware-driven, instead of content-driven. Remember that the main reason for success of console games is their far more effective DRM when compared to PC titles! And that with the introduction of easy CD copying and MP3 players, kids allocate a smaller share of their pocket money to buying music.
E-book ramifications
Unfortunately, it could be that this argument works for e-bookstores as well. In a world where the most recent Harry Potter is just a WiFi exchange with your friends at school away, we might discover that only a fraction of books read on e-reader devices are actually bought. In the consumer market, digital books are in direct competition with other media with respect to monthly household budgets. Thus, fiction books, the main segment aimed at by Sony’s Connect store, might need a much lower price, and perhaps even some kind of convenient copy-restriction to find enough customers.
The situation in professional areas might be much different, though. Here, e-books are not in competition with other media, but they represent additional value to paper editions, through higher usability (storage, access, upgrading, sharing, processing). Thus, DRM in professional areas should probably not impede usability by copy-protection. We instead might see a trend for using per-customer watermarking, to get a handle on leakage of licensed content into peer-to-peer networks.
Related link, from Moderator: Music execs chime in on DRM: it’s lame, but it ain’t going anywhere, from Engadget.
Moderator’s note: Joscha Bach lives in Germany and is with Bookpac. Thanks for a fascinating essay, Joscha! We invite others, too, to contribute—there is no minimum quota. – David Rothman
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Comments:
I do believe that DRM is crippling sales of media. However, I look suspiciously at Jobs statement. It seems to me that he has made a self-serving, and safe argument. He has said “don’t bother me; its the fault of those other guys”. Meanwhile he gets off without having to pay attention to his own DRM woes.
Not only is fairplay an issue, but so is the way that Apple distributes its OS. There is no reason the Apple OS couldn’t be released to run on a generic intel box.
So where is 97% of the songs coming from? Ripping CDs, right?
Come on!
Apple’s iPods are selling because people can find tons of pirated content!
Steve Jobs’s motives matter less to me than the fact that an industry leader, Apple, who is king-of-the-hill of the status quo, has come out and said, “It would be a good idea to drop DRM.”
We face the potential of the end of our culture via incompatible digital formats, both hardware-formats and software-formats. DRM makes for a third kind of formatting on top of the other two.
Every one of these renders it more difficult to read old texts, listen to old recordings, watch old movies, and so forth.
I see nothing in Joscha’s essay to suggest that DRM is in any way “good.”
Let’s keep our eyes on the ball here. It may well be that Steve Jobs is attempting to change the subject away from Norway’s legal insistence that Apple open up FairPlay. But now that the topic is DRM, let’s all remember that DRM is evil and we face an historic opportunity here where the media corporations just might be forced to do something that helps the consumers, students, readers, and the rest of us.
@pond:
From a cultural and ethical point of view, I am just as opposed to DRM as you are. It hinders the dissemination of ideas and free discourse, and it is a technology designed to do less, not more with the things in the world. DRM as such does not make the world a better place.
Yet DRM might make for better business, and for the “content industry”, this is the thing that counts. Apple is not just an arbitrary industry leader, it is primarily a hardware vendor, unlike for instance Warner. Lets not forget that until now, music and book sales are coupled to physical media. Some (small) successful business models have sprung from copy protected on-line sales, but until now, it is not clear if selling unprotected content on-line will ever go beyond a niche market.
Let us not mix this up: I am not trying to fight for (or against) industrial content marketing – I am just trying to get closer to the economical reasoning behind it.
There is another issue here. Apple dominates the digital audio player market, and may become open to anti-trust legislation down the road if that dominance continues. Some EU countries have already made noise about interop issues with FairPlay.
Yes, you could sell OS X to run on any Intel hardware, but that is a really bad idea. Keeping OS X stable and reliable is easier when you have a limited universe of hardware to support. Two things that make Windows such a challenge is the vast array of legacy and current hardware Microsoft needs to support, and the fact that Microsoft has no control over the hardware Windows is installed on.
OS X is the value proposition that drives sales of Mac hardware. That is their entire business model.
If you think that FairPlay could be licensed out successfully, look at the propensity of “Plays4Sure” devices, which should really be called “Might Play Possibly”. Apple is focused entirely on the end user experience, and to maintain their quality standards requires being a control freak about the entire chain of hardware and software. Lets not forget that Microsoft’s own Zune player and store *does not support their own Plays4Sure initiative*.
I’ll side with Steve-o on this one. Instead of dealing with licensing out FairPlay and having to deal with what to do when some software vendor lets the encryption keys out of the bag, just eliminate the problem entirely.