Apple: Record Labels Should Drop DRM

Apple Inc. indicated it would open its iTunes store to other portable players besides its ubiquitous iPod if the world's major record labels abandoned the anti-piracy technology that serves as the industry's security blanket.

Steve Jobs, Apple's chief executive, made the case for abolishing the protections known as "Digital Rights Management," or DRM, in an open letter posted Tuesday on the Cupertino-based company's Web site. He also explained why Apple had decided against licensing its own DRM technology, known as "FairPlay," as an alternative method for making iTunes accessible to all portable players.

Like many things the trendsetting Jobs does, his call for change created an almost immediate buzz.

Supporters hailed Jobs for leveraging Apple's growing clout as one of the world's largest music sellers in an attempt to remove restrictions that annoy many consumers. Critics, though, derided the message as a disingenuous maneuver designed to soften a recent backlash in Europe, where iTunes' incompatibility with other portable music devices besides the iPod has been branded has anticompetitive.

Jobs' essay, dubbed "Thoughts on Music," cited the recording labels' anti-piracy technology as the main reason music sold through iTunes can't be transferred to other portable players besides the iPod.

Those same DRM protections also prevent the iPod from playing music bought from many other competing online stores.

If not for the DRM safeguards, Jobs asserted that Apple would be able to create a more flexible system that would allow iTunes music to work on other devices, such as Microsoft Corp.'s recently introduced Zune.

Jobs suggested that consumers unhappy with the status quo should urge the world's four largest labels -- Universal Music Group, EMI, Sony BMG Music Entertainment and Warner Music Group -- to sell their online catalogs without the DRM restrictions. Those four labels distribute more than 70 percent of the world's music.

"Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace," Jobs wrote. "Apple will embrace this wholeheartedly."

EMI began selling a handful of songs in an MP3 format that isn't shielded and has been encouraged by the consumer response to the experiment, spokeswoman Jeanne Meyer said. She declined to comment on Jobs' call to end all DRM protections.

Officials from the other major record labels either didn't return calls or had no immediate comment.

"I think Steve is finally saying something he has wanted to say for a long time," said Forrester Research analyst James McQuivey. "He is not saying this just to grandstand. He really thinks this could open up the market."

The tremendous reach of the iTunes store makes it difficult for the music industry to ignore or ridicule Jobs.

Since its debut nearly four years ago, iTunes has sold more than 2 billion songs, mostly for 99 cents apiece. With sales of about 5 million songs per day, Apple now rank ranks behind only Wal-Mart Stores Inc., Best Buy Co. and Target Inc. as a music retailer.

Apple's music sales have flowed largely from iTunes' compatibility with the iPod, whose immense popularity prompted the company to recently drop "computer" from its name. With about 90 million iPods sold so far, Apple accounts for about 70 percent of the portable players on the U.S. market.

That dominance has convinced some observers that Apple won't mind at all if the iPod remains the only device designed to play songs bought at iTunes.

Jobs "could open that platform up tomorrow if he really wanted to," insisted Mike Bebel, chief executive of Ruckus Networks, a Herndon, Va., service that offers more than 2.5 million DRM-protected song titles to college students. "It's great PR (for Jobs) and a nice way to turn the tables, but it's not really working toward a solution."

In his Tuesday posting, Jobs said Apple can't risk opening up the iTunes store to other portable players as long as DRM technology remains in place.

Going down that road would require licensing its FairPlay technology, requiring sensitive secrets to be shared, Jobs wrote. "And history tells us those secrets will leak. The Internet has made such leaks far more damaging, since a single leak can spread worldwide in less than a minute."

ITunes' incompatibility with other music players has drawn fire in Europe. Over the past eight months, consumer rights and protection groups in Germany, France, Norway and the Netherlands have lodged complaints against Apple.

The attacks have to be especially painful for Jobs, who has long positioned Apple's Macintosh computers as a more consumer-friendly alternative to the personal computers that depend on Microsoft's dominant Windows operating system, said Chris Castle, a music rights lawyer.

Europeans are "painting (Jobs) out to be as bad as Bill Gates and that is not exactly what he wants," Castle said. "Steve is used to being seen as a the cool guy."

Raising a bit of irony in his dissertation, Jobs noted that three of the four largest music labels are owned by European interests.

Even if iTunes remains incompatible with other players, Jobs argued that most consumers can still easily load virtually all of their digital music on just about any computing device that they desire.

That's because most consumers already own a library of CDs unencumbered by DRM restrictions or acquire other music files, either legally or illegally, that aren't copyright protected.

Based on Apple research released for the first time Tuesday, Jobs estimated that just 22 out of every 1,000 songs stored on an iPod were purchased from iTunes.


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