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February 7, 2007

Jobs Issues Open Letter Suggesting DRM Free Music Sales

Steve Jobs issued an open letter in the last day calling on a DRM free world for music sales.  He says that Apple would embrace selling non-protected music. The New York Times calls this a "gamble" on the part of Jobs.  The real gamble is that the labels would call Jobs' bluff and go with unrestricted music files, something Jobs knows is unlikely to happen.  Certainly an unnamed senior executive from a label is quoted in the same article as saying there are no plans to lift DRM restrictions for online music sales.

Jobs indicated in his letter that he has no intentions of licensing the Apple FairPlay system to third parties.  The problem for labels, consumers, and any interested parties in this is the plethora of DRM systems that not only restrict copying, but universal playback.  While it is hard to resist the lure of free, as in pirated and illegal, pirated files offer consumers the one thing they really crave, which is thoughtless playability anywhere.  Imagine DVD sales being successful if DVD players had to be branded against a Microsoft DRM scheme, or an Apple, or one from Sony (Heaven forbid based on their track record).  There is one worldwide system that, with minor exceptions such as region codes, that make DVDs playable world wide.  Technical problems such as NTSC and PAL playback are solved by most hardware manufacturers building in support for these standards in their players.  If anything, the movie download market is hamstrung for the lack of universality of the consumer experience, other than it being limited by playback options for an excessive amount of money.  Sound familiar?

The music companies are so paranoid about their product that they can't do what they've done in the past, which is create standards.  Vinyl was standard, as were/are CDs.  In the case of the labels, DRM is an all or nothing proposition:  everything protected to the point of absurdity or no distribution.  The labels were not able to coalesce around a digital download standard and left it to the online distributors for the model.  Apple has theirs, and Microsoft has two, which are not even compatible with each other.  The labels missed the boat on that one by not dictating a standard and opening up their own online stores.  Hardware manufacturers would have followed because they love standards.  It's a selling point.  Now the market is tilted in favor of Apple dictating the terms as it sells more dowloadable content than anyone.

Some will argue that the labels didn't do this so as not to antagonize the brick and mortar stores that sold CDs.  The answer to this would have been to let anyone set up online stores that linked back to their servers.  Many places such as Best Buy and Circuit City sell physical product at varying prices.  The labels could have done the same with online product.  Let the stores fight it out as they do now, except online. There are legal marketing techniques such as online exclusives, value added content from the artists, and sales as a way of distinguishing online stores.  Because the market is fragmented, so is the consumer base.  Apple can only sell to iPod owners.  Microsoft can only sell to Zune owners and the music is not transferable between the two without going through the hoops of burning tracks to CD, which effectively destroys the copy protection, and ripping the tracks again.  This is not the way to sell music to consumers who never had to worry about players and formats before. 

Don't expect the labels to take Jobs' bait, and don't expect the online market to develop to the extent that the labels prefer.  It may be too late to fix this one.  Lawsuits by the RIAA may provide moral victories, but they won't stop the majority of consumers from going with the least amount of hassle to get music on their portables.

February 7, 2007 | Permalink

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