There were several interesting points in Steve's "Thoughts on Music," which my son Justin accurately points out would more accurately have been titled "Thoughts on DRM." Of course, Steve suggests that there are three possible alternatives: stay the course (which means that there will be multiple proprietary music services that interoperate seldom or never); license Apple's FairPlay (which could mean that Apple's DRM system become dominant, but as Steve spins the argument means something very different [more on that]); or abolish DRM completely.
Although licensing Apple's FairPlay DRM technology is referenced by Steve as an "alternative," what really caught my attention was this:
[i]f our DRM system is compromised and their [the Major label's] music becomes playable on unauthorized devices, we have only a small number of weeks to fix the problem or they can withdraw their entire music catalog from our iTunes store.
This is followed by Steve's adamant assertion that if Apple is forced (e.g., by consumer agencies in the European Union) to license FairPlay to others, all bets are off:
Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies.This has the effect of reducing Steve's "three alternatives" to two: (1) maintain the status quo of proprietary systems (Apple, Microsoft, SONY) that do not interoperate; or (2) abolish DRM altogether.
I think Jobs is right to suggest that DRM is a lost cause and therefore misguided. The major labels have required it as a condition of their licensing deals with Apple, but they know better than to encumber their own CDs with DRM technology, never mind that ripped CDs produce digital content that is blissfully unencumbered by any DRM scheme. This means, as Jobs points out, that a large percentage of the digital content that floats around in the musical universe comes originally from unprotected CDs. To pretend, then, as the labels do, that DRM applied to iTunes, Rhapsody, eMusic, Napster et al. solves a big problem . . . well it just doesn't. What it does do is create a set of interoperability problems for digital sales and distribution, problems that those in the music industry would do better to put behind them. The big Myth is that DRM is protecting the music industry from theft. But in reality as long as CDs remain free of DRM, there's nothing to stop the unscrupulous from redistributing the ripped content. And because a ripped CD track will play on pretty much any device, those tracks have more value than their otherwise identical counterparts downloaded from iTunes or Rhapsody. When CD sales are falling so dramatically, and digital sales are increasing (but not fast enough to make up for the decline in CD sales), it makes little sense to do anything that reduces the demand for digital distribution or creates the perception that a digital track has less value than the tracks on a CD.
Steve says something else with which I wholeheartedly agree:
So if the music companies are selling over 90 percent of their music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system? There appear to be none. If anything, the technical expertise and overhead required to create, operate and update a DRM system has limited the number of participants selling DRM protected music. If such requirements were removed, the music industry might experience an influx of new companies willing to invest in innovative new stores and players. This can only be seen as a positive by the music companies. [emphasis mine]In his blog, A VC, Fred Wilson says the same thing in plain words:
We've been locked in DRM wars and format wars for too long. And the online music business has suffered from walled gardens that don't interoperate the way web services do. It's time to change those things. Apple has led the way to date. They must finish the job.I'll be thrilled to see what happens in this space if the major labels decide that it's finally time to get smart and play the digital game rather than fight it. To rights holders, taking the step to provide open access to proprietary content can seem threatening, something to be resisted and avoided. But when the horse you're riding is exhausted, out of breath and about to go down, well, it might just be time to saddle up a fresh horse.