Tuesday, February 06, 2007

Music, DRM, and Mr. Jobs' Good Idea

Today an interesting item appeared from within the annals of Apple's website: post by non other than everyone's favorite CEO/Mogul/Salesman, Steve Jobs, entitled "Thoughts on Music". The page addresses recent calls for Apple to open the FairPlay DRM used in the iTunes Store, and points out how the current content-protection systems of the industry came to be in the first place.

However, the real interesting bit comes a little further down, where Steve outlines the three possible directions the online music industry can take from here. First, they could "stay the course" and keep up the fragmented, proprietary DRM systems that consumers love to hate today. Second, Apple could license FairPlay to other companies, but that would make meeting the music industry's security requirements monumentally more difficult. Finally, we could probably take the best course possible, and just do away with DRM entirely.

In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves. The music companies sell the vast majority of their music DRM-free, and show no signs of changing this behavior, since the overwhelming majority of their revenues depend on selling CDs which must play in CD players that support no DRM system.

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.
It's not a new request to hear, but it's certainly new to hear it from the guy in charge of the world's largest source of DRM'ed music! Unlikely though it may sound, if the music industry would ever do this, Steve Jobs is the man who could convice them.

Honestly, I think the reluctance to sell DRM-free music is mostly due to corporate nervousness, not any justifiable business position. Here's an example - take Fred, a fictional college student living with 3 other undergraduates in an on-campus 4-person suite. He's a mostly honest kid, but he's pirated his fair share of music in the past. Fred wants to get a new song he heard on the radio. He could use his university's Ruckus subscription, but that wouldn't play on his iPod because of incompatible DRM. He could buy it from the iTunes store - that would make sense, but he'd like to be able to share the song with his roommates, and FairPlay would only let the music play on Fred's iPod. So he resorts to Limewire, or BitTorrent, or any of a million other illegal sources that you, dear reader, are likely intimately familiar with.

Now, here's where the RIAA throws a fit. Fred resorted to stealing because he wanted to do something illegal! You can't just get a song and share it with your friends! That's wrong and we won't allow it!

Ah, but see, it's happening anyway. Thousands of times every day. Even people who still buy CD's are likely to let friends and family rip them. You can't stop that with anything short of Big Brother. I feel for the content creators, I really do. Heck, I'm going to school to become one of their ilk. But, illegal or not, this is simply the way the world works, and it will still happen no matter how much the RIAA screams about it. Fred is going to share his music. He has some morals of his own (independent of the law, I might add), so he won't post it on the internet, but he still wants to share it with his roommates, and that pulled him away from legitimate online music sources. From my own experience, I'd say "Fred" accounts for a very large portion of my generation. (Most of the rest won't settle for any price but "free," so there's little you can do about winning them over)

Now, let's pretend iTunes sold DRM-free music. What changes here? Well, Fred might decide that the song is worth a buck to him, and buy it. He's a nice enough guy after all, and the DRM was the only thing stopping him before. (He'd probably be even more likely to go legit it he could get it for free from Ruckus) He buys the song, then throws it over AIM to his roommates. They all listen, and a grand time is had by all. How did the record companies fare in these two scenarios?

Profit made from DRM'ed store: $0
Profit made from DRM-free store: $1

Now of course, in this situation the record companies would argue they're really entitled to $4, not $1, and probably that Fred has "stolen" $3 from them (if the lawyers got involved). But that's their fantasy world. In the real world, the choice isn't between $1 and $4, it's between $0 and $1.

So the real question is, who wants a dollar?

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