Only a few weeks after releasing iTunes 4 in conjunction with the iTunes Music Store, Apple has released iTunes 4.0.1 via Software Update, rolling in a few bug fixes and steamrolling Internet sharing of music by restricting sharing to a single subnet on a local network.
One of the innovative features in iTunes 4 was the capability to share music with anyone on the Internet; you chose Connect to Shared Music, entered their IP address, and watched their shared playlists appear in your playlist pane. Sharing in iTunes 4 was quite restricted: only five people could connect at once and the only thing they could do was play music. iTunes didn't make it easy to reconnect to shared playlists, and people sharing the music couldn't make playlists from shared songs or copy them locally... at least within iTunes.
Therein lies the rub - Web sites quickly appeared to let people publish the fact that they were sharing music, and utilities popped up to copy shared songs. Some of the sites shut down quickly after the copying utilities appeared and others obscured the IP addresses of the sharing sites, but neither that nor the five-user restriction was enough. The copying utilities were too concerning for Apple, particularly given the music industry relationships necessary to make the iTunes Music Store happen, so the Internet sharing feature had to go. (It's easy to imagine a record label executive calling Steve Jobs and telling him that unless copying via iTunes was stopped, the necessary contracts for the iTunes Music Store wouldn't be renewed when they expire in a year.)
What's most unfortunate about this move is that plenty of legitimate uses were also eliminated, such as sharing your own music between work and home or sharing between different subnets on your local network. I'd like to see Apple refine these restrictions so, for instance, you could share music with any computer you've authorized to play songs you've purchased on the iTunes Music Store, no matter where it's located. In the meantime, those who want to share music in legitimate situations that are no longer possible can revert to previous methods, such as using standard file sharing to publish the contents of the iTunes Music folder. Of course, there's no reason you must upgrade to iTunes 4.0.1 right now, although I wouldn't be surprised to see the next version of Mac OS X require an upgrade.