In an unprecedented move, Apple last week posted on the company Web site an open letter from Steve Jobs entitled "Thoughts on Music." That Apple chose the open letter approach is interesting, but sensible, since there isn't really a conventional format for a company to express an opinion or take a position other than a press release, and the letter was aimed, as we'll see, at many audiences other than the press. I'm a bit surprised that Apple didn't choose to film Jobs talking instead (or at least in addition to posting the letter). Why not harness the Reality Distortion Field when your CEO controls it? Such a video would have become an instant hit via iTunes and YouTube, further spreading Apple's message.
Video or no video, you can and should read the full letter, which makes a number of interesting and relevant points about the current state of the music industry, digital rights management (DRM), and Apple's role in the world.
First, Apple was forced to create and use FairPlay DRM when selling music on the iTunes Store because that was the only way the big music companies would agree to license their music to Apple. However, perhaps due to the music companies not realizing the potential size of the online market, Apple was initially able to negotiate pretty good terms, which accounts for FairPlay-encrypted tracks working on up to five computers and unlimited iPods, enabling burning to audio CDs from the same playlist some number of times, and so on. (Also, iTunes ran only on Macs at the time, so Apple was able to convince the music companies that the platform's small market share ensured that if the experiment were a failure, they wouldn't have lost much.) Apple may have benefited early on from the way FairPlay locks iTunes Store users into using iPods, but Jobs claims that on average, only about 2 percent of music on iPods was purchased from the iTunes Store (of course, that's a weak argument for any individual who happens to have purchased a lot of music from the iTunes Store, but no one was forced to buy from Apple). Plus, remember that before the opening of the iTunes Store, Apple was running its "Rip, Mix, and Burn" commercials, which were widely seen as tweaking the recording industry.
Second, if FairPlay were breached, Apple would have to fix it in a very short time or risk losing its ability to sell music on the iTunes Store. There have been several breaches of FairPlay that Apple has resolved quickly - thanks to the company controlling all portions of the media-purchasing and playing process - but on the whole, FairPlay's protections have remained intact. That may be in part due to it having reasonable conditions, unlike many other DRM systems. But with 70 percent of the market, Apple certainly isn't escaping attention by being a small player, as is often stated as a reason for the paucity of exploits aimed at Mac OS X. That said, Jobs unfairly equates the desire to break FairPlay to the desire to steal music, conveniently ignoring how many people are both philosophically and practically offended by DRM and how it limits their fair use rights.
Third, were Apple to license FairPlay to other manufacturers, the likelihood of a license-endangering breach and the difficulty of implementing a quick fix goes up, as the number of people in different companies with access to code and encryption keys increases along with the number of devices available to crack. That worry is not unfounded; it was by hackers disassembling the object code of the Xing DVD player that the Content Scrambling System (CSS) protecting DVD movies was broken. And while Apple could in theory license other forms of DRM from Microsoft and others to enable iPods to be used with other online music stores, the general consensus among industry insiders is that it would be a cold day in hell before that would happen (though you can never count out global climate change affecting the netherworld; see the linked picture). Plus, unlike releasing iTunes and the iPod for Windows, it's unclear how licensing Microsoft DRM would benefit Apple, given that most of the online music stores have significant overlap in their catalogs. The primary benefit to users would involve being able to choose an online music store that offers a subscription plan, which Apple has steadfastly avoided with the iTunes Store. (Of course, subscription plans require DRM, because otherwise you could keep forever everything you heard once, so eliminating DRM would also destroy that entire business model.)
Fourth, although Apple owns 70 percent of the online music market today, with companies like Microsoft and Sony entering the fray with similar proprietary music stores selling DRM-protected content that plays on only specific music players, Apple sees no problem with its dominant position (no surprise there). Jobs also points out that because only 2 percent of music on the average iPod has been purchased from the iTunes Store (the remainder being unprotected MP3s ripped from CDs or purchased online from unprotected sources), it's disingenuous to portray Apple as locking iPod users into using the iTunes Store. And something he doesn't say is that it's easy - if extra work - to remove FairPlay by burning protected tracks to an audio CD, after which they could be transferred to any other music player.
Fifth, and this is undoubtedly the most interesting point, Jobs states unequivocally that Apple would prefer that all music sold online was DRM-free, because it would be better for customers who want to use alternative music stores or alternative music players. What he doesn't say is that it would also be easier for Apple, which wouldn't have to maintain and update FairPlay constantly. It would also be better for competition, eliminating what little lock-in currently exists between a particular music store and its associated player. Given how Apple essentially created the portable music player market with the iPod (not the first, but so much better than its predecessors that it might as well have been) and the online music market (by integrating the iTunes Store into iTunes itself), I don't think Apple fears competition at all, and may even welcome it as an encouragement to innovation.
Sixth and lastly, Jobs points out that while fewer than 2 billion protected tracks were sold online in 2006, the music companies sold over 20 billion songs in completely unprotected form via conventional CDs. He uses this fact to point the finger of blame at the music companies themselves for furthering illegal music copying. This is in fact a tricky argument, because it can be used either to push for removing DRM restrictions on music sold online or for increasing restrictions on physical media. Efforts to use copy prevention technologies on CDs have failed, partially through technical ineptitude (they simply didn't work), and partially through utter stupidity, as in the case of the Sony BMG rootkit scandal, in which Sony intentionally installed spyware on Windows PCs when a protected CD was played.
Why This Letter, and Why Now? Response among our sources has been interesting. Many don't feel that Apple is saying anything new, but I'm not sure I agree. Apple has never before come out against DRM in music so plainly. Also, even if these attitudes aren't completely new, Apple hasn't previously shown such aggressiveness in promoting them and assigning the blame for DRM to the music companies. It's possible that the letter is in part a PR effort to paint Apple as a friend of the consumer, in contrast with the big bad music companies, thus giving Apple the high moral ground with customers and establishing Apple's position in advance of any large-scale movement on the part of the music companies to offer unprotected tracks via other online services, as EMI has done with Yahoo.
Interestingly, video is never mentioned in the letter. Jobs has always seemed to consider music and video differently, perhaps because of his association with Pixar, and it's also certainly true that Apple is by no means in the same powerful negotiating position with the movie studios as it is with the music companies. Plus, all commercial DVDs are nominally protected against copying by CSS, and bandwidth limitations have slowed large-scale sharing of video content.
But again, why now, and to whom is the letter targeted? It's almost certainly a response to the Consumer Council of Norway's complaint against Apple with regard to the End User License Agreement (EULA) with which iTunes customers must agree. Among the criticisms (many of which are legitimate) is the concern about interoperability - songs purchased on the iTunes Store cannot be played on other devices (the conversion step I outlined previously is never mentioned). In essence, Apple is saying to Norway and the other European countries, "Look, this DRM wasn't our idea, and without it, we couldn't maintain the licenses that enable us to be in business. But we'd happily drop the DRM if we could; go talk to the music companies about that." If push comes to shove, Apple will simply pull the iTunes Store out of Norway.
Another possibility is that the letter is meant to tweak Microsoft over that company's embrace of DRM, including the Windows Media DRM, the Windows Media DRM-incompatible Zune (on the sales of which Microsoft pays royalties to the music companies; see "Of the Zune, DRM, and Universal Music," 2006-11-13), and the extensive DRM support that's built into Windows Vista. Peter Gutmann, a University of Auckland computer science researcher who works on the design and analysis of cryptographic security architectures, has posted an exhaustive discussion of the problems that are likely to result from Vista's low-level content protection code. Jobs's letter never mentions Vista, but it seems entirely within Jobs's character to set Apple as an alternative to Microsoft with respect to DRM.
It's also possible, though less likely, that the letter comes in part as a followup to a rather unflattering portrayal of Apple's attitudes about DRM in the New York Times. In that article, the head of the Nettwerk Music Group, Terry McBride, says that although Nettwerk's music is sold on the eMusic online service without DRM restrictions, Apple insists on adding FairPlay to the same tracks sold on the iTunes Store.
A challenge to Apple then: start selling unprotected tracks on the iTunes Store when the rights-holders request such an action. Apple currently makes many unprotected podcasts available for free in the iTunes Store, though I don't know if there are any unprotected podcasts or songs that are sold, or if Apple currently has back end limitations that require FairPlay on non-free tracks. And if Apple really wanted to put its money where Steve Jobs's mouth is, it could buy eMusic, which is the second-largest online music service, and which has about two million tracks from independent artists, none of which contain any DRM. (Of course, buying eMusic might draw unwanted attention from monopoly regulators.)
Other Views -- Coverage of the letter has been widespread, with a variety of responses. On Playlist, Jim Dalrymple has some interesting reactions from Real Networks and a wonderfully typical comment from the RIAA. Also on Playlist, Nancy Gohring of IDG News Service reports on the response from the Consumer Council of Norway, which admits that music companies have some responsibility but still claims that ultimate responsibility lies with Apple. The Economist concludes, "Mr Jobs's argument, in short, is transparently self-serving. It also happens to be right." Dan Moren of MacUser.com imagines a world without DRM, John Gruber of Daring Fireball reads between the lines of Jobs's letter, and as usual, John Moltz of Crazy Apple Rumors Site makes up the stuff you wish had been said.