Last week a public shouting match erupted between Apple Computer and RealNetworks over what material can be played using Apple’s iPod portable music players. RealNetworks develops the RealPlayer digital media player software, which competes with both QuickTime and Microsoft’s Windows Media technologies. RealNetworks also operates the RealPlayer Music Store (a competitor to Apple’s iTunes Music Store) and the Rhapsody subscription music service.
Duelling Divas — The current brouhaha has some history. On 09-Apr-04, RealNetworks CEO Rob Glaser proposed a "tactical alliance" between RealNetworks and Apple, in which Apple would license the FairPlay digital rights management (DRM) technology used by the iTunes Music Store to RealNetworks. This would allow content purchased from Rhapsody and the RealPlayer Music Store to play on the iPod, which – then as now – commands the lion’s share of the market for portable digital music players. In return, RealNetworks would make the iPod its "primary device" for its music services and player software. Glaser also waved a stick, hinting RealNetworks might convert over to Microsoft’s Windows Media or approach other hardware vendors if a deal couldn’t be reached with Apple.
Apple quickly declined RealNetworks’ proposal. Apple already had the most popular portable player and the most popular online music service, and apparently felt staying on its current track was more beneficial than diverting effort into striking deals with smaller partners. Apple may also have felt RealNetworks’ adoption of Windows Media was unlikely, given the rancorous legal history between RealNetworks and Microsoft.
Shouting Match — On 26-Jul-04, the public silence between RealNetworks and Apple was broken when RealNetworks announced a new technology initiative dubbed Harmony. Among other things, Harmony purports to make material protected using non-Apple DRM technologies playable on the iPod. Harmony could be an important market advantage for RealNetworks. Currently, iPods can play back either unprotected files (e.g., ordinary MP3s) or content protected using Apple’s FairPlay DRM system (like songs purchased from the iTunes Music Store). RealPlayer Music Store and the Rhapsody music service would have a competitive edge if they could claim their material works with Apple’s iPod as well as a multitude of other devices from Sony, Rio, PalmOne, Gateway, Dell, and others. RealNetworks’ DRM-enabled content would work on more than 70 portable devices, whereas protected material from iTunes Music Store would work on just one. RealNetworks’ reasoning for Harmony is appealing: when people buy music online, they should be able to listen to that music on the portable player of their choice without worrying about file formats or copy protection. It should just work.
I’m not fully versed in the technical details of Harmony, but it’s apparent RealNetworks did not create Harmony in conjunction with Apple. Instead, RealNetworks proceeded on its own, taking authorized material protected using non-Apple DRM schemes and wrapping it with Apple’s FairPlay DRM for use on the iPod. Thus, when the iPod sees content a user purchased from RealNetworks, it plays transparently. This method works for material available via Rhapsody and RealPlayer Music Store because those services use the same AAC audio format as content from the iTunes Music Store (albeit at a higher bitrate: 192 Kbps rather than 128 Kbps). iPods have built-in support for AAC; Harmony does not alter the iPod software or give it the capability to handle new media formats.
Apple fired back sharply at RealNetworks on 28-Jul-04, saying it was "stunned that RealNetworks has adopted the tactics and ethics of a hacker" to enable its content on Apple’s iPod, and warning that Harmony was unlikely to work with current and future iPods once Apple released new iPod software. In other words, Apple was angry, and would attempt to hamstring Harmony on the iPod as soon as possible. Apple also indicated it was investigating legal action, including possible violations of the Digital Millennium Copyright Act (DMCA). RealNetworks responded 29-Jul-04, re-affirming its commitment to Harmony and asserting the technology was both fully legal and developed independently.
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Loud and Off-Key — This dispute between Apple and RealNetworks touches on many nerves in the worlds of online music and digital rights management. Some people resent that Apple’s iPod currently supports only a closed, proprietary DRM system, and many people would welcome the idea of playing music purchased from any source they like on the iPod, regardless of whether it comes from the iTunes Music Store or another service. Support for additional DRM systems might make the iPod even more popular, and – given the iPod’s high margins – that would mean even more money for Apple. After all, Apple isn’t yet earning much (if any) money from selling music via the iTunes Music Store: why would Apple care if people bought songs from another service, so long as they’re played back on a profitable iPod?
On the other hand, part of the reason for the iPod’s success is its tight integration with iTunes and the iTunes Music Store. By controlling the user’s online music experience from browsing and purchase to synchronization and playback, Apple has created a best-of-breed solution. Supporting other DRM systems on the iPod – or licensing FairPlay to other online music services – means Apple would surrender both iTunes and the iTunes Music Store, two key components in Apple’s digital music strategy. If another online music service (like Rhapsody) or another jukebox application (like RealPlayer) didn’t support the iPod very well, that would diminish the market’s perception of the iPod.
However, if Apple remains set against Harmony, it’s not yet clear whether Apple has any practical recourse but to try pulling the rug out from under it via software updates, since Apple’s claim that RealNetworks potentially violated the DMCA seems tenuous. First, RealNetworks has been in enough tooth-and-nail fights with Microsoft over the years to be able to afford quality legal advice – it’s a safe bet a reasonable amount of homework was done before RealNetworks made a public statement. Second, RealNetworks’ Harmony does not appear to be violating copyright of protected content, since it is not disabling DRM – protected content is still protected once it’s transferred to the iPod. Third, Apple may have difficulty claiming its own copyrights were violated, since Harmony does not alter iTunes or the iPod’s built-in software, and the DMCA contains specific exemptions for reverse engineering solutions for the purpose of interoperability.
No Fat Ladies Singing Yet — Harmony may simply represent an escalation in RealNetworks’ efforts to get its content onto the iPod and expand the utility of its Windows-only Rhapsody music service. The dispute also highlights the fact that Apple’s current market-leading position in digital music distribution means the company will be forced to protect its business from competitors and dilution; in doing so, will undoubtedly take on tones and behaviors long-time Apple aficionados will find jarring. In fact, those tones and behaviors might be more reminiscent of a company which has long-dominated the operating system market: Microsoft.