Steve Jobs on Eliminating Digital Rights Management

The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.

Steve Jobs has a very provacative posting at Apple.com today asking for the elimination of digital rights management (DRM) that is used "to protect its music against theft." The most interesting part of the discussion to me was way Apple doesn't license its FairPlay DRM to others because it would be difficult for Apple to control information about the program and these leaks could be used to disable the protection. He suggests that is part of the reason that Microsoft has moved to the Apple model of having one company control both the hardware and software.

The other issue is ending DRM. Obviously Jobs would support this only if he believes that he has the best online music store and best hardware. Many economists have argued that Apple had locked customers into using iTunes once they had bought an iPod and that then the fact that they bought songs on iTunes would lock them into buying iPods in the future. The numbers that Jobs provides makes it clear that the investment the people make in songs bought by iTunes is so small that it is hard to think that there is much of a lock-in effect. He claims that the average iPod owner only has 3% of their songs from iTunes. The implication that he draws that this DRM hasn't stopped piracy. That last part seems like a big jump in logic to me, at least with the evidence that he has provided. These songs could be from people's legitimate CD collections. I also wonder about how much of this other space is due to podcasts, movies, audio books. It is because I have problems with this last step that I also have problems with his conclusion that the big four record companies would be better off junking DRM. Doing so could greatly increase piracy, which is what the record companies fear. I appears Jobs believes that he would benefit, but all that goes to show is that people aren't being locked into the iPod world. iPod and iTunes are both doing well because they are the best out there, not because people are locked into them.

There is one other possible interpretation to all this. It is possible that Jobs is reacting to recent pressure from multiple European countries to share its DRM. Apple might believe that it is easier for the music companies to defend this and at the same time Apple can make it look like it is in agreement with the Europeans. This interpretation depends on the reasonable assumption that the music companies are willing to fight hard to defend their property rights.

UPDATE: Well, others have picked up on this last point. "But several industry executives said they viewed Mr. Jobs’s comments as an effort to deflect blame from Apple and onto the record companies for the incompatibility of various digital music devices and services."

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Anonymous Ken said...

So junking DRM could (and almost certainly would) greatly increase piracy. The real question should be why, if record companies are rationally concerned with maximizing their profits, should they fear this. The situation seems quite similar to the brouhaha over VCRs a generation ago. They certainly increased piracy of movies, but every bit of empirical evidence seems to demonstrate that they also help boost movie producers' profits significantly. If I can increase my profits by letting people "steal" from me, then I'm all in favor of being a "victim". The industry's concern with piracy and DRM seems reminiscent of the miser who keeps his money in a mattress rather than invest it in a booming stock market , lest brokers charge him commissions on his trades, or the older person on a low, fixed income who seeks out tax free bonds in order to avoid the meager taxes with would otherwise have to pay on higher yield investments.

2/07/2007 2:47 AM  
Blogger Scott said...

Apple knows that their own DRM can be easily beaten. Every time I bought an album on iTunes, burned it to an audio CD as a backup. Later, if I wanted to re-import the songs from that audio CD, they can be imported as non DRM mp3 files. Therefore, you could theoretically switch to a non-Apple player.

But why would you want to? The new 5th generation 80GB iPod is just so damned good.

2/07/2007 9:55 PM  

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