DRM Spells Trouble for Apple, iTunes

    December 7, 2006

Earlier this week, Yahoo released singles by Norah Jones and Relient K in unprotected mp3 formats as part of an ongoing experiment looking at the viability of offering music tracks that are free of DRM (Digital Rights Management) constraints, which have had audiophiles the world over crying “foul” for quite some time.

For the past three years, Apple has exercised clear dominance in the digital music marketplace, chiefly as a result of the popularity engendered by its iPod portable media player, and the device’s subsequent dependence on Apple’s iTunes store as the sole method of legally purchasing music tracks.

Nicholas Carr echoes the lament of many would-be digital music merchants regarding Apple’s iTunes:

The existing model is, of course, the iTunes model. Apple’s iTunes store, which sells songs in a proprietary format that works only with iTunes software and iPod devices, is responsible for the vast majority of legal music downloads. Because it has the dominant music player, Apple has been able to call the shots up to now. It was the only company with the leverage to get people to start buying digital songs online, and to get that business going the record companies played along. They had little choice.

This has been the bane of other music services, such as Rhapsody and Yahoo, looking to establish a presence in the digital music market. As the Wall Street Journal reports, however, Yahoo’s bold move to release music in unprotected mp3 format could be just the remedy that competing marketplaces could embrace.

The releases come as some high-tech and music-industry executives are becoming increasingly concerned about Apple’s growing clout in the music business. Only online music files purchased from iTunes, ripped from users’ own CDs or downloaded from pirate services can be played on the popular iPod. Copy-protected songs purchased from Yahoo and other legitimate sources don’t work on it. By selling music in the MP3 format without copy-protection software, Yahoo can offer music that works easily on iPods.

The sentiment among most major music companies is that Apple’s refusal of allowing iTunes purchases music to be played on other devices, and the inability of music bought from other online vendors to play on the iPod, poses a clear and present danger to the engagement of legitimate commerce in the digital music market by companies other than Apple.

The constraints of DRM, however, are not solely commercial. In fact, the true loser in the tussle of protected versus unprotected content is actually the consumer.

I could wax poetic about the drawbacks of DRM, but a poster at Learn Out Loud does an excellent job by outlining the Top 10 Arguments Against DRM, these two being perhaps the most relevant to the consumer:

DRM fundamentally changes who is control of your media. – This might be the most esoteric of the arguments and is a bit difficult to explain but in a nutshell, when you buy DRM content for the first time in history, someone else is dictating to you what you can do with something that you’ve legally purchased.

Often the costs of the DRM are passed along to the consumer as well. – Since DRM isn’t free someone has to pay for it. Sometimes it’s the content producer in the form of reduced royalties. Other times it’s the consumer. Take the example of eMusic and Apple iTunes. iTunes tracks sell for 99 cents while eMusic tracks sell for 25 cents. One of the reasons why eMusic can sell its music for so much cheaper is that it isn’t spending tons of money implementing a DRM system and dealing with customers who are having DRM issues. So it is able to offer a technically superior product for a significantly lower price.

Peter Da Vanzo sums it up quite nicely with this analogy, “It’s like having a record (remember those?) that you can only play on one brand of record player. This stupid idea was never going to last.”

As the DRM debate continues, Apple would be well served to take heed of the handwriting on the wall, here. Yes, people love their iPods, but when faced with the choice of paying .99 cents for a song from iTunes or .25 cents for the exact same track from another merchant (which will play just the same on the device) who do you think will win out?

In the end, DRM could leave Apple SOL in the digital music marketplace.

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Joe is a staff writer for WebProNews. Visit WebProNews for the latest ebusiness news.