Steve Jobs
Wednesday 7th February, 2007 13:46 Comments: 3
In his open letter, Thoughts on Music, Steve Jobs writes:
Some have argued that once a consumer purchases a body of music from one of the proprietary music stores, they are forever locked into only using music players from that one company. Or, if they buy a specific player, they are locked into buying music only from that company's music store. Is this true? Let's look at the data for iPods and the iTunes store - they are the industry's most popular products and we have accurate data for them. Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that's 22 songs purchased from the iTunes store for each iPod ever sold.
Today's most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats. Its hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.
Perhaps he should give consumers a bit more credit. Perhaps one of the reasons why only 22 out of 1000 songs on an iPod contain DRM is because consumers don't pay for these tracks as they know it would lock them in. Perhaps another reason is they already have their MP3 collection on their computer and it's easier and cheaper to copy their existing collection across than buy and download versions that contain DRM. For such an accomplished businessman, he seems to present an odd interpretation of those statistics.
When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.
Apple was able to negotiate landmark usage rights at the time, which include allowing users to play their DRM protected music on up to 5 computers and on an unlimited number of iPods.
I suspect Apple did have to put up a fight in order to obtain these somewhat generous usage rights, but the rumour is there wasn't much of a "negotiation". As the launch date for the iTunes Music Store neared, negotiations between Apple and the big four dragged on. They'd already gone on for months - but with each label setting a different price, and attaching complicated clauses of its own to the deal. Jobs simply threw the paperwork in the bin, the story goes, and went ahead with the launch anyway. Contemplating an avalanche of publicity some days later, the labels decided it would be too embarrassing to withdraw. Maybe the story isn't true. Maybe he accidentally omitted it fom his story.
It is a cat-and-mouse game. Apple's DRM system is called FairPlay. While we have had a few breaches in FairPlay, we have been able to successfully repair them through updating the iTunes store software, the iTunes jukebox software and software in the iPods themselves. So far we have met our commitments to the music companies to protect their music, and we have given users the most liberal usage rights available in the industry for legally downloaded music.
It's amazing how quickly they can come up with an update to iTunes (and how often you have to upgrade the software and your iPod's firmware) when the big labels are on their back. When it comes to security, they're not quite as good. And it is a cat and mouse game, and they can dodge as much as they like, but ultimately it's flawed and offers limited protection. It's also a nuisance for legitimate consumers, those that want to pay for music once and play it anywhere.
I don't have a problem with paying for music, but I don't want to pay more than a token amount for a track that comes with restrictions. The cost of a track at iTunes is more than a token amount. Bandwidth is dirt cheap, especially in America, and it costs the same amount of money and effort to put a song on iTunes no matter how many people download it.
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.
Or... DRM is flawed, Europe are threatening us, and we don't sell enough tracks on iTunes to make any money, so we're going to stick with making trendy looking hardware that we can sell for a profit. Like the iPhone. But until then, we'll pass the buck onto the big four and try and make them look bad.
If Apple aren't making any music from iTunes, there's no reason to keep the "big four" on their side.
Some have argued that once a consumer purchases a body of music from one of the proprietary music stores, they are forever locked into only using music players from that one company. Or, if they buy a specific player, they are locked into buying music only from that company's music store. Is this true? Let's look at the data for iPods and the iTunes store - they are the industry's most popular products and we have accurate data for them. Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that's 22 songs purchased from the iTunes store for each iPod ever sold.
Today's most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats. Its hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.
Perhaps he should give consumers a bit more credit. Perhaps one of the reasons why only 22 out of 1000 songs on an iPod contain DRM is because consumers don't pay for these tracks as they know it would lock them in. Perhaps another reason is they already have their MP3 collection on their computer and it's easier and cheaper to copy their existing collection across than buy and download versions that contain DRM. For such an accomplished businessman, he seems to present an odd interpretation of those statistics.
When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.
Apple was able to negotiate landmark usage rights at the time, which include allowing users to play their DRM protected music on up to 5 computers and on an unlimited number of iPods.
I suspect Apple did have to put up a fight in order to obtain these somewhat generous usage rights, but the rumour is there wasn't much of a "negotiation". As the launch date for the iTunes Music Store neared, negotiations between Apple and the big four dragged on. They'd already gone on for months - but with each label setting a different price, and attaching complicated clauses of its own to the deal. Jobs simply threw the paperwork in the bin, the story goes, and went ahead with the launch anyway. Contemplating an avalanche of publicity some days later, the labels decided it would be too embarrassing to withdraw. Maybe the story isn't true. Maybe he accidentally omitted it fom his story.
It is a cat-and-mouse game. Apple's DRM system is called FairPlay. While we have had a few breaches in FairPlay, we have been able to successfully repair them through updating the iTunes store software, the iTunes jukebox software and software in the iPods themselves. So far we have met our commitments to the music companies to protect their music, and we have given users the most liberal usage rights available in the industry for legally downloaded music.
It's amazing how quickly they can come up with an update to iTunes (and how often you have to upgrade the software and your iPod's firmware) when the big labels are on their back. When it comes to security, they're not quite as good. And it is a cat and mouse game, and they can dodge as much as they like, but ultimately it's flawed and offers limited protection. It's also a nuisance for legitimate consumers, those that want to pay for music once and play it anywhere.
I don't have a problem with paying for music, but I don't want to pay more than a token amount for a track that comes with restrictions. The cost of a track at iTunes is more than a token amount. Bandwidth is dirt cheap, especially in America, and it costs the same amount of money and effort to put a song on iTunes no matter how many people download it.
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.
Or... DRM is flawed, Europe are threatening us, and we don't sell enough tracks on iTunes to make any money, so we're going to stick with making trendy looking hardware that we can sell for a profit. Like the iPhone. But until then, we'll pass the buck onto the big four and try and make them look bad.
If Apple aren't making any music from iTunes, there's no reason to keep the "big four" on their side.
Robert - Wednesday 7th February, 2007 23:48 
Well he is right. The records and movie companies have really fallen behind technology. I usual argue with my stepdad about this stuff as I keep pointing out that the law is geared towards old fashioned piracy and is totally inadequate today. Consumers are also more informed and well aware of the limitations and want their music to be transferrable. It is about time the big four recognised that and adapted their business to it.
I stumbed across this on The Register:
So true! Hehe.
And it seems he's not that keen on ditching DRM!
http://www.nytimes.com/2007/01/14/business/yourmoney/14digi.html?pagewanted=2
Passing the buck. Eventually we will discover that all this is about muscians actually wanting to get paid and make money from their work. How selfish of them! Can't they just work for free like open-source programmers?
So true! Hehe.
And it seems he's not that keen on ditching DRM!
http://www.nytimes.com/2007/01/14/business/yourmoney/14digi.html?pagewanted=2
Among the artists who can be found at eMusic are Barenaked Ladies, Sarah McLachlan and Avril Lavigne, who are represented by Nettwerk Music Group, based in Vancouver, British Columbia. All Nettwerk releases are available at eMusic without copy protection.
But when the same tracks are sold by the iTunes Music Store, Apple insists on attaching FairPlay copy protection that limits their use to only one portable player, the iPod. Terry McBride, Nettwerk's chief executive, said that the artists initially required Apple to use copy protection, but that this was no longer the case. At this point, he said, copy protection serves only Apple's interests .
Josh Bernoff, a principal analyst at Forrester Research, agreed, saying copy protection "just locks people into Apple." He said he had recently asked Apple when the company would remove copy protection and was told, "We see no need to do so."
But when the same tracks are sold by the iTunes Music Store, Apple insists on attaching FairPlay copy protection that limits their use to only one portable player, the iPod. Terry McBride, Nettwerk's chief executive, said that the artists initially required Apple to use copy protection, but that this was no longer the case. At this point, he said, copy protection serves only Apple's interests .
Josh Bernoff, a principal analyst at Forrester Research, agreed, saying copy protection "just locks people into Apple." He said he had recently asked Apple when the company would remove copy protection and was told, "We see no need to do so."