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Posted by Michelle Steiner on 02/07/07 00:29
<http://www.apple.com/hotnews/thoughtsonmusic/>
Steve Jobs
February 6, 2007
With the stunning global success of Apples iPod music player and iTunes
online music store, some have called for Apple to open the digital
rights management (DRM) system that Apple uses to protect its music
against theft, so that music purchased from iTunes can be played on
digital devices purchased from other companies, and protected music
purchased from other online music stores can play on iPods. Lets
examine the current situation and how we got here, then look at three
possible alternatives for the future.
To begin, it is useful to remember that all iPods play music that is
free of any DRM and encoded in open licensable formats such as MP3 and
AAC. iPod users can and do acquire their music from many sources,
including CDs they own. Music on CDs can be easily imported into the
freely-downloadable iTunes jukebox software which runs on both Macs and
Windows PCs, and is automatically encoded into the open AAC or MP3
formats without any DRM. This music can be played on iPods or any other
music players that play these open formats.
The rub comes from the music Apple sells on its online iTunes Store.
Since Apple does not own or control any music itself, it must license
the rights to distribute music from others, primarily the big four
music companies: Universal, Sony BMG, Warner and EMI. These four
companies control the distribution of over 70% of the worlds music.
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. Obtaining such rights
from the music companies was unprecedented at the time, and even today
is unmatched by most other digital music services. However, a key
provision of our agreements with the music companies is that if our DRM
system is compromised and their music becomes playable on unauthorized
devices, we have only a small number of weeks to fix the problem or they
can withdraw their entire music catalog from our iTunes store.
To prevent illegal copies, DRM systems must allow only authorized
devices to play the protected music. If a copy of a DRM protected song
is posted on the Internet, it should not be able to play on a
downloaders computer or portable music device. To achieve this, a DRM
system employs secrets. There is no theory of protecting content other
than keeping secrets. In other words, even if one uses the most
sophisticated cryptographic locks to protect the actual music, one must
still hide the keys which unlock the music on the users computer or
portable music player. No one has ever implemented a DRM system that
does not depend on such secrets for its operation.
The problem, of course, is that there are many smart people in the
world, some with a lot of time on their hands, who love to discover such
secrets and publish a way for everyone to get free (and stolen) music.
They are often successful in doing just that, so any company trying to
protect content using a DRM must frequently update it with new and
harder to discover secrets. It is a cat-and-mouse game. Apples 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.
With this background, lets now explore three different alternatives for
the future.
The first alternative is to continue on the current course, with each
manufacturer competing freely with their own top to bottom proprietary
systems for selling, playing and protecting music. It is a very
competitive market, with major global companies making large investments
to develop new music players and online music stores. Apple, Microsoft
and Sony all compete with proprietary systems. Music purchased from
Microsofts Zune store will only play on Zune players; music purchased
from Sonys Connect store will only play on Sonys players; and music
purchased from Apples iTunes store will only play on iPods. This is the
current state of affairs in the industry, and customers are being well
served with a continuing stream of innovative products and a wide
variety of choices.
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 companys music store.
Is this true? Lets look at the data for iPods and the iTunes store
they are the industrys 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,
thats 22 songs purchased from the iTunes store for each iPod ever sold.
Todaysmost 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 enoughto 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.
The second alternative is for Apple to license its FairPlay DRM
technology to current and future competitors with the goal of achieving
interoperability between different companys players and music stores.
On the surface, this seems like a good idea since it might offer
customers increased choice now and in the future. And Apple might
benefit by charging a small licensing fee for its FairPlay DRM. However,
when we look a bit deeper, problems begin to emerge. The most serious
problem is that licensing a DRM involves disclosing some of its secrets
to many people in many companies, and history tells us that inevitably
these secrets will leak. The Internet has made such leaks far more
damaging, since a single leak can be spread worldwide in less than a
minute. Such leaks can rapidly result in software programs available as
free downloads on the Internet which will disable the DRM protection so
that formerly protected songs can be played on unauthorized players.
An equally serious problem is how to quickly repair the damage caused by
such a leak. A successful repair will likely involve enhancing the music
store software, the music jukebox software, and the software in the
players with new secrets, then transferring this updated software into
the tens (or hundreds) of millions of Macs, Windows PCs and players
already in use. This must all be done quickly and in a very coordinated
way. Such an undertaking is very difficult when just one company
controls all of the pieces. It is near impossible if multiple companies
control separate pieces of the puzzle, and all of them must quickly act
in concert to repair the damage from a leak.
Apple has concluded that if it licenses FairPlay to others, it can no
longer guarantee to protect the music it licenses from the big four
music companies. Perhaps this same conclusion contributed to Microsofts
recent decision to switch their emphasis from an open model of
licensing their DRM to others to a closed model of offering a
proprietary music store, proprietary jukebox software and proprietary
players.
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.
Why would the big four music companies agree to let Apple and others
distribute their music without using DRM systems to protect it? The
simplest answer is because DRMs havent worked, and may never work, to
halt music piracy. Though the big four music companies require that all
their music sold online be protected with DRMs, these same music
companies continue to sell billions of CDs a year which contain
completely unprotected music. Thats right! No DRM system was ever
developed for the CD, so all the music distributed on CDs can be easily
uploaded to the Internet, then (illegally) downloaded and played on any
computer or player.
In 2006, under 2 billion DRM-protected songs were sold worldwide by
online stores, while over 20 billion songs were sold completely
DRM-free andunprotectedon CDs by the music companies themselves. The
music companies sell the vast majority of their music DRM-free, and show
no signs of changing this behavior, since the overwhelming majority of
their revenues depend on selling CDs which must play in CD players that
support no DRM system.
So if the music companies are selling over 90 percent of their music
DRM-free, what benefits do they get from selling the remaining small
percentage of their music encumbered with a DRM system? There appear to
be none. If anything, the technical expertise and overhead required to
create, operate and update a DRM system has limited the number of
participants selling DRM protected music. If such requirements were
removed, the music industry might experience an influx of new companies
willing to invest in innovative new stores and players. This can only be
seen as a positive by the music companies.
Much of the concern over DRM systems has arisen in European
countries.Perhaps those unhappy with the current situation should
redirect their energies towards persuading the music companies to sell
their music DRM-free.For Europeans, two and a half of the big four
music companies are located right in their backyard.The largest,
Universal, is 100% owned by Vivendi, a French company.EMI is a British
company, and Sony BMG is 50% owned by Bertelsmann, a German company.
Convincing themto license their music to Apple and others DRM-free will
createa truly interoperable music marketplace. Apple will embrace this
wholeheartedly.
--
Support the troops: Bring them home ASAP.
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