[Fmpro] More chinks in the wall -from the biggest Apple

[Phil Kelly]

read it and weep      Phil Kelly

February 7, 2007

Jobs Calls for End to Music Copy Protection
By JOHN MARKOFF


SAN FRANCISCO, Feb. 6 —  Steven P. Jobs, Apple’s chief executive, 
jolted the record industry on Tuesday by calling on its largest 
companies to allow online music sales unfettered by antipiracy 
software.

The move is a gamble for Apple. Its iPod players and iTunes Store have 
defined the online music market, and they have much at stake in the 
current copy-protection system.

Under terms reached with the major record labels, online music stores 
embed software code into the digital song files they sell to restrict 
the ability to copy them. Because Apple uses its own system, the songs 
it sells can be played only on the iPod. That limitation has drawn 
increasing scrutiny from European governments, pressure that Apple has 
recently begun to acknowledge.

Mr. Jobs’s appeal, posted on the company’s Web site Tuesday, came in 
the form of an essay titled “Thoughts on Music,” but in essence it was 
a letter to the “Big 4” music companies: Universal, Sony BMG, Warner 
and EMI.

While he said that “customers are being well served” by the current 
approach to digital rights management — with online music retailers 
using incompatible antipiracy systems but nonetheless offering “a wide 
variety of choices” — the subtext clearly pointed to the prospect of 
change.

He dismissed one possible alternative, in which Apple would license its 
own system, FairPlay, allowing competing digital players to play iTunes 
songs and letting other stores sell copy-protected music for the iPod. 
Mr. Jobs said that approach would only complicate enforcement of 
digital rights management, as myriad companies would have to coordinate 
software and hardware updates.

Instead, he proposed that labels could shed digital rights management 
altogether. Mr. Jobs pointed out that only 10 percent of all music sold 
last year was through an online store and that music is already easily 
loaded onto digital players from CDs, with no antipiracy features. 
Attaching digital rights management to music bought online has only 
limited the number of online music stores, he wrote.

“This is clearly the best alternative for consumers, and Apple would 
embrace it in a heartbeat,” he wrote.

Mr. Jobs’s move comes as the music industry appears to be facing a 
crisis. Sales of its mainstay product — the album — continue to sink, 
and sales of digital music, including individual songs, have not 
increased fast enough to offset the decline.

With a paucity of hit releases to start the year, industrywide album 
sales are already down more than 15 percent from last year, the worst 
January performance since computerized sales tracking began in 1991.

At a forum in France last month, Rob Glaser, chief executive of 
RealNetworks, which operates the Rhapsody digital music service, 
predicted the widespread availability of unrestricted digital music 
within a few years. He said it was “an idea in ascendance and whose 
time has come.”

But Mr. Jobs is clearly the most powerful voice raised so far in 
support of a change. With the clout built on his company’s market share 
for both players and music, he has already prevailed against the labels 
in disputes over pricing.

Facing pressure to bolster digital sales, the four major music 
companies have only toyed with the idea of selling unprotected files — 
most notably with a personalized version of a Jessica Simpson song and 
the first single from the new album of Norah Jones. MySpace, the 
social-networking giant that is host to pages for countless independent 
and major-label acts, has embraced the unrestricted MP3 format for 
artists who choose to sell music there.

More recently, the industry has been abuzz with rumors that one or more 
of the major companies is preparing to lift restrictions on some 
portions of their digital catalog.

Jeanne Meyer, a spokeswoman for EMI, said, “The lack of 
interoperability between a proliferating range of digital platforms and 
devices is increasingly becoming a real issue for music consumers.”

The Universal Music Group, the Warner Music Group and Sony BMG Music 
Entertainment declined to comment. 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.

There is a general sense that the industry is still unwilling to do 
away completely with copy protection, and no contracts have been signed 
yet to change the systems of distribution by any of the players.

A senior executive at one company, who requested anonymity to avoid 
straining relations with Apple, said that while labels might experiment 
with other forms of copy-protection software, “we’re not going to 
broadly license our content for unprotected digital distribution.”

Another digital music industry executive said that the record companies 
— many of them part of larger media companies involved in movie and 
television production — were concerned that lifting restrictions on 
digital music might have perilous effects on the parallel market for 
copy-protected video content.

Several consumer electronics and music industry executives said that if 
the music industry moved away from copy protection, it could 
potentially make it easier for competing music players. Mr. Jobs seems 
to be betting that anything that stimulates the sale of digital music 
can only help his company.

“It’s a bold move on his part,” said Ted Cohen, managing partner of TAG 
Strategic, an industry consultancy; he is also former senior vice 
president for digital development and distribution for EMI Music. “If 
anything can play on anything, it’s a clear win for the consumer 
electronics device world, but a potential disaster for the content 
companies.”

The global music trade group, the International Federation for the 
Phonographic Industry, based in London, has long pushed for 
“interoperability,” saying Apple should license its digital management 
system so that iTunes music plays on devices other than the iPod. But 
the industry has also stuck with the idea of some kind of digital 
control to prevent wholesale copying of musical tracks.

Officially, the industry chose to respond Tuesday by seizing on one 
idea that Mr. Jobs raised — licensing Apple’s own copy-protection 
system — even though he went on to reject it. “Apple’s offer to license 
FairPlay to other technology companies is a welcome breakthrough and 
would be a real victory for fans, artists and labels,” the Recording 
Industry Association of America said.

Mr. Jobs’s statement drew criticism from some competitors, who argued 
that he was simply trying to get in front of a shift in industry 
strategy and claim credit for it.

Jason Reindorp, marketing director for Zune at Microsoft, said Mr. 
Jobs’s call for unrestricted music sales was “irresponsible, or at the 
very least naïve,” adding, “It’s like he’s on top of the mountain 
making pronouncements, while we’re here on the ground working with the 
industry to make it happen.”

“He’s certainly a master of the obvious,” Mr. Reindorp said, adding 
that “the stars were already aligning” to loosen the restrictions.

In Norway last month, after a yearlong investigation, the government’s 
consumer ombudsman ruled that iTunes violates national law by 
restricting playback to iPods. The government gave Apple until Oct. 1 
to make changes.

Consumer agencies in six other European countries are looking into the 
legality of limiting how legally purchased songs can be played.

Late last month, as consumer groups across the region began banding 
together, Apple issued a statement that said, “Apple hopes that 
European governments will encourage a competitive environment that 
allows innovation to thrive, protects intellectual property and allows 
consumers to decide which products are successful.”

In 2005, France lobbed the first legislative volley in the European 
effort to fight digital restrictions, but by the time the law was 
adopted last summer, most of the teeth were gone from the proposal. 
Now, the French are putting together a government commission that will 
rule on the legality of digital rights restrictions case by case.

Jeff Leeds contributed reporting from Los Angeles, Victoria Shannon 
from Paris and Michael J. de la Merced from New York.



Copyright 2007  The New York Times Company

Phil Kelly
www.philkellymusic.com