Jobs’ letter prompted by sales concerns

Walker Boyd Guest Writer

“A storm is brewing”, is what the technologically inclined would say. No doubt they would be referring to the controversy surrounding Digital Rights Management (DRM) and digital music downloads. In a recent, highly publicized, open letter by the Chief Executive Officer of Apple Steve Jobs entitled “Thoughts on Music,” Jobs berates the “big media” record conglomerates. Apparently this is for forcing his “free-spirited, youth-loving” company, Apple, to attach code to every song sold through the popular iTunes music store that prevents users from copying and sharing their music. Jobs writes, “If the big four music companies would license Apple their music without the requirement that it be protected with DRM…Apple would embrace it in a heartbeat.”

Jobs, of course, is responding to recent events that are putting the squeeze on Apple. First, France and a few other European countries who obviously have no understanding of our kind of capitalism—the kind that allows companies to do whatever they like regardless of the consumer’s concerns—moved to ban iTunes outright because its DRM scheme locks customers into using the iPod to play purchased music. This, in addition to the lawsuits wielding the same accusations stateside, must have Jobs sweating in his black tee and faded Levi’s.

However, this is money we’re talking about. Big money! So it comes as little surprise that Jobs has passed the blame for this unfortunate situation onto the record companies themselves. If Apple had no contractual obligation to put DRM on every piece of music sold, the reasoning goes, it wouldn’t hesitate to remove it. One can hear Apple saying, “Don’t blame me, the poor middle-man! Blame the music industry!”

At this point, though, Apple stands to gain quite a bit by removing DRM from the music it sells through iTunes. Not only will Apple be able to limit its legal exposure, competition will no longer be a threat to iTunes, seeing as Apple already controls 70 percent of the digital download market (npd.com). Apple is constantly searching to expand its presence in music sales. One of the greatest markets it has yet to exploit is the market of people who don’t buy digital music because they feel its protections are too restrictive. Copy-protected music sold by Apple can only be used with the iPod. If the iTunes store started selling unprotected music, it would attract customers who prefer more flexibility with their music or do not have iPods. Apple’s music store would therefore gain a larger share of the digital music download market.

This, coupled with the iPod’s near ubiquitous use, means that it is in both the consumer’s and Apple’s interest to lift the restrictions on music bought online. According to Jobs, around three percent of all music on iPods is bought from the iTunes store. By Jobs’ logic, iTunes DRM isn’t locking customers into using the iPod anyway. This statistic is a bit flawed, however, in distributing the number of songs bought through the iTunes store over all the iPods ever bought. One customer has reportedly spent $27,000 on music from iTunes. While DRMed music may be only three percent of all music on iPods, this statistic does not account for people who have no DRMed music at all, and those whose music collections may consist entirely of it.

How has the record industry responded to this? Hard to tell, but it looks positive. One of the largest of the “big four” music rights holders, Electric Music Industries, has recently begun testing a DRM-free model of digital music sales. It is certainly too soon to tell what effect, if any, Jobs’ “thoughts on music” will have on the music industry. If, however, it succeeds in forcing the record companies to re-evaluate their stance on DRM-free music, it will be a success by any measure. The record companies have always clung, dinosaur-like, to old sales models, but it looks like this wave of change is something the Recording Industry Association of America (RIAA) cannot avoid. Now, if only they will stop suing 13-year-olds for downloading Kelis and Ludacris songs on iTunes, the RIAA may yet garner some respect.