Jobs: Apple would drop DRM if record labels agree

Apple would drop digital rights management (DRM) technology from the music sold through its iTunes Store if major record companies would allow such a move, Apple CEO Steve Jobs said in an online post at Apple’s Web site. Jobs also called on people unhappy with DRM systems—particularly European regulators who want Apple to open its FairPlay DRM to competitors—to push record companies to sell online music without digital-rights restrictions.

“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,” Jobs wrote in a post called Thoughts on Music. “Every iPod ever made will play this DRM-free music.”

The comments from Jobs come at a time when consumers and European countries are pressuring Apple to loosen the tight ties between music sold at iTunes and Apple’s iPod music player. Currently, songs sold through iTunes can only play on iTunes—a restriction common to other digital music retail services.

Last month, Norway’s government ombudsman gave Apple a March 1 deadline to say whether it would change its DRM policy. Previously, the company had come under fire from France, which nearly passed a law requiring companies using DRM to open their technology to competitors last year; a compromise bill that allowed the iTunes Store to continue using its DRM system eventually passed.

It’s skirmishes like these that likely prompted Jobs to clarify Apple’s stance on digital-rights management, said analysts contacted by Macworld .

“It’s a perspective that's very much driven by practicality,” said Ross Rubin, director of analysis at market-research firm NPD Group. “It reinforces that Apple feels that it would benefit the user to offer better interoperability, but they are not willing to expose consumers more DRM to do it.”

Other factors may have pushed Jobs and Apple to respond so publicly to the DRM issue, Rubin added. “With the iPhone on the way, clearly the stakes have been raised. Apple is moving from a product that has a market size in the tens of millions to a market with a size of hundreds of millions or even 1 billion a year,” he said.

In his open letter, Jobs said creating a DRM system was a requirement by the major record labels if they were to agree to let Apple sell their music online. Apple’s FairPlay lets users play protected songs on up to five computers and an unlimited number of iPods while burning playlists of purchased music up to seven times.

“Obtaining such rights from the music companies was unprecedented at the time, and even today is unmatched by most other digital music services,” Jobs wrote. “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.”

The Apple CEO called DRM-free music “clearly the best alternative for consumers” and one Apple “would embrace… in a heartbeat.” But that decision hinges on what the four largest music companies—Universal, Sony BMG, Warner and EMI—decide to do, Jobs added. And right now, they’re adamant that DRM technology be included with online music.

“Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free,” said Jobs, noting that two of the four largest music companies have owners located in Europe, where much of the clamor over DRM has taken place. Another, SONY BMG, is half owned by German-based Bertelsmann.

“Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace,” Jobs said. “Apple will embrace this wholeheartedly.”

Could Apple face a backlash from major record labels by calling on consumers and regulators to pressure them? It’s unlikely, analysts say.

“I don’t really think there's anything to lose,” NPD’s Rubin said. “It’s a plea to the court of public opinion.”

While Jobs expressed an eagerness to drop FairPlay entirely from iTunes purchases, he was less open to the idea of licensing the DRM technology to Apple’s competitors. That would require Apple to disclose proprietary technology to people outside the company, Jobs said, inevitably leading to leaks.

“The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute,” Jobs wrote. “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.”

Analysts predicted Jobs’ comments have a strong chance of resonating with the market. “He builds a very rational case,” said Tim Bajarin, president of market-research firm Creative Strategies. “The music industry has already been floating the idea of a DRM-free environment. Hopefully what Jobs did today will go a long way to making it a reality.”

Jobs also criticizes the efficacy of DRM technology in his letter, noting that it’s difficult for a DRM system to work since music companies sell 10 times the amount of songs sold online via CDs with no DRM. Users can rip those CDs and upload those music files to the Internet for others to download.

“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,” Jobs said.

Jobs also disputed the notion that DRM systems tie users to a particular music player or store. According to Jobs, Apple has sold 90 million iPods and 2 billion songs—or 22 songs purchased for every iPod ever sold. By Jobs’ math, that accounts for less than 3 percent of the music stored on an iPod capable of holding 1,000 songs that’s filled to capacity.

“It’s hard to believe that just 3 percent of the music on the average iPod is enough to lock users into buying only iPods in the future,” Jobs said.

Editor’s note: This story was updated at 1:50 p.m. PT to add comments from analysts.

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