A year after iTunes Plus, Apple faces stepped-up competition

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Does DRM matter?

iPod classic

But for all of the noise about Digital Rights Management, the broad availability of DRM-free music has done little to change the overall digital downloads market; people clamoring for it appear to be a vocal minority. Despite iTunes’ meager selection of DRM-free music compared to Amazon and Napster, customers are still buying tracks from iTunes in droves. According to NPD’s Crupnick, Apple continues to hold around three-quarters of the digital download market, with Amazon in second place, trailing at “a huge gap.” Apple’s even risen to become the top seller of music in the U.S., beating out brick-and-mortar stores Wal-Mart and Best Buy.

“There’s been no real substantive change in market share for iTunes and for the iPod,” says Crupnick. “If you’re in that environment, DRM-free doesn’t impact you.”

Phil Leigh agrees: “The amount that it hurts Apple is almost unnoticeable. Most people that have MP3 players have iPods. And the vast majority of iPod owners are unaware or [disinclined] to use other services.”

And the number of those services on the market is narrowing, too. In the past year, several download sites backed by prominent companies have closed their doors, including Sony’s Connect store and Yahoo Music.

Music services shutting down may let DRM finally shows its teeth. If a brick-and-mortar music retailer goes out of business, all of the CDs you bought there continue to work just fine. But the matter is not so straightforward in the online music world. While many of the closing services operated on a subscription basis that offered unlimited music as long as you paid a regular fee, some also let users download songs to their computer for an additional fee. What happens to those tracks when the service closes?

Phil Leigh thinks issues like this could prompt more awareness of DRM in the future, as digital media becomes even more a part of our lives. “When people buy new computers and try to move their libraries, it’s not straightforward. There’s going to be some foul-ups, disillusioned consumers.”

Microsoft is one company that’s recently had to deal with just this sort of problem. The company’s MSN Music venture stopped selling music in 2006, but only recently announced its intention to shut down the servers that let users continue to play purchased music at the end of this summer. Past that point, those users will only be able to play their music as long as they keep using the same computer and operating system. But if they upgrade either hardware or software, they’re out of luck.

For all of that, though, most users haven’t yet found themselves on the business end of DRM. “It’s not an issue for the average consumer,” says Crupnick. “The average consumer is an Apple consumer and they don’t run into DRM issues except for very rarely.” It seems that as far as most people are concerned DRM is not a major factor when buying media online. At least, not yet.

The future

In the long run, music isn’t the only form of media DRM is concerned with either. In the five years since its inception, the iTunes Store has steadily expanded, adding audiobooks, podcasts, TV shows, movies, and even games for the iPod. In June 2008, Apple will also launch its AppStore, which will let iPhone and iPod touch users download software directly to their devices. And nearly all of this media is or will be protected by DRM too.

As the former CEO of Pixar and now a board member at Disney, Steve Jobs clearly has a vested interest in video. When asked about the topic at Apple’s joint press conference with EMI first announcing the DRM-free initiative, Jobs said that video was different from music: you can’t go out and buy DRM-free video, even on a physical medium like a DVD. To some that might seem like a rationalization, but if nothing else it’s an indication that the movie and television industry are eager to avoid the mistakes of their cousins, the record labels.

“You’ll continue to see DRM on video,” says Russ Crupnick.”The video people look at the way music is acquired and go ‘we don’t want to wind up like that.’ It’s killing the business.”

Inside Digital Media’s Phil Leigh concurs: “The natural instincts of the people that control the studios is to try and control [the media] as much as possible.”

Leigh foresees a two-prong model for video, where companies will offer their content in both ad-supported and for-pay formats. But he thinks consumers will be more forgiving of DRM on video, too, because it’s consumed differently. “The problem with music is you want to move it one from device to the next; with movies you just want to watch it once.”

But both Crupnick and Leigh agree that the march toward DRM-free music will continue. “In the long term, the reality is we are going to a situation where we’re going to be DRM-free for individual downloads,” says Crupnick. Leigh points out that the record industry’s sales have been in decline over the last several years, and says that he would be unsurprised to see them drop even more.

“It puts more pressure on the labels than on Apple.” The relationship between Apple and the labels will change over time, Leigh says. “The question is: who has more time?”

[Associate editor Dan Moren blogs about Apple at MacUser.]

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