Maybe Phil Schiller didn’t introduce a new Mac mini, or the mythical iPhone nano, but for my money the most important announcement of the keynote came shoved in the last ten minutes or so of Tuesdasy’s presentation: the news that Apple had struck a deal with the other three major labels to finally offer—eventually—iTunes’s entire song catalog without Digital Rights Management.
It’s the culmination of something Steve Jobs said that he was setting out to accomplish way back in February of 2007 when he published his open letter, Thoughts on Music. At the time, DRM was just the way things were: it was the tradeoff that we all accepted for the ability to buy music online from our favorite bands. But DRM was always an antiquated idea, promulgated on the flawed premises that: 1) sharing is bad; and 2) your average person would rather steal something than buy it.
What makes this move interesting, if not wholly unexpected, is the fact that Apple didn’t need to do it. Sure, there’s long been a vocal minority that objects in principle to the idea of Digital Rights Management, but it’s just that: a minority. It’s not a segment that really impacts Apple’s bottom line for the iTunes Store—they’re still raking in money left and right despite the presence of DRM. And since Apple makes the world’s most popular music player, you could easily argue that selling DRM-music helps their business model, as music from competing vendors can’t be played on the iPod—unless, of course it’s DRM-free.
DRM, thus, became one of the labels’ levers for keeping Apple under control. With Cupertino dominating the online—and increasingly the entire retail—market, the labels worried they were losing their power in the situation. So instead they gave the DRM-free to Apple’s competitors, like Amazon MP3, Napster, and Rhapsody. That way, iPod users had their choice of vendors for buying music they could play on their preferred device.
So how—and why—did Apple drop DRM now of all times? For that, look no further than the announcement that directly preceded the DRM-free news: the introduction of variable pricing tiers to the iTunes Store. Apple, and reportedly Steve Jobs, have been adamant on the 99 cent price point that songs have held since the iTunes Store opened and, with the company’s backing, it quickly became the de facto price for music tracks sold online. Meanwhile, the record labels have tried everything in their power to try and get Apple to budge and allow them to price content as they saw fit; the same complaint that NBC had when it yanked its content from the iTunes Store.
So this quid pro quo of pricing for DRM means Apple has apparently reached the point where it believes that offering DRM-free music will benefit them more than variable pricing could potentially hurt them. Schiller was quick to point out that there would be more tracks available at the new 69 cent price tier than at the $1.29 level, but that doesn’t tell the whole story. For example, will tracks be priced like in the iTunes’s movie section, with new releases fetching higher prices and “catalog” tracks coming in at the lower level? And even if 69 cent tracks outnumber $1.29 tracks, could $1.29 tracks still outnumber 99 cent tracks?
We won’t know how the pricing shakes out until at least April, when it actually goes into effect, but the DRM-free movement has already started, with the majority of iTunes tracks already supposed to be available as iTunes Plus tracks (raising the question, of course, of whether that moniker gets dropped entirely when everything is iTunes Plus; or will we see iTunes Plus Plus?).
As I said up top, this is, to my mind, the biggest announcement we saw come out of Expo, primarily because it’s of importance not just to Apple followers, but to every consumer in this digital age. Remember that old adage about the customer always being right? The shift to DRM-free tracks rebalances the scales and reaffirms the fact that it’s the consumers’ needs that are paramount, and not those of the content providers.
So what happens now that the walls of Jericho have come crashing down? Will the fact that all of Apple’s music is now being sold without DRM mean that the record labels are going to crash and burn as people begin trading their songs willy-nilly? Far from it; in fact, I’m betting sales will be better than ever—of digital downloads, anyway; I expect that CDs are heading the way of VHS. More to the point, what I think the music industry will start to learn is that sharing music actually helps them in the end, as word-of-mouth remains one of the most powerful marketing forces around, and DRM-free digital music makes it easier than ever.