Jobs drowning in his own Kupertino Kool-Aid

A day late and a dollar short, I know. But since I was the one out on a limb for a while writing and making videos about digital rights management technologies and how Apple's in particular (officially called FairPlay but I called it UnFairPlay) was harmful to consumers, not to mention how I've said and still believe that the US trustbusters should be after Apple (and not politicking on its behalf in Europe), I can't not weigh in on Steve Jobs' request to the world to not shoot the messenger. Look 'datta way, at the record labels he says. 

Actually, I'm glad I'm late because it gave time for another important data point to roll in. Today, while listening to National Public Radio, I heard the morning news folks read a response from the Recording Industry Association of America to yesterday's NPR reporting on Jobs' letter. It was short and to the point and instructed Jobs to make Apple's DRM technology available to the company's rivals.  

What's interesting to me is that Steve Jobs was apparently feeling enough heat over Apple's DRM to come up with the herring that he did in the first place. Why come out now, of all times, to plea Apple's innocence on the issue and ask the world to rid itself of DRM (see the update at the end of this post for more thoughts on the answer)? Public pressure? Pressure from the Europeans? Microsoft's Zune? Is he feeling paranoid over some of the other rights management technologies that are in-play -- for example the DRM associated with the CableCard specification -- a specification associated with a pipeline into people's homes (the cable guy) that's far more prominent than Apple's iTunes Music Store (iTMS) pipeline? It's hard to tell.

But one thing is for sure. Jobs must have have ingested a serious amount of his own Kupertino Kool-Aid in order to work up the bravado it must have taken to write such a disingenuous letter (as though everyone would buy it). Yesterday, I wanted to write about how he couldn't lose by calling upon the record labels to give up on DRM. This is a guy that knows the entertainment business better than most. He has wheeled and dealed with the entertainment confab (in fact, he's a part of it too) long enough to know that the record labels would say no to his open letter. This morning's statement by the RIAA simply confirmed that. Sure. Jobs tries to come off as the average music lover's knight in white shining armor and the music industry ends up looking like the bad guy.

Jobs is actually right about what the music industry should do. But his presentation reminds me of the pathological liar who ends up believing his own lies. For Jobs to successfully frame the music industry, he had to also make convincing arguments that (a) the integrity of Apple's DRM remains uncompromised and (b) licensing that DRM would result in such compromise. Finally, he needed to establish that Apple isn't the big bad wolf everyone is making it out to be. 

Enter the Kupertino Kool-Aid.

History tells us that no anti-piracy system is safe from compromise. Apple's has been compromised. Microsoft's has been compromised. The protection on Hi-Definition DVDs is toast. How far do we want to go back? They've all been beaten. Jobs comes right out and says it's a cat and mouse game, that FairPlay has been breached. But in the same breath, he wants to believe that he can't license FairPlay because that too will lead to a breach. Wrote Jobs:

The most serious problem is that licensing a DRM involves disclosing some of its secrets to many people in many companies, and history tells us that inevitably these secrets will leak. The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute. 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.

On the one hand, Jobs wants us to believe that FairPlay will remain unbreachable as long as Apple  doesn't license it. On the other, he's telling us that it has been breached as long as Apple hasn't been licensing it. Too bad he's not under oath in a mock trial at some law school. Even a first year law student would eat him alive on the stand.  The bit about a single leak spreading worldwide? It's a distraction. That's true in either case. Not only that, although it should be, Apple is not currently facing an antitrust ruling. If it decided to license FairPlay, it would be under no obligation to license it to every Tom, Dick, and Harriet that asked for a license. Jobs could decide who he trusts and who he doesn't just the same way he placed his faith in his pal (and Motorola CEO) Ed Zander. If Jobs truly believed his own blather, he would have never licensed Apple's technology to Motorola   for inclusion in the very first iTunes phones. 

Jobs doesn't even have to listen to the RIAA. There are plenty of companies that aren't Apple's rivals that could benefit from licensing FairPlay. Escient for example, makes a digital media server (the Fireball) for centralized home entertainment systems like the one I have in my home. Until very recently, Apple had nothing that was remotely close to a solution like Escient's where, through LED panels in the walls of my house, I could browse whatever music was stored on the Fireball server. The only solutions from Apple that are remotely close to this all require a computer running iTunes which is pure insanity.

To me, Apple TV, which is one such solution that was recently released is simply evidence that even if the traditional hi-fi vendors like Escient aren't rivals of Apple now, they will be. Apple wants its gear (some of which hasn't been invented yet) to be the heartbeat of our home entertainment systems and by not licensing its DRM to companies like Escient, it's positioning itself to nudge them out once that stuff is invented. In antitrust-speak, they call that using a monopoly to foreclose on competition. 

And this is where Jobs wants us to appreciate Apple for its benevolence, not its dominance. Writes Jobs (after more Kool-Aid):

Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full.  This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats.  It’s hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future.  And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.

Isn't it convenient that when the time comes to take the spotlight off of Apple's dominance, Jobs manages to find a way to cite some data that paints the company as far less of a foreboding force in the entertainment business. Lest we forget that this the same Steve Jobs who, just last September, before an exclusive audience of about 300 people, was boasting of how the company controls 88 percent of the purchased music downloads business.  It's a statistic and a force to be reckoned with that the record labels are all too familiar with.  In one breath, Jobs wants us to believe that the iTMS isn't nearly as important a channel of music as his critics make it out to be. On the other, it was the dominance and growing importance of that same channel that gave him the leverage he needed to tell the record industry to stuff it when they asked him if they could move to a variable pricing model instead of a flat rate of 99 cents for every song. The record labels buckled. 

And just in case you're still not convinced that the iTMS is more of a force than Jobs is making it out to be, here's a Jobs quote from a January 7, 2007 press release:

iTunes has crossed another major milestone by selling over two billion songs—with over a billion of them sold in the last year alone—making it by far the world’s most popular music store....And by selling 50 million TV shows and over 1.3 million movies to date, iTunes is already the largest online video store in the world as well.

Let me rephrase. In the last year alone (11 months to be exact), Apple sold as many songs through the iTMS (1 billion) as it sold in all of its existence up to Feb 2006. Maybe Jobs' data on the percentage of iTunes-protected music on iPods is correct. But make no mistake about it. That number is heading in one direction and one direction only.

Neither Jobs nor Apple are the harmless sheep he wants you to think they are. He was well aware that the record labels wouldn't say yes and the company's growing dominance has left many in its wake reeling. Beware. Underneath that white wool are fangs and dripping saliva; the stuff wolves are made of.

Update: I've posted a follow-up to this blog that you may find to be interesting. See The Source of Steve Jobs paranoia: Cooperation.