Steve Jobs, DRM and eating money

Steve Jobs recently posted some comments to the Apple web site where he discussed the issue of Apple's proprietary DRM technology. This is timely, given the attention Apple is currently getting in Europe among governments attempting to pry open Apple's DRM. As noted in that previous link, I think Apple has every right to keep their DRM closed.

Mr. Jobs had some interesting things to say as to why Apple feels it needs to keep its FairPlay DRM exclusive to Apple products. I don't find his secrecy arguments to be very strong, as what applies to security algorithms likely applies to secret DRM algorithms. However, his thoughts on the issue of managing updates is worth noting:

An equally serious problem is how to quickly repair the damage caused by such a leak. A successful repair will likely involve enhancing the music store software, the music jukebox software, and the software in the players with new secrets, then transferring this updated software into the tens (or hundreds) of millions of Macs, Windows PCs and players already in use. This must all be done quickly and in a very coordinated way. Such an undertaking is very difficult when just one company controls all of the pieces. It is near impossible if multiple companies control separate pieces of the puzzle, and all of them must quickly act in concert to repair the damage from a leak.
Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies. Perhaps this same conclusion contributed to Microsoft’s recent decision to switch their emphasis from an “open” model of licensing their DRM to others to a “closed” model of offering a proprietary music store, proprietary jukebox software and proprietary players.

Fair point, though it's a model that has its problems. Centralization yields more control and an "easier" upgrade path for broken DRM, but hardly create a vibrant hardware ecosystem around iTunes, unless an environment where the music purchased from iTunes can only be run from Apple-made hardware is considered diverse. However, centralization might be necessary to back up guarantees made to content companies, and Mr. Jobs is right - Microsoft did move to a closed Zune DRM model. Are there market reasons why that shift was necessary? PlaysForSure-compatible stores might not thinks so, as a lot of content is available in such stores (and Zune doesn't support that, though I expect that to change in future).

Most interesting, however, was this bit, which basically declares Apple's (and Mr. Jobs) preference for a DRM-free music market:

The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. 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. Every iPod ever made will play this DRM-free music.

I have to agree. It truly would be better from a consumer standpoint for music to be available DRM-free. I defend the right of companies to sell media under as restrictive terms as they want (property rights do mean something), but that doesn't mean I think restrictive DRM is wonderful for me as a consumer. I own a Zune, and the odds of me buying DRM-protected music is about zero. As Jobs pointed out, CDs have no DRM protections, and they ensure that I can move my music to any device I want.

I do understand, however, why content companies are concerned. When I was in college, the Internet was the exclusive domain of the Physics department, and if you wanted to copy someone's CDs, you had to borrow that CD and record it to a cassette tape (yes, I'm that old). I copied LOTS of my friends' music, but there was a natural limiter on the ability to spread an album copy: the owner can only loan the CD to so many people, and cassette tapes were a poor base for subsequent copies. That's a technological barrier that limits piracy, and besides, my copying activity turned into a 300 CD collection once I earned enough money to buy CDs on a regular basis, so one wonders if revenue lost wasn't more than made up by content companies in that it sowed the seeds of a long-term interest in music.

In an Internet world, however, all someone has to do is rip an MP3 from a CD, post it on a web site, and literally millions can download the song. That's a wide-open barn door through which an entire revenue model based on sale of media as such flies into the lake.

Of course, as Steve Jobs noted, over 90% of all music sold is DRM-free. However, though ZDNet readers find ripping music, if not finding it on the Internet, relatively straight-forward, legions of mere mortals do not. Many non-technical people know I work for Microsoft. It's funny how many times I've been asked by those same people, however, where they could find software to download free music and free software (yes, us Microsofties, as employees of the largest vendor of proprietary software in existence, apparently are specialists in that).

In other words, the only reason the problem of pirated music isn't bigger is that, for many people, the process of getting ahold of it is a bit complicated. That's where DRM fits in. Content companies know DRM isn't bulletproof. What is more important, however, is raising the complexity level high enough such that the vast majority of people won't bother to access pirated media. That mostly works in developed nations where consumers can generally afford media prices, but breaks down in developing nations, where pirated copies of most major music, video and software CDs / DVDs are readily available in street markets for anyone to purchase. Then again, in developing nations, odds are consumers wouldn't be able to afford the media in the first place, so how much revenue is truly "lost" is questionable.

What, then, is the answer? Mr. Jobs thinks that unprotected CDs are a sign that it is safe to sell unprotected media. However, its one thing to force people to go to the Internet equivalent of back allies to find illegally copied music. It's another to distribute it, unprotected, from the largest source of digital music in existence (iTunes).

Culturally we humans have proven ourselves incapable of respecting copyright when it is very easy to access pirated media. No, not everyone has that problem, but enough are afflicted that piracy is a growing problem for media companies as more consumers become acquainted with ways to acquire such bootleg media.

Perhaps the solution is watermarking. A watermark would work as follows: when you buy music, some sequence of bits gets interwoven into the digital music in ways human ears can't detect, but would identify the purchaser. Anyone who uploaded such media to trading networks could thus be tracked down and given a good whack over the nose by content companies. Watermarking can be removed, to be sure, but the more important goal is to make barriers to doing things you aren't supposed to do. Would that be enough, however, with certain groups who honestly believe that they have a god-given right to access all the free digital media they want on the Internet, and make such media available to others?

Steve Jobs and his company are in a singular position to find a solution. He is now on record as advocating DRM-free media sales. There are pitfalls in that model, to be sure. Given that Apple is the leading source of digital music, however, they are in a position to create a solution to this problem that is amenable to content companies, and where it's not, apply a little of that market share leverage to help make it amenable.

I'm glad Mr. Jobs understands that the ideal is the flexibility and universal compatibility of unprotected media. It's easy to say that, however, knowing full well that music companies would never go for it.

Mr. Jobs needs put his money where his mouth is. A DRM-free model IS ideal. Now tell us how to do it.