The RIAA and Norway respond to Jobs

A few days ago, Steve Jobs defended his company's decision to keep its FairPlay DRM exclusive to the iTunes store and iPod music players (among other things, such as declaring his preference for sale of DRM-free music). Central to that argument, however, was his insistence that the only way to grant content companies the protection guarantees insisted upon in the licensing agreement for the music sold by iTunes is to keep FairPlay private so as to protect DRM secrets (which as noted yesterday, I don't consider a strong argument, as we wouldn't agree with those who advocate keeping security algorithms secret) as well as create an easier upgrade path should the DRM be broken (which, IMO, is much easier if the algorithm isn't publicly vetted).

In other words, Jobs is basically saying that the music companies are making him do it, so blame them. Well, the music companies have responded to the charge with a "don't blame us, we aren't forcing you to keep your DRM private" answer. In fact, the RIAA is now on record as encouraging Apple to license its FairPlay DRM to third parties.

Doing so, argued Mitch Bainwol, chairman and chief executive of the Recording Industry Association of America, would eliminate technology hurdles that prevent music fans from buying songs at Apple's iTunes Music Store and playing them on devices other than the iPod.
"We have no doubt that a technology company as sophisticated and smart as Apple could work with the music community to make that happen," Bainwol said in a statement.

The RIAA, of course, has its own selfish reasons for wanting a more widely available FairPlay DRM. For some time, they've wanted to escape the flat $0.99 "straitjacket" Apple has forced them to wear in order to sell through iTunes. They want a finer-grained pricing model, one that would make certain popular songs more expensive while making other songs less expensive. Apple has pushed back because they can, given they are the number one source of legal digital music on the Internet.

The RIAA would love to erode that market power by dealing with a marketplace of multiple FairPlay-compliant stores all feeding the dominant music player - iPod. If Apple didn't agree to their terms, they probably could manage an agreement with a smaller store, and then all they'd have to do is threaten to yank rights from Apple in order to force the guys in Cupertino to do what they want.

It's a divide and conquer strategy, and clearly, music companies would love to get the chance to use it. That leads me to believe, however, that there really is a third reason Jobs feels Apple must keep its FairPlay DRM private. Keeping FairPlay private gives Jobs a lot of leverage in negotiations with the music studios. He can't say that out loud, but I'm sure he and all his senior lieutenants know that is the case.

Another response to Jobs comments came from Norway, a country that has given Apple a deadline of September of this year to open up its FairPLAY DRM to non-Apple music players or face fines. Their response, in essence, was predicated on the belief that its not "fair" for Apple to prevent iTunes songs from being played on non-Apple music players.

"It's quite clear that the record companies carry their share of the responsibility for the situation that the consumer [is] stuck in," exclaimed Waterhouse. "However no matter what agreements [the] iTunes Music Store [has] entered into, they're still the company that's selling music to the consumers and are responsible for offering the consumer a fair deal according to Norwegian law."

I guess I have a different undestanding of what it means to be "unfair." "Unfair," to me, would be if Apple lobbied government to force me to pay a $50 / month income levy for the right to download $50 worth of music from iTunes, whether or not I wanted to use the store. "Unfair" would be for Apple to send to my house clones of that smug SOB from their TV ads and, using cattleprods and ropes, force me to buy music from iTunes.

When I have a choice as to whether or not to buy music from iTunes, however, "unfair" doesn't even enter into the equation. As Jobs noted, over 90% of music sales are CDs, a format that has no DRM (and hence can run on any player), and for which there is no shortage of sources.

Norwegian government authorities may wish to step gingerly, as there is an endpoint to this wrangling that would have minimal effect on Apple but would hurt iTunes-using Norwegians considerably. Apple could choose to block access to the iTunes store from Norway, which from an Apple earnings standpoint, is probably a rounding error in balance sheets for global iTunes revenues.

Would they do that? I don't know, as it has a strong potential to backfire on the company from a public relations standpoint. On the other hand, there is a property rights principle at stake here (it is Apple's iTunes store, and Apple's DRM), and Mr. Jobs has stated quite clearly that he does not want to open the FairPlay DRM to third parties.

Unless someone blinks, a Norwegian iTunes music embargo may be in the cards.