Steve Jobs On DRM-Free Media: Right Idea, Whatever His Reasons

Has Steve Jobs been cloned? The Apple Inc. chief is being so smart, making so much sense and so many right moves lately that there must be more than one of him. His "Thoughts on Music" think piece published yesterday on the Apple Web site builds on the dazzle of the iPhone launch. It's an announcement that is the beginning of the end of digital rights management systems (DRMs). Jobs is absolutely right. DRMs haven't worked any better than Prohibition did 80 years ago, and they should be scrapped. His call for an end to protected media files may be mostly an effort to keep Apple a couple of steps ahead of the shredder. But that doesn't make him any less visionary.Jobs laid out three possible futures: stay the course, make DRMs cross-licensed open systems, or drop DRMs and sell unprotected downloads.

His arguments for the third option are compelling -- if a tiny bit self-serving. Current proprietary DRMs like Apple's, Microsoft's, and Sony's appear to be anticompetitive, locking customers into a tight web of hardware, software, and file formats. But at the same time, they aren't doing the job. Only 3 percent of the files on iPods bought from Apple in DRM-protected format, and where do customers get the 97 percent of their music that's unprotected? From the very music companies that insist Apple protect their downloadable content: "In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores," he says, "while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves."

About that anticompetitive thing: Apple is taking increasing heat for iTunes in Europe. (A New York Times article this morning points out that a Norwegian government official last month rules that iTunes violates national law by restricting the playback of legally purchased media to iPods, and consumer agencies in six other European countries seem poised to draw similar conclusions.) Jobs clearly wants to lay the blame for proprietary DRMs back on the music companies, and invites Europeans to tackle DRMs by twisting the arms of Universal (100 percent owned by Vivendi, a French company), EMI (British), and Sony BMG (50 percent owned by Bertelsmann, a German company) to license their music to Apple and others DRM-free. The New York Times article includes some seriously snarky cheap shots at Jobs from Jason Reindorp, marketing director for Microsoft's Zune, who tries to have it both ways, saying that Jobs's call for unrestricted music sales is "irresponsible, or at the very least naïve," and in the next breath adding, "It's like he's on top of the mountain making pronouncements, while we're here on the ground working with the industry to make it happen."

The fact is that it may well happen. The music industry -- those same record companies Jobs insists keep throwing him into the briarpatch of DRM -- seem to be getting the point that consumers don't want protected files. In early January the Reuters newswire carried a story from the music trade publication Billboard headlined "Ailing music biz set to relax digital restrictions". The reason, the story said, is that revenue from digital music sales -- downloads and mobile content -- is expected to be flat or, in some cases, decline in the coming year. And if it is, the music companies won't be able to point to a growing digital marketplace as justification that DRM works.

The industry may turn to DRM-free sales and services for another reason, too, says the story -- to get out from under the thumb of Steve Jobs. "Forcing would-be competitors to sell music incompatible with the popular iPod is not showing any signs of working," the story notes. Removing DRM might attract powerful new players to the market, and writer Antony Bruno names five possible entrants into the music-download business in 2007, Amazon.com, Limewire, MySpace, eMusic, and Yahoo Music.

Jobs may seem crazy for inviting competitors like these into iTunes's space, but he's crazy like a fox. My guess is he's seeing the handwriting on the wall (the iPod is saturating the player market while iTunes sales are stuck at very low levels) and making a big bet that removing DRMs will have a double whammy: it will get the European regulators off his back and at the same time keep sales going up in a more open marketplace for content. Whatever his reasons, his conclusions are music to my ears.