Dancing to Apple's tune
Worse for the labels, the restrictions ultimately resulted in less control over the paid download industry. Because DRM tended to tie consumers to the store most compatible with their music device, the record labels unwittingly gave much of the power over music distribution to Apple, the manufacturer of the most popular digital music player, the iPod.
Music industry executives say Apple has not wielded that power lightly. With control of an estimated 80 percent of the market for legally downloaded music, Apple pushed its preferred price of US$0.99 per song over the opposition of several labels, which preferred variable pricing that would allow some artists to sell at a premium.
Apple CEO Steve Jobs also refused repeated requests from the recording industry and iPod competitors to license its DRM technology so that iTunes customers could easily put their music on other devices, without first burning it to a CD or otherwise altering the files.
In a Feb. 6, 2007, letter titled "Thoughts on Music," Jobs maintained that licensing its DRM technology to many providers would make it too difficult to keep its antipiracy code under wraps: "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."
Jobs used the letter to pressure the music labels to abandon their own use of copyright protection technology. "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," Jobs wrote. "This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat."
The public shaming helped Apple take the moral high ground at a time when it was under pressure from European regulators to open its DRM to let iTunes customers download their music to non-Apple devices. With his letter, Jobs pointed the finger at the labels for supporting DRM, silently suggesting the wrath of consumers and antitrust authorities should lie with them.
Within two months, EMI, one of the smaller of the big four labels, offered to sell higher-quality, DRM-free tracks through iTunes for a US$0.30 premium. By Oct. 17 the tracks were selling for US$0.99.
A play for an iTunes competitor
DRM is by no means dead. Music subscription services such as RealNetwork's Rhapsody and ad-supported services like Ruckus will continue to use DRM to ensure music stops playing when a subscription ends. But these services represent only a small segment of the market.
"There won't be any DRM of significance by the end of 2008," said David Pakman, president and CEO of DRM-free music download service eMusic, the second-largest service after iTunes. "The only time you will see it used is for rental services."
Rather than following EMI's lead, other labels are hoping to create another Apple competitor in Amazon, which is willing to give the recording industry greater pricing flexibility. "That was a big part of it--countering Apple's control in a positive way by creating more able competitors," said Mike McGuire, a vice-president for research at Gartner.
Narrowing Apple's lead will not be easy. Just ask Microsoft, which has made meager headway with its Zune music player and online music store. Still, no service has yet been able to offer DRM-free music downloads from all four major labels. Amazon could yet become a contender.
With Tom Lowry and Spencer Ante in New York.
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