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Music Businesses Media Media (Apple) Apple

BusinessWeek on Opening Apple's iTunes DRM 489

hype7 writes "BusinessWeek is running a very interesting story on Apple's foray into music, with a different bent to everyone else's. BW suggests that, instead of opening the iPod up to the world, Apple should instead license its DRM - 'Fairplay' - to anyone who wants to start up a music store. The upside is obvious: it would mean that Apple's music format, AAC, would become ubiquitous; Apple could quite feasibly make money on licensing fees (say 1 cent per song sold); and, it would just happen to stick it to Microsoft and the Windows Media Format. As the iTunes Music Store isn't running at a profit (or forecast to make a big one), having the Music Store clones eat into Apple's existing market share wouldn't be a problem; all these stores would be doing is building a bigger potential market for the iPod."
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BusinessWeek on Opening Apple's iTunes DRM

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  • AAC (Score:5, Informative)

    by daeley ( 126313 ) * on Friday March 26, 2004 @01:24PM (#8681039) Homepage
    For the nth time, AAC is not "Apple's DRM technology." It is part of the MPEG-4 specifications. More info here. [apple.com]. To quote:

    AAC was developed by the MPEG group that includes Dolby, Fraunhofer (FhG), AT&T, Sony, and Nokia--companies that have also been involved in the development of audio codecs such as MP3 and AC3 (also known as Dolby Digital). The AAC codec in QuickTime 6 builds upon new, state-of-the art signal processing technology from Dolby Laboratories and brings true variable bit rate (VBR) audio encoding to QuickTime.
    • Re:AAC (Score:2, Insightful)

      by Squashee ( 573673 )
      True, but they are probably referring to the DRM technology in QuickTime, not AAC itself. That one Apple probably could License.
      • Re:AAC (Score:3, Interesting)

        by Frymaster ( 171343 )
        That one Apple probably could License.

        for the one millionth time: apple is a hardware company.

        remember when apple tried license the os to clone makers back in 96 or so? total disaster. that's because gil amelio forgot the basic tenet of the apple business model:

        "software is written to drive hardware sales".

        the mac os exists to sell mac computers. itunes and fairplay and itms and all that exists to drive ipod sales. period.

        • Re:AAC (Score:5, Interesting)

          by the argonaut ( 676260 ) on Friday March 26, 2004 @02:36PM (#8681964) Homepage Journal
          And for the one billionth time, things change. Even Apple. The best point of the article is that the iPod is cool now, but how long will it stay that way? And how long will Apple be able to maintain the premium to buy in?

          I'm not generally a fan of Salkever, but I think he makes a pretty good point. The only thing that I would add is that Apple should re-negotiate their contracts with the labels and get themselves a better deal, so that iTMS could actually generate some profits for them. Right now, they're the Walmart (**shudder**) of the music download world, they should flex some muscle as the market leader to get a lower wholesale price. And if they really wanted to change the world and actually support the music creators, their contract would include a better cut for the performers and writers (I would think a 40% Apple, 25% label, 20% performer, 15% writer/composer cut would be about right).
          • Re:AAC (Score:3, Insightful)

            by soft_guy ( 534437 )
            Thier going to "flex their muscle"? Give me a break. The percentage of music sold online vs. CDs is tiny. Apple has maybe 60% marketshare in a very immature market. There's not enough muscle there.

            Also, I think your split of the proceeds is fantasy land. Currently the split is more like 90% label, 8% Apple (to partially cover costs), 1% performer, 1%writier. Apple isn't going to help the writers and performers out.

            If they can hang on and be the market leader 3-5 years from now, then they will have enough
    • Re:AAC (Score:5, Insightful)

      by LostCluster ( 625375 ) * on Friday March 26, 2004 @01:28PM (#8681090)
      Apple's DRM technology is FairPlay, and the files they offer for download on iTunes Music Store are AAC files wrapped in the FairPlay encoding.
    • Re:AAC (Score:2, Redundant)

      by barryblack ( 31922 )
      You are correct. Apple raps AAC with a DRM technology called fair play. Fair play is what should be opened up to other stores/devices.
    • RTFA (Score:5, Informative)

      by Ogrez ( 546269 ) on Friday March 26, 2004 @01:28PM (#8681093)
      It doesnt say that AAC is Apples DRM.. it says that Apples DRM is called 'Fairplay' and licensing that to others would increase usage of the AAC FORMAT.

      • Re:RTFA (Score:5, Informative)

        by cOle2 ( 225350 ) on Friday March 26, 2004 @01:45PM (#8681298) Homepage
        FairPlay is actually owned by Veridisc so it may not be up to Apple to choose who to licence it to (if at all).

        http://64.244.235.240/explained_contentprovider.as p [64.244.235.240]
        • Re:RTFA (Score:5, Informative)

          by farzadb82 ( 735100 ) on Friday March 26, 2004 @02:37PM (#8681979)
          Umm... hate to burst your bubble but VeriDisc's Fairplay is not related in anyway to Apple's Fairplay (see [macslash.org])
          • Re:RTFA (Score:3, Insightful)

            by BasilBrush ( 643681 )
            You aren't bursting anyone's bubble. Veridisk's Fairplay is very much related. They do appear to let their domain name expire though.

            http://64.244.235.240/info_about.asp
    • Re:AAC (Score:4, Insightful)

      by worm eater ( 697149 ) on Friday March 26, 2004 @01:29PM (#8681098) Homepage
      True, but I think the point is that AAC is the technology that Apple has adopted, and the DRM they use with it is their DRM technology. So the point stands, that if they license their DRM layer, they stand to get at least as much out of it as they are getting out of the HP iPod rebranding deal.

      However, does anyone else think it might be too late in the game for this? Why weren't they licensing their DRM tech to Wal-Mart, Coca-Cola, etc?
    • AAC as a simple encoding format, yes belongs to other groups.

      However, DRM AAC is "Apple's DRM technology". AAC is Apple's format of choice, which could be said to be Apple's Music format. I guess if they really wanted to be acurate they'd call it DRM AAC.

      BUT WHO REALLY CARES???
  • While... (Score:2, Interesting)

    by zeruch ( 547271 )
    ...that is a novel (and arguably appealling) tact for Apple to take, it certainly would not be true to their typical behavior (at least not while Steve Jobs is at the helm). Apple likes the 'go it alone' route, regardless of any benefits to other routes.

    And of course, one has to wonder if 'ubiquity' would actually happen regardless...
    • Actually, there's good reason for them to "go it alone". People keep missing that Apple isn't looking at the iPod sales or the iTunes sales. You need a computer to plug the iPod into, right? Well, if 25% of iPod sales lead to Mac laptop or desktop sales, Apple makes a bundle. Sure, Apple makes money on the iPod, but they make even more money on that 17" PowerBook you just bought.

      In order to understand why Apple hasn't released their DRM technology to licensees, one has to understand the pyramid of "suck yo
      • Re:While... (Score:3, Interesting)

        This was the original rationale for developing and releasing the iPod: to drive computer sales. However, it's pretty safe to say that the success of the iPod has given it it's own reason for being. iPod is now a major profit center for Apple. If this wasn't the case, they wouldn't have created a Windows version (originally released with MusicMatch jukebox software, then with iTunes for Windows).

        True, they still hope consumers will become interested in purchasing a Mac. It's still a wedge strategy (or as St
    • Re:While... (Score:5, Interesting)

      by Anonymous Coward on Friday March 26, 2004 @01:41PM (#8681254)
      Apple likes the 'go it alone' route, regardless of any benefits to other routes.

      Which is why Apple has licensed the iPod to HP.
      Which is why iTunes is also Windows software.
      Which is why the iPod OS is designed and maintained by somebody other than Apple. Which is why USB, Firewire and other technologies are shared across the broad spectrum of platforms. yeah Apple goes it alone with such things as ATA, PCI

      Apple goes it alone on these things:
      Design (beautiful things work better see Donald Norman)
      Usability (because if it's not brain dead simple I'll have to think about how to do stuff instead of just doing it.
      Focus (whether in Digital lifestyle stuff like iTunes and iMovie or whether in bio-informatics, Apples hardware and software are tailored to getting things DONE)
      Lifestyle (like the wearable computing fashion indicates, computers and devices are becoming embedded in our lives to such an extent that choosing these tools is a real factor in fashioning out lives)

      And why Dell, Roxio, M$, and the others only sit and snipe.
    • Re:While... (Score:3, Interesting)

      by grendelkhan ( 168481 )
      This sounds like the clones argument all over again. Agreed, while Steve Jobs is at the helm it will never happen.
  • by Motherfucking Shit ( 636021 ) on Friday March 26, 2004 @01:25PM (#8681053) Journal
    The upside is obvious: it would mean that Apple's music format, AAC, would become ubiquitous
    I thought that AAC was already well on its way to becoming ubiquitous [slashdot.org], without Apple having to license it to every up-and-coming online music retailer?
  • by overbyj ( 696078 ) on Friday March 26, 2004 @01:27PM (#8681079)
    I agree with this article. Adding WMA to the iPod is ludicrous (as is Rob Glaser's plea to add other support....Real.....get real!). However, licensing the DRM to AAC that Apple uses would nothing but grow the iPod marketshare because no one could complain that the iTMS is the only place to buy music for the iPod.

    However,.......based on Steve's stubborness and protectiveness of Apple, I am not going to hold my breath on this one. Having clones to Apple hardware is one thing and I can understand Steve killing that idea but this is so totally different. Steve readily admits that iTMS is not a breadwinner. But Steve is a just a bit too protective still to license FairPlay.

    Here's to hoping.....
  • by Anonymous Coward on Friday March 26, 2004 @01:27PM (#8681081)
    The only reason iTunes has DRM in the first place is because the major labels insist on it: they like their paying customers to have more restrictions than the folks that are getting it for free, makes sense right?

    Every fumbling attempt the record companies make to control and restrict music blows up in their face. Case in point, the new, bannedmusic.org [bannedmusic.org] which is using a BitTorrent installer packaged with a specific torrent to spread music that's run afoul of the current copyright regime. They could have made money licensing this stuff, but now there ain't nothin they can do about it.
    • Apart from the debate regarding switching one proprietary format for another, Apple's FairPlay DRM scheme is still the most lenient which is a good reason for people to support its wider use, especially in comparison to Microsoft's alternative.
    • by Xenographic ( 557057 ) on Friday March 26, 2004 @01:43PM (#8681281) Journal
      Heh, it could be worse. Almost all other DRM schemes I've heard of are worse than Apple's.

      Then again, I would much prefer no DRM at all, and, ironically, the more draconian the DRM, the more likely people will refuse to use such products, and the more likely it is that we won't have to put up with it at all...

      I may be a tad overly optimistic, but I think we all know that DRM is futile so long as we have full control over our own computers. The problem is in the corrollary of that is that the DRM folks have to control our computers to make their schemes work. I don't find that to be a pleasant thought at all... Effectively unenforceable laws tend to get applied in discriminatory manners, after all... :/
    • Comment removed based on user account deletion
    • The only reason iTunes has DRM in the first place is because the major labels insist on it: they like their paying customers to have more restrictions than the folks that are getting it for free, makes sense right?

      I love that logic. I think Apple's DRM is the least odious of what's out there, but it's still too restrictive for me. Adding any arbitrary constraints just seems so... ludicrous in terms of the customer's ability to enjoy the product.

      I stick with Emusic [emusic.com], b/c the price is reasonable (40/mont
  • by tiktokfx ( 699424 ) on Friday March 26, 2004 @01:28PM (#8681091)

    The obvious problem is that what incentive is there for someone to open a music store with encrypted songs that are only playable on the iPod?

    Musicians already have ways of submitting their music to the iTMS.

    Any large conglomerate opening a music store online is generally stupid or on the "music store" bandwagon, or both. Apple pretty clearly does it because it's a selling point for iPods, and with their early appearance on the scene, they have a good chance to dominate the market until such time as it does become profitable.

    So what earthly good does licensing FairPlay do for anyone?

  • by vinit79 ( 740464 ) on Friday March 26, 2004 @01:29PM (#8681107)
    I know apple probbaly wont agree, but looking at the sucess of OSS, doesnt it make sense for them to simply open iPod and release its source code, so anyone with lots of time to spare can write interseting and useless plugins.

    These will ultimately result in the iPod becoming more popular

    An apple a day keeps MS away
  • by TempusMagus ( 723668 ) * on Friday March 26, 2004 @01:30PM (#8681114) Homepage Journal
    This is wise-wise-wise advice. However, why stop there? Why not make the entire DRM system a sub-set of QuickTime and get acceptance for other non-audio formats as well? QuickTime is the high-end standard and with the new Pixlet format apple already has a HD leg-up on other folks.
  • by Anonymous Coward
    How would licensing FairPlay to other hardware manufacturers sell more iPods? Oh it wouldn't? Oh then I guess that's not gonna happen.

    AAC can be the next audio standard, but FairPlay will not be the DRM standard. An industry DRM standard will have to be devised and then every digital music seller and player must support it. Then iTunes and iPod can continue to simply be the best digital music experience around.
  • Apple's Dual Paths (Score:5, Insightful)

    by Dark Paladin ( 116525 ) * <jhummel.johnhummel@net> on Friday March 26, 2004 @01:38PM (#8681211) Homepage
    I think that Jobs has his own plan in mind, though I hope he's included "flexibility".

    Option 1: Stay Alone

    This basically has the iPod and the iTunes Music Store (iTMS) working only together. So far, this situation has proven to be the case, and it's working pretty well: the iPod is the #1 selling MP3 player out there, it's making Apple a butt load of cash (and when you try to carry money in your butt you'll know what I mean), and iTMS is the #1 online music sales system by far - 50 million songs sold compared to Roxio's 5 million. Even comaring apples to , er, apples, just within the 6 months since Napster has been out Apple has made 5 to 1 sales.

    If this continues, then eventually Jobs can force out all of the "for profit" music shops out there, and boil it down to just the "for advertising" places, like Wal-Mart, Coke, and Microsoft (which would really be looking to make Windows Media Audio the default standard).

    From this, Apple makes AAC the next MP3, and their DRM becomes the "de facto standard" - even though nobody else can use it. Apple makes all the money, and they like it.

    This will only come true, however, if Apple keeps a huge lead. What happens when Microsoft (MS) unveals their own online music store (didn't originally they tell folks like Napster that they wouldn't? Well, nevermind that....), sells songs for $0.50 each, takes a hit on profits, and basically acts like they did with Internet Explorer. (Ignoring any antitrust issues - not that Microsoft ever has had to in the past.)

    So that goes to Option 2: License the DRM

    I have the feeling that Jobs will release this if and only if iTMS and iPod sales start taking a dive. It's his "ace in the hole" to keep iPod sales alive. All it will take is him going to the other stores, making an offer, and then everybody can use the iPod with any service. Sure, it could hurt iTMS removing the one thing that makes it different from everybody else - but Apple is about the hardware.

    But what happens if someone like Dell or Gateway come out with their own MP3 player that starts to make the iPod look like yesterday's bulky cell phone? That's when option 3 kicks in:

    Option 3: License WMV for the iPod

    This one only happens when things are dire and Apple feels they finally have to put in their chips.

    The question is, how likely is either option to be? I can see Option 2 and 3 as "someday, maybe" futures. But as of right now, iTMS and the iPod rules the roost, and as long as Apple keeps that up for another 12-24 months, everybody else just in it to "make money selling music" will be so marginalized it won't matter. We're more likely to see Pepsi style promotions than anything else - though Apple had already keep an eye on possible cracks in their popularity: McDonald's may have dumped a iTMS deal in favor of a Sony Online Music one already, though of course nothing is official yet.

    2 years I think the dust will be settled. Until then, I'll keep saving up to buy my wife an iPod mini. Hey, if nothing else, they're cute. And she still buys lots of CD's.
  • by lotsofno ( 733224 ) on Friday March 26, 2004 @01:41PM (#8681257)
    Just so you all know, Winamp [winamp.com], being the awesomely versatile player it is, CAN play AAC songs with Fairplay DRM attached [inthegray.com], with this convenient plug-in [harrison-fisher.co.uk]. Of course, there are many limitations still, but that's proprietary DRM for you.

    You can chart and discuss the plug-in's progress here [winamp.com]. The older, "officially released" version of the plug-in with brief descriptions and reviews is here [winamp.com].

    BTW, Winamp 5.03 is already out [inthegray.com], in case you weren't informed.
  • "So we help youj and Prince HumperGates suffers?"

    "Humiliations galore!"

    "Let's go!"

    (yes, I know these aren't the exact words... work with me here)
  • Burns bridges (Score:3, Insightful)

    by BillyBlaze ( 746775 ) <tomfelker@gmail.com> on Friday March 26, 2004 @01:47PM (#8681330)
    I hope Apple doesn't do this, because it will make it much harder for them to drop DRM in the future. Instead of doing as they should by pressuring the RIAA members to allow DRM-free downloads, Apple would implicitly support DRM to protect their new revenue stream. The RIAA needs to realize that DRM doesn't work, and that those who purchase the music generally don't infringe anyway.
  • A Guess (Score:4, Interesting)

    by jeffkjo1 ( 663413 ) on Friday March 26, 2004 @01:47PM (#8681332) Homepage
    I'm going to guess that Apple probably legally can't license the Fairplay technology. I imagine that the RIAA probably has Apple locked into some super restrictive contract that makes it so only Apple can use Fairplay, even though they made it.

    After all, (outside of Apple being Apple), why wouldn't they have done it already?
  • Apple has sold about 30 million songs through the iTunes music store. All told, if they had licensed their FairPlay technology and let someone else open a store and sell those 30 million songs, they would have raked in a cool $300,000 dollars at a penny per song.

    Apple is already losing money through the store, and while outsourcing it would have staved off costs, they'd still be very much in the red. Imagine if they now started operating their money-losing store in competition with another money-losing s
  • All hail FatWallet [fatwallet.com]:

    Here are some legal (in Russia!) MP3 download sites - most flat fee:

    allofmp3.com [allofmp3.com]
    This site is locally legit and songs can be downloaded for as little as $0.01 per MB. That's around 3 cents per song.

    DELit [delit.net]
    Unusual emphasis on hard rock and metal acts (east European and Russian youth apparently worship metal acts)

    3MP3.ru [3mp3.ru]
    $4.55 per month for unlimited downloads.

    And you are not stuck with the typical iTMS low-quality 128Kbit file. Most of the Russian sites let you choose your quality and give you the option to do "online encoding" where you can select the settings you want. When the pop up screen shows up you can hit switch to advanced mode toward the bottm and you get the following options:

    You can choose between the LAME or BLADE codec and 128, 160, 192, 256, and 320 kbps for each (constant bitrate). Or you can choose LAME variable bitrate at 128, 160, 192, or 256.

    If you enjoy these services, 3MP3 should be your first stop to see if you can find what you are looking for at the lowest price. Then I'd move to allofmp3, followed by clubmp3.ru, and then DELit.

    Cue the "In SOVIET RUSSIA" trolls now...
    • by cpt kangarooski ( 3773 ) on Friday March 26, 2004 @02:04PM (#8681525) Homepage
      Of course there is a problem in that legal in Russia doesn't necessarily mean that it's legal for Americans in America to use those. In fact, it pretty likely isn't legal here, because all claims to the contrary, 17 USC 602 probably doesn't apply at all.
  • by microcars ( 708223 ) on Friday March 26, 2004 @01:59PM (#8681486) Homepage
    It seems obvious that Glaser has never actually used an iPod.
    Otherwise he never would have said this:

    "The only way to presently put songs on an iPod is to (buy) them from iTunes," Glaser said, ...."
  • by maggard ( 5579 ) <michael@michaelmaggard.com> on Friday March 26, 2004 @02:07PM (#8681558) Homepage Journal
    OK, cutting through the assumptions already posted, and folks who couldn't be bothered to actually read the article before posting...
    • Yes, Apple's music files are encoded in AAC.
    • Yes, AAC is an open [vialicensing.com] standard, in that it is publically documented (for a reproduction fee to ISO), just not a free [vialicensing.com] one, patent-wise or royalty-wise.
    • Apple's AAC files are then protected with DRM using Apple's FairPlay (if this FairPlay is related to VeriDisc's FairPlay [64.244.235.240] is unknown, Apple lists FairPlay under their Apple's copyright).
    • If folks had bothered to read the article the DRM opportunity is pretty much what it was about, not the AAC format. FWIW FairPlay could be applied to mp3's too.
    • As DRM goes FairPlay is pretty liberal and there have been few problems (Cory Doctorow's [boingboing.net] consistantly forgetting to un-license [apple.com] machines aside)
    • Can FairPlay be broken? Probably, there are ways at getting to the AAC files via Apple's freely distributed QuickTime architecture (this is what iTunes uses).
    • There's also the trivial exercise of using iTunes to burn a CD then re-ripping the music. Of course the music has then been lossily encoded twice, with different encoders, so it's sorta like listening to a copy of a tape of a FM broadcast.
    • Ultimately though at US$1 a song & US$10/album most folks appear willing to own the music legitimately. Furthermore Apple has made it absurdly simple to share music locally via their iTunes software so most dorm & office style needs are handled that way.
    • Of course, the article pretty much ignores if Apple wants to be in the Music or IP licensing business at all. They only gave MS their previous Apple-IP license when their mutual lawsuits seemed deadlocked for eternity. The Mac licensing program cannibalized their own sales before it was killed off, their FireWire licensing plan shot itself in the foot, there doesn't even seem to be much co-branding like used to happen with special speakers and such for Macs. These days Apple seems pretty intent on only doing things that directly support selling, or at least evangelizing, Mac hardware.
    • There's also the trivial exercise of using iTunes to burn a CD then re-ripping the music. Of course the music has then been lossily encoded twice, with different encoders, so it's sorta like listening to a copy of a tape of a FM broadcast.

      You haven't done this before, have you? The sound quality is lower, but it's not *that bad*. I would compare the original to CD quality and the re-ripped / twice-encoded version to FM radio quality (and really, no worse than most of the less common pirated MP3s floating
  • by th77 ( 515478 ) on Friday March 26, 2004 @03:00PM (#8682251)
    First off, in the article, Salkever proposes that Apple "allow other device and software makers to license ... FairPlay". That's much more than just allowing other online stores to sell FairPlay DRM'd songs. But let's consider what the original poster said about licensing to other stores.

    I definitely think that Apple should license FairPlay to other online music stores, but not other hardware or software players just yet. Why? It's a matter of perception. I'm sure there are people out there who won't buy an iPod because they learn that it can only play iTMS songs (out of all the other legal download stores, ignoring any MP3 stores). If Wal*Mart and any other "me too" store also sold FairPlay music, all of a sudden this wouldn't be a problem--iPod users could buy online music from any number of places. iPod users would have a choice.

    Now, would Apple lose some iTMS revenue? Probably, but big deal. iTMS is a loss-leader for selling iPod, which has been pointed out many times here before. I bet, though, that Apple would continue to be the industry leader in terms of selling songs to iPod users because they have such a clean, easy-to-use interface and seamless interoperability between the player, the store, and the iPod.This is something the standalone FairPlay licensee stores would not be able to offer. They could compete on price, or selection, which Apple competes based on ease-of-use and style (which would not be Mac vs. PC all over again because Apple would still control the iPod hardware).

    So it would be win-win. Apple would have more stores selling music for its iPod, which would make consumers more comfortable in committing to iPods, and Apple would be able to maintain the near-excellent user experience for customers who stick with the iTMS.

  • by amichalo ( 132545 ) on Friday March 26, 2004 @03:03PM (#8682295)
    What if Apple not only licensed the DRM, (= more music = more iPods = more $) but also sold it in bundled with Xserve technology?

    Make it so an Indy music producer just has to copy songs to a "publisher" program which encodes and makes available on-line.

    They could spec a Xserve Music Server that an Indy music producer could buy (Xserve RAID etc) all pre-configured and easily managed (even sell remote management support so Apple supports the thing). They customize the variety of e-Commerce templates and copy music to a program that will encode it and add it to the library.

    Now Apple can support Indys AND keep their own music library "clean".
  • by webslacker ( 15723 ) on Friday March 26, 2004 @03:49PM (#8682887)
    Even if licensing out the iTMS format to other online music stores would theoretically drive more people to buy iPods, there's one factor that everyone's forgetting: user experience.

    Apple doesn't want just any joe schmoe with a smelly t-shirt selling songs for the iPod because Apple wants to maintain a level of quality with the entire user experience, from the purchase of songs on iTMS to the browsing of their songs on iTunes to the uploading and management to the seamless integration between the store and iTunes.

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