Dear Recording Industry,
You’re being had.
Online music sales have soared, from $220 million in the first half of last year, to $790 million in the first half of this year. Millions of consumers are discovering the convenience of buying music online. There’s just one problem: if you don’t change your strategy, you’re going to give the store away to Apple CEO Steve Jobs. His iTunes Music Store is the industry leader, and thanks to digital rights management (DRM) technology, every customer who buys your products from the iTunes Music Store becomes locked into Apple products. If that’s not changed, that will soon make Steve Jobs the most powerful man in your industry.
Fortunately, there’s an easy solution: when you renew your contract, you should demand that Apple remove the digital rights management (DRM) technology from the iTunes Music Store.
Yes, you read that right: you need to stop letting Apple use DRM technology with your songs. I know that DRM was originally developed at your request, but I hope to persuade you that that was a strategic blunder. If you don’t correct it, you run the risk of making Apple’s shareholders very wealthy at your expense.
To understand the danger, we need only look at Jobs’ long-time arch rival in the computer industry, Microsoft’s Bill Gates. In the early 1980s, IBM licensed Microsoft’s DOS operating system for its personal computers. In a blunder that would have historic repercussions, IBM let Microsoft retain control of the operating system. Microsoft quickly made itself a gatekeeper to the PC platform. Soon, Gates was in a position to dictate terms to PC makers, who knew they couldn’t survive without his software. Fierce competition drove down hardware margins, but Microsoft was able to take a tidy profit off the top of every PC sold.
The result has been stark. Today, Microsoft rakes in billions of dollars in profit every year from Windows sales. In contrast, IBM’s PC division performed so poorly that it was sold to the Chinese PC maker Lenovo in late 2004.
If you continue on your present course, Jobs will do precisely the same thing to you. Thanks to DRM, a song downloaded at the iTunes Music Store will only play on iTunes or an iPod. That means that if a customer wants to start using different jukebox software or another MP3 player, he’ll need to rebuild his music collection from scratch.
As Apple’s share of the overall music market grows, it will be more and more difficult for you to walk away from the table during contract negotiations. Jobs will hold all the cards, because his customers–who form an ever-growing share of the music market–will be locked into his products. Like Bill Gates in the PC world, Steve Jobs will become the gatekeeper to tens of millions of music fans, and you will have to pay his price for admission.
How does ditching DRM help? If Apple’s songs were distributed without copy protection, your customers would be able to switch to another program at any time. You could threaten to cut a deal with any of the other companies now clamoring for your business–Real, Napster, Sony, Microsoft, etc–and Jobs would know that his customers had the option of leaving his platform.
I know what you’re thinking: what about piracy? The reality is that DRM does next to nothing to reduce piracy. Virtually every song ever recorded is already available on peer-to-peer networks. It’s easy to “rip” a song from a CD (which has no protection at all), and Apple’s DRM scheme has been repeatedly cracked. So people who don’t respect the law aren’t going to buy songs from the iTunes Music Store in the first place. DRM won’t do a thing to stop them!
On the other hand, DRM systems treat your most honest customers like criminals. People who purchase music from the iTunes Music Store know perfectly well that they could get the same song for free via a peer-to-peer network. They choose to purchase from iTunes for one of two reasons: they value convenience or they respect the law. Either way, you don’t need DRM to keep them honest. If they were inclined to engage in piracy, they wouldn’t have bought the song in the first place.
But many of them would like to purchase music from iTunes and then play it on a Dell MP3 player. (Or, conversely, to purchase music from Sony’s download service and play it on an iPod) Digital rights management makes that impossible for no good reason. If you want to encourage people to purchase music instead of stealing it, you should make legally purchased music as convenient and portable as possible. Why hamstring the people who do the right thing?
Everyone has heard the story of the emperor’s new clothes. In that story, everyone could see that the “clothes” were a fraud. But the emperor didn’t want to admit that he’d purchased a product that only enriched the charismatic hucksters who sold it to him. Please don’t make the same mistake.
Tim Lee is the science and technology editor of Brainwash and the editor at the Show-Me Institute, a Missouri think tank. His website is www.binarybits.org.
Source: AFF Doublethink Online | Joseph Hammond
Source: AFF Doublethink Online | Andrew Stiles