February 7th, 2007
Five reasons why Jobs went anti-DRM now
As any witness of a Macworld keynote knows Apple CEO Steve Jobs doesn't do much of anything that isn't well scripted and thought out.
That strategy and advance preparation is what makes his open letter to the music industry about digital rights management so interesting. Lost amid all the conversation about Jobs' blog one question remains unanswered: Why now?
Jobs' letter comes at a very interesting time. Apple, which has been one of the few companies to make DRM easy enough for consumer adoption, arguably has benefited the most from DRM schemes. It has a critical mass and can dictate pricing to the music industry. So why would Jobs suddenly go anti-DRM?
Here are a few plausible reasons:
1. No DRM means no lawsuits. Apple is increasingly under fire at home and abroad over iTunes' DRM strategy. If DRM goes away so do most if not all of the legal hassles facing Apple, which has to fend off lawsuits in the U.S. and regulators in Europe. The chain of events: DRM disappears. Then regulators in Europe have nothing to complain about. In the U.S. questionable class action suits become moot.
2. If DRM remains Apple owns the standard. Jobs' discussion of licensing Apple's FairPlay DRM technology in his post serves two purposes. It opens up the door to potentially licensing FairPlay while still arguing against DRM. No matter what happens to DRM Apple wins. If FairPlay is licensed Apple gets another revenue stream and the music industry standard just based on the iPod's market share. Meanwhile, Jobs can always point to his open letter and say "look we don't want DRM, but since the music industry still wants it we'll license you our technology." Tom Krazit's report walks through the licensing scenarios with FairPlay and the limitations.
3. Apple's critical mass makes the anti-DRM argument low risk. Jason Calacanis notes that Jobs is back from the dark side and is shooting a shot across the music industry's bow. Richard MacManus calls Jobs' letter propaganda. The reality is in the middle leaning toward MacManus' take: Jobs can boost Apple's image by coming out against DRM without much risk. When Apple didn't have critical mass in music, Jobs played along with the music industry. Now Apple is dominant and Jobs has leverage he can generate marketing and financial upside by prodding the music industry to drop DRM. It's a win, win, win for Apple.
4. The music industry is ready to go without DRM. Jobs wouldn't pen his open letter if the music industry wasn't at least a little receptive. Some folks will scoff at the idea that the music industry will go DRM free. But the music industry has become much more experimental with its business models. However, that's just a small reason the music industry is receptive to dropping DRM. The biggest reason: The music industry needs to erode Jobs' leverage and dropping DRM is one way to do it. Imagine if the Zune's Wi-Fi music sharing capability wasn't shackled? Perhaps the Zune looks better. Perhaps it takes some iPod market share. Right now, Jobs runs the music industry. When labels wanted variable pricing Jobs said no. Ditch DRM and maybe just maybe the music industry can control Jobs a bit.
5. The no-DRM genie is already out of the bottle. Apple can't afford to be with DRM-based when labels are already tinkering with licensing MP3 files without it. On MySpace and Yahoo Music labels are licensing songs sans DRM. Jobs obviously realizes that DRM–and perhaps even its FairPlay technology–will become a handicap and is getting in front of the issue.
Larry Dignan is Editor in Chief of ZDNet and Smart Planet as well as Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
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