French parliamentarians finished drafting a law on Friday that would open up Apple’s market-leading iTunes online music store to portable music players other than its popular iPods.
The new law, now set for a vote on Tuesday, would allow consumers to
circumvent software that protects copyrighted material — known as
digital rights management (DRM) — if it is done to convert digital
content from one format to another. Using such software is currently
illegal in much of the world.
This is expected to pass, here is the article.
My take: The French are probably still at the point where the songs aren’t making money but rather serve as loss leaders for the hardware. A legally forced unbundling could induce Apple to leave the market, if only to send other governments a message.
More generally, song prices are relatively low early on to induce people to lock into the technology. If you forbid lock-in, early period song prices and indeed hardware prices will be higher than otherwise (think of market exit as the limiting case). But will forced unbundling make prices lower in the long run, due to the growing competitiveness of the market? My guess is no. Something better than iPod will come along within five or ten years, so the relevant form of future lower prices is "higher quality." Allowing monopoly profits, rather than confiscating them, is the way to get there more quickly and more decisively. By enforcing interchangeability at such an early stage in the process, the French will more likely get a lame rather than a cool version of a universal access platform. How’s that for lock-in?
“A legally forced unbundling could induce Apple to leave the market, if only to send other governments a message.”
I don’t think so. Apple depends a great deal on good will–on being perceived as purveyors of cool, the good corporate citizen, the anti-Microsoft. Only if Apple were ordered to open up iTunes so that other manufacturers players could be plugged in and supported directly would I see any possibility of Apple choosing to exit the market.
“More generally, song prices are relatively low early on to induce people to lock into the technology.”
Relatively low? How so? At $.99, song prices are roughly what they were when sold on CDs as albums. Albums at $9.99 are cheaper than retail. And with movies on DVD being sold at Best Buy on sale for as little as $4.99, I don’t see song or album prices going *up*.
Also the lock-in is pretty leaky. The majority of songs on iPods, by FAR, weren’t bought from the iTunes store–they were ripped from CDs. And it’s always been possible to circumvent iTunes DRM and load the songs onto any player by burning them onto a $.10 CDR disc and re-ripping them to whatever format you like. There are also software hacks out there that will bypass the DRM without physical burning and re-ripping. So the French law won’t actually do much, as far as I can tell. Apple does fight circumvention efforts, but I believe they do so primarily because their record companies partners expect it. If Apple were able to say to the record execs, “Sorry, guys, but the French government won’t let us go after these hackers”, Apple might actually be happier.
That’s because the iPod advantage doesn’t really depend on iTunes store songs being playable only on iPods (they aren’t). The advantage depends on the whole ‘ecosystem’ — not just that the songs come from the iTunes store, but that the iTunes software is used as the interface with both device and iTunes store (and the French law wouldn’t change that). And THEN, a big part of the iPod advantage lies in the accessory market–there is an enormous array of iPod accessories many of which don’t work with other players. And Apple has scaled back the premium that they charge for the hardware, so there’s not much room for hardware competitors to win on price–only around $50 a unit, I’d estimate. You can still find great deals on other players–but generally by looking for discontinued models of manufacturers bailing out. When Dell gives up (as they did on hard-disk based jukebox MP3 players), that tells you something.
Also: If you can’t get around DRM by changing things to .wav and then reencoding them as .mp3 using some freeware you can get on the internet, then perhaps you don’t deserve to move your music around.
Interesting… while at MIDEM in Cannes (the annual music industry professional get together)… the majority were signing Apple’s praises… it is quite a good deal for the major recording companies – they get 70 of the 99 cents, if not more for each song sold†¦ Apple loses money on each song sold if you were to include marketing, however (God bless accounting) they can shift marketing to the iPod, which they make a killing on.
The bigger issue is still choice and price – I do not know anyone that is going to pay $10,000 to fill up an iPod. $.99 x 10,000 songs it can hold (less one dollar). iTunes offers a vending machine concept that will not last forever and is merely a fat kid sticking their finger in the dyke. The subscription basis is much better, however it’s current flaw isn’t with the price but with the underlying artist/label contract payment terms. The typical subscription is priced at $15 per month – would take 55 years to pay $10,000 and you would have access to millions of songs.
The long-term answer is to rework artist contracts and charge less to the consumer. This is what we are working towards at SoundGreen. Paying an artist a fair wage that allows them to focus all their energies on creation and not working part-time to support a hobby.
Cheers,
cannon
http://www.soundgreen.com
Second Dan K
This move isn’t aimed at Apple–it’s aimed at the record companies (remember that source-protecting CD’s is much more common in Europe than in the US). It’s the anti-DMCA. And long-term, what it will mean is that there’s a source for legal, well-monitored translation software, which is currently hard to find since DMCA made it illegal in the US.
why do people think that a way around DRM is to burn a lossy file (aac) to audio and then rip that back to a lossy file (aac or mp3)?!?!?
these are not substitutes. quality matters here. i am no audiofile with thousand dollar stereo equipment, but c’mon. it’s bad enough that the songs for sale at iTMS are lossy already but don’t make them worse.
also i would love to know how emusic and iTMS do with the tracks they have in head-to-head competition.
i agree with the folks who think that iPod+iTunes+iTMS is a coherent experience that apple is selling. and it is that experience that is better than what anyone else is offering right now.
the fact that you can buy music from other sources (emusic, ripped CDs) and use the songs from iTMS outside of the ipod (ie on your computer with iTunes) suggests to me that the goods being bought from apple are plenty open. i don’t think a DRM scheme could exist that is much more open than the one that Apple is pushing.
The move is largely symbolic. Nominally-illegal software already exists to circumvent these protections and any savvy iPod owner/iTunes user knows where to get it. Converting the files takes place in the privacy and comfort of your own home and so the existing legal arrangment is 100% unenforceable. Making it nominally legal would simply sanction it culturally, and allow distribution of such software in stores.
The primary beneficiaries would be users in other countries who could then illicitly acquire high-quality commerical circumvention applications produced in France.
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