Posts filed under 'Apple'
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March 26th, 2008, 03:38pm
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The iPhone, Xbox, BlackBerries, and other proprietary, closed Internet-enabled devices are dooming the PC and taking the Internet with it; or so says Jonathan Zittrain. I’m currently reading an advance copy of Zittrain’s new book, “The Future of the Internet – And How to Stop It,” in which he discusses the trend away from the generative PC to “sterile appliances tethered to a network of control.”
The battle for the democratization of the internet – net neutrality – is fairly loud (although not nearly loud enough if you think about what is at stake). Similarly, there’s a lot of talk about open APIs and open platforms for customizable applications. However, the discussion around the transformation of the PC itself from an open platform to locked-down appliance is much more subdued. But, as Zittrain notes, “the endpoint matters.” Read More »
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March 21st, 2008, 01:00pm
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How much of a premium would you pay for unlimited legal music downloads?
Alright, so the title is an obvious exaggeration, but it raises an interesting question - How much would you pay for an iPod or iPhone with unlimited access to the entire iTunes catalogue? That seems to be one of the questions being kicked around by our Cupertino, CA friends these days. In an effort to beat (or at least match) Nokia’s launch of their “comes with music” line of mobile devices, Apple appears to be in negotiations to deliver a line of premium iPod and/or iPhones that would be bundled with unlimited access to all available iTunes music.
Read More »
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January 29th, 2008, 02:22pm
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A recent estimate by Bernstein Research analyst, Toni Sacconaghi, indicates that 27% of iPhones sold in the U.S. since its launch last summer were unlocked. This means that the handsets were made to work with network providers other than the iPhone’s “exclusive” partner - AT&T. In addition, another report suggests that as much as 40% of European iPhones are unlocked as well. In Canada, where Apple does not yet have a partner, iPhones can easily be spotted on the streets.
Admittedly the iPhone is an amazing product, however, the business model could hardly be worse. Sacconaghi estimates that Apple could lose $500 million in revenues if the company sells 10 million iPhones till the end of the year. If almost three out of ten customers are explicitly telling Apple that they want to choose their own carriers, it can be expected that a whole lot more are thinking it. For once, it might actually be beneficial for Steve Jobs to listen.
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January 18th, 2008, 09:07pm
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As a follow-up to a previous post, I wanted to comment on some of the trends that have emerged over the past couple of days to make my prediction of “The Year of Apple” appear, well – just plain wrong (for now). At the time of my initial post, nearly two weeks ago, Apple was riding high, having just peaked at a share price of over $200 and the blogosphere was abuzz with the latest predictions (read: wishes) about what delights Mr. Jobs’ latest black shirt, blue jeans affair (Macworld 2008) would behold.
After last year’s industry-changing iPhone release, everyone knew Jobs would have a tough act to follow, but nonetheless, rumors abounded and many signs seemed to be pointing to a very impressive keynote at Macworld 2008. Among the leading speculations was the release of an “ultraportable” that would make the competition’s next best look like a Commodore 64 and an iTunes-based video rental service featuring the catalogue of nearly every major movie studio.
By the time Jobs’ epic was done, he had revealed a series of launches that would make any other company green with envy, but instead of the raucous iPhone-induced cheers of the prior year, most of the presentation, and the week up until now, have been devoid of applause – replaced instead with grumblings and complaints (not to mention a tumbling stock price).
Unfortunately for Apple in this case, it appears that the hype squad of bloggers, tech analysts and consumers (sometimes compared to Trekkies for their fervour and passion for all things Jobs), has ultimately helped create a very tough week for all in the Apple camp.
Even when releasing a market-leading technology, such as the world’s thinnest laptop, and numerous other products that really do focus more than (m)any others, as Don mentioned, on a complete consumer experience, Apple’s OVERhype, created mainly via web 2.0, can cast such a long shadow that the light of many bright sides can easily be lost.
Now Apple is not completely innocent in this whole thing. In typical fashion to what many critics cite as Apple’s creation of hyper-consumerism, a few of the products launched seem to have an “upgrade or perish” aspect to them. For instance, similar to the iPhone, early adopters of the iPod Touch are now faced with a tough reality that, as with many things tech, there is already better out there and they may have been better off waiting. With a new set of really cool programs on all new iPod Touch units, previous “Touchers” now have to purchase a $20 software upgrade in order to take full advantage of their device’s benefits. While creating additional subscription-based revenue for Apple, there has been an online petition started to address consumers` concerns with this upgrade and we will have to wait and see whether this digital-era petition proves to be of any use.
I am confident that this downward trend will reverse, but these events help illustrate how easy it is for web 2.0 to quickly rear its head to reveal an ugly second face. (It also serves to illustrate why the world is a better place when I’m not managing anyone’s investment portfolio but my own…which may or may not include a few recently-purchased shares of AAPL.)
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January 17th, 2008, 10:51am
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Sometimes it’s really hard to wrap my head around far Apple has come in recent years - from near bankruptcy and almost total irrelevence, to a point where their new product launches feel like rock concerts, and one sees almost daily stories about different industries they are set to either take over or destroy en route to extraordinary profits. Amazing.
If you missed the news somehow, one of Apple’s most recent announcements involves a video rental service, with a few interesting twists - with the Apple TV set-top box videos can be ordered through the TV with a remote control, each of the major studios have offered up movies for the service, it sounds like newly-released DVDs will be available within 30 days, once you start the movie you have 24 hours to finish it before it “disappears”, you can move the movie across multiple devices, a hologram of Steve Jobs will sit beside you while you watch the movie… in other words, a pretty comprehensive offering. To quote Jobs:
“I think we got it all together”
Indeed - and that’s what continues to amaze about Apple’s offerings (noting that I made up the hologram, part of course). It’s not so much the technological wizardry embedded in them, though there is plenty of that in the “background”, but this relentless focus on delivering complete consumer experiences. By no means does this mean Apple is perfect, as among other things they have a “walled garden” tendency that continues to pop up at inopportune times (even while they are credited with knocking down walls in other industries). But they are doing some amazing things for customers in many industries that have for too long been satisfied with the status quo, and I applaud them for it.
So great, in fact, that one of the more common questions I see bouncing around is whether Apple TV will kill cable TV, as the Pajama Entrepeneur (not to be confused with the Tuxedo Contractor) articulates here. My response would be… probably not. The change that will come to television, like the change that comes to most industries, will likely continue to be relatively slow, and what the cable companies and others have to do is respond to such developments with offerings of their own.
On this point, think about what we’ve already seen happen in the music industry - iTunes launched, became extremely popular, and the music companies got very antsy about the balance of power in the buyer/supplier relationships, just as classic business strategy dictates they should (yes, I’m purposely ignoring all other aspects of the digital music development at this time). Is it concievable that studios would repeat the same tactic in the movie business and have a single buyer dominate the relationship?
I doubt it, and I’m quite sure the cable companies themselves can and will do some very, very interesting things here, while leveraging some very strong competitive advantages of their own. It’s not like they’re sitting on their hands waiting to be knocked off their perch, so stay tuned because this battle is just starting to heat up…
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January 4th, 2008, 05:56pm
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It’s been a tough year to be in the music industry. Sales of the labels bread and butter products – CDs, cassettes LPs etc. – have fallen 15% in the U.S in 2007. Consumers are spending more on other forms of entertainment such as DVDs and video games. Even artists are shunning the major labels. Madonna signed a huge deal with a concert promoter, Prince gave out copies of his CD with a newspaper, Paul McCartney decided to work with Starbucks and Radiohead released “In Rainbows” for free on the internet. Other obvious pressures include file-sharing, the rise of Apple as a giant in one of the only growth segments of the industry and emerging online competitors such as Sellaband and thesixtyone.
It’s no surprise that the industry is slowly changing. One of the most promising developments is the move towards selling DRM-free music. The last major label, Sony BMG, made the announcement today. Although Sony’s motives are far from enlightened, mostly fear of Apple and the need to match the other three major labels, this means good news for JT fans who will be able to get his songs on Amazon. This more open approach is definitely not the cure for all the industry’s woes, however, it’s a first step in admitting that the customer is and should be in control.
The music labels have a chance to turn things around in a positive way as Apple continues to control the vital iTunes – iPod link. It is conceivable that some company, say Microsoft, comes out with a cooler player than the iPod, and consumers will demand an alternative to iTunes. Assuming that Apple holds on to its DRM (there were hints that it may not) an alternative will have to emerge. Many labels, with the notable exception of EMI, have thrown their weight behind Amazon. With online sales expected to continue growing - they increased by 45% in 2007 - it will be interesting to see if the music industry is able to create a truly open distribution model for digital music in 2008. As for CDs, it seems that their era is quickly drawing to a close.
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December 4th, 2007, 04:06pm
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Just another quick update to our previous post about Radiohead’s recent decision to let users set the price of their latest album In Rainbows. Commenting on the first update, “An update on Radiohead downloads,” reader Scott asked, “Any word on what the average person is paying for those 1.2M downloads? It will be interesting to see if this is more fiscally advantageous for the band than releasing under a major label.”
Well, as a matter of fact, “yes” there is some data on that. The folks at comScore recently reported that the average user who was willing to pay for the download forked out $6.00 for the album, or $0.60 per song. Among U.S. users, the average price was $8.05 for the album, or $0.81 per song. In comparison, songs sold through iTunes yield between $0.05 and $0.10 to the artist, depending on who you believe.
So, in terms of collecting money from those willing to pay, and excluding the promotional advantages of iTunes for up-and-coming artists, distributing music via the Radiohead model does seem to be more lucrative.
However, the comScore study also reports that only 38% of those people that downloaded the album via Radiohead’s site were actually willing to pay for the music. Furthermore, among those willing to pay, the largest proportion (17%) were only willing to spend under $4.00. This reminds me of the keg fridge my friends had in university, and the mostly empty donation jar that sat on top of it. As far as college students are concerned (and Radiohead fans… assuming the two are actually mutually exclusive), free is the best price around.
I think the main point here is that while this has proved somewhat successful for Radiohead, the model only works if you have an established fan base. Over 50% of the total revenues from downloads came from a small portion of loyal fans (12%) that willingly paid between $8.00 and $12.00 for the album. So, even if all music goes the way of the download, there will still be a role for music promoters. Although, I doubt these entities will look anything like the record labels of old.
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October 17th, 2007, 10:32am
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Online rumors, and at least one BusinessWeek article, are indicating that Apple is planning to release a software development kit in early 2008. The kit would allow third party developers to create applications and widgets for the company’s popular iPhone.
This is already happening following the braking of the security on the iPhone by a group of hackers called the iPhone Development Team. Most users, however, are reluctant to fiddle with their phones or use these new apps due to Apple’s threat of further software updates. An official development kit would be a good compromise – Apple would retain some control over who gets the kit and which applications they endorse, while users would get the benefit of the creativity and enormous productive potential of third party developers. Now if Apple would only allow users to cut free of the AT&T cannonball…
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October 1st, 2007, 09:40pm
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Last week I talked about Apple’s plan to release a firmware update that would make modified iPhones, in the words or Steve Jobs ‘permanently inoperable’. Below is a timeline of how this story has played out.
September 28, 2007 - Apple releases new firmware update for the iPhone in an effort to take back control of the phones which they no longer own.
September 28, 2007 – In what perhaps was not Apple’s wisest decision, Apple Genius Bar employees are informing customers who now own a $500 dollar brick (a result of Apples update) they are out of luck. Check out the Video
September 30, 2007 – Hackers unlock iPod functionality on the iPhone, and are still working on enabling call features (unlocking the SIM).
October 1, 2007 – The iPhone is fully unlocked again. Paid solutions from Turbo SIM and iPhonesimfree.com now have solutions to restore the iPhone to a fully functional state. (free solution reported to be very close)
Apple’s new firmware didn’t even last a weekend and hackers from around the world are working to create a free solution. I wonder is Apple will get the hint that their customers would like to add applications to their phones. Seeing as they have now hacked the phone not once, but twice! Nokia on the other hand seems to get it, and in their latest ad campaign for the N95 smartphone the company appears to be poking fun at Apple.
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September 30th, 2007, 09:33pm
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Ever been in line for a Grande double semi fat Mocha Frappo Cappucino with an Espresso Vanilla twist, popped your iPod earphone out to place the order with the barista, and found the Starbucks was playing a better song than you were listening to? And if so, at that moment did you really, really want to buy it? Well if you answered yes you may want to rethink some things about your life, but you should be happier soon because according to the New York Times:
Starting tomorrow at certain Starbucks stores, a person with an iPhone or iTunes software loaded onto a laptop can download the songs they hear over the speakers directly onto those devices. The price will be 99 cents a song, a small price, Starbucks says, to satisfy an immediate urge.
I’ve been waiting for this announcement for a long time, because it just makes so much sense (particularly since Starbucks has been running HearMusic cafes for years that are tied to CDs). The obvious problem, however, has been one of business models - Apple only makes a few cents a song at best. If Starbucks wants to make a few cents too, there just aren’t enough cents to go around to make any sense.
So why now? Well I think we continue to slooowwwllly move towards a more fundamental shift here. As I posted back in June, the most successful musician of all time has seen the writing on the wall and has a new label - Starbucks. Now let’s pop back to another quote from the NY Times article:
Impulsive music lovers will have to sign onto the cafe’s Wi-Fi network to discover what song is playing over the Starbucks speakers. With a few taps, users can download the song onto their iPhones (which double as an iPod), or the new Apple iPod Touch with its wireless connection. The 99-cent charge will appear on their phone bills.
Interesting. So (for example) Paul McCartney lovers can buy the album from the Starbucks label, with their iPhone, in a Starbucks. That seems to eliminate somebody from the music industry equation - those pesky legacy labels. And why might that matter? Well, to quote the article again:
Mr. Entner said the sticking point on the growth of the phone as a full-service payment device had less to do with technology, which is adequate, and more to do with business questions. He said that all the potential participants — phone carriers, retailers, credit card companies, music labels — wanted a cut of the action, and it was not clear how the money for over-the-air payments would be divided.
For example, he said, the mobile-carrier profits for downloadable songs were about 3 cents a song, which he deemed “razor thin.”
Razor thin indeed - but let’s just say one of those “participants” account for a lions share of that cut. But if you could get a musician out of the clutches of the old labels, there might just be a heck of a lot more money to go around for everyone else (including the artists).
At least that’s what I keep hoping is happening here - Apple, Starbucks and others are using Trojan Horse tactics to force the music industry to somehow, someday, move to a much better model than what they’ve been clinging to.
Of course, I also see what Apple is doing with the iPhone right now, so I won’t exactly be surprised if songs I might buy at the Starbucks are rendered unlistenable if I grab my next coffee at the Second Cup.
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September 27th, 2007, 11:19am
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The iPhone is no doubt the must have gadget of the year, one of those rare products that manage to live up to the pre-launch hype (Halo 3 being another mega success example, although the game was a hit before its release with over a million pre-ordered copies). The thing is that success has come in spite of Apple and AT&T teaming up to release what may be the most un-consumer friendly product ever (we are not talking interface here).
When you buy an iPhone you are told to play by Apple’s rules
- You must use it on AT&T (ok, that’s reasonable, carrier subsidies etc…)
- You cannot add any programs to the phone (a little odd, it’s a smartphone, as a user can I not make it smarter?)
- You cannot even turn on the phone and use all the iPod and video screen goodness until its activated (Really, what is the point of that, and yes this may turn into a rant)
- If you pay Apple a dollar for a song from iTunes you can’t use that as your ringtone. Yes, that’s right you must pay another dollar to download the music you already own and paid for in ringtone format (This part just made people angry and was a pure cash grab)
After all the rules and limitations Apple slammed on its new products what does the company do to its loyal earlier adopter customers. It slashes the price of the iPhone 33% less than three months after it was introduced. If that wasn’t enough, Jobs is now pledging to turn all ‘hacked’ iPhones into bricks with the next firmware update for the iPhone. Stating that unlocks that have been applied “will likely result in the modified iPhone becoming permanently inoperable when a future Apple-supplied iPhone software update is installed” (Does Apple remember the trouble Sony got into with the whole DRM/spyware issue, this sounds is 10 times more malicious)
I understand that Apple has to try and save face with AT&T and try to look like they are protecting the exclusive agreement, but is wrecking customers phones the best option? The ironic thing is that in most of cases these are customers who can’t even be serviced by AT&T if the wanted to as the live in other parts of the world. They are die hard Apple junkies who feel the ‘need’ to have the latest Apple products. Compound that with the fact that over 500,000 copies of the unlock program have been download, you are looking at almost half of all iPhone users owning a $500 brick.
The real problem for Apple however is they just don’t get it, I think we need to send Steve a copy of Wikinomics. The iPhone hack was created by a collaborative community of hackers (the iPhone Dev Team) operating on IRC channels and wikis. Jobs has now thrown down the gauntlet, stating that “It’s a cat-and-mouse game. We try to stay ahead. People will try to break in, and it’s our job to stop them breaking in.” It has turned into Apple vs. the collective intelligence of the world. HD DVD was cracked in a matter of days, IBM and other software giants have bowed to Linux (remember that Open Source collaborative OS) so why is it that Apple is trying to fight the community head on?
A spokesman of the iPhone Dev Team responded by saying that “We will provide you with a tool in the next week which will be able to recover your ‘nck’ counter and ’seczones’ and even enable you to restore your phone to a factory-like state if you are really [determined] to update your phone”. Game on Steve Jobs, and good luck. I would love to see Vegas put odds on this, you just know Apple would be a long shot to win.
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September 26th, 2007, 07:27am
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So the general story, in many people’s eyes, is supposed to go like this - music companies are bad, and Apple is good, because Apple has not only embraced digital music sales, Steve Jobs has said he’d fully support DRM free music. More specifically, Steve’s Thoughts on Music web letter from February 6th 2007 said:
Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.
How nice of Apple to think this way, and support an open, interoperable marketplace. But now let’s look at what Apple’s saying about what’s going to happen to people (or more specifically, to people’s iPhones) that have been unlocked to use a variety of different software programs (can you say interoperable?):
Apple has discovered that many of the unauthorized iPhone unlocking programs available on the Internet cause irreparable damage to the iPhone’s software, which will likely result in the modified iPhone becoming permanently inoperable when a future Apple-supplied iPhone software update is installed.
Um, right - the unlocking programs cause irreparable damage, which will be revealed at the exact moment when future Apple-supplied software updates are installed. Doesn’t that sound a little like Apple-supplied software will disable the phones of anyone that dared unlock it? Did they get interoperable and inoperable confused, or what’s going on here?
Well, to quote Steve Jobs on this issue:
It’s a constant cat and mouse game. We try to stay ahead. People will try to break in, and it’s our job to stop them breaking in.
Huh. Alternatively, of course, Apple’s job could be to make amazing electronics and embrace an open developer community to further enhance their products and experiences. Or maybe turn the iPhone into a platform. There’s lots and lots of alternative “jobs” that Apple can be doing that don’t involve sabotaging products customers bought from them.
I’ve been waiting for a backlash on Apple for some time - they seem to have quite the ability to walk many thin lines at once, and rarely get called on actions that companies like Microsoft would get hung out to dry on. I wonder if intentionally disabling phones of a huge group of fanatical customers might finally do it?
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September 5th, 2007, 07:49am
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While it might not have quite the celebrity appeal of the Brad Pitt / Jennifer Aniston / Angelina Jolie saga that continues to seep into the tabloids, what’s going on with NBC, Apple, and Amazon right now is fairly interesting in it’s own right.
In short, NBC used to distribute it TV content through Apple (i.e. iTunes), and accounted for something to the tune of 30% of iTune’s sales. They wanted to raise the prices and bundle content together, Apple said no way, NBC bid adieu, and has now hooked up with Amazon to save the children in Afr… I mean, to sell their “traditional” TV content online.
I’m of mixed feelings about this, being a long time fan on Friends and all. On one hand, I can kind of see why Apple thought a sudden increase in the downloading price from $1.99 to $4.99 might be a bit steep. On the other, I can totally understand why content providers are a little uncomfortable with Apple’s “our way or the highway, we set the prices here buster!” approach… what’s so wrong with variable pricing anyway? Or bundling? Or just SOME sort of distribution network where EVERY content provider can sell anything they want, at any price they want, bundled with anything they want, to whoever wants it?
Maybe it wouldn’t work - maybe all the networks would price everything at a bazillion dollars and we’d all end up watching I Love Lucy re-runs over the antenna in time. But maybe, just maybe, if some of these new online retailers simply opened up and let content providers sell whatever they wanted, the market would evolve naturally - and maybe Amazon is doing just that.
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August 25th, 2007, 03:01pm
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Thanks to David Cameron for sending this along.
George Hotz of Glen Rock, N.J., confirmed Friday that he had unlocked an iPhone and was using it on T-Mobile’s network, the only major U.S. carrier apart from AT&T that is compatible with the iPhone’s cellular technology. In a video posted to his blog, he holds an iPhone that displays “T-Mobile” as the carrier.
For educational purposes only, here is how to do it.
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June 14th, 2007, 09:03am
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“Bebo’s 8.8m users in the UK and Ireland will be able to buy music directly from the profile of any musician who has a Bebo profile and whose music is available on iTunes.”
While this may not seem like ground breaking news, it’s an important step for Apple (and a scary progression for music companies). Below I have listed a couple of interesting points and questions that have come up.
- Apple is finally acknowledging the power social networking sites have in the music industry, and the importance of the reach of sites like Bebo, MySpace and even Facebook. Social networks provide iTunes with a direct pipeline into the lives of their target market. I am trying to think how to quantify this, and what comes to mind is Coke deciding to put pop machines in schools and completely infiltrating the habitats of their target market.
- The music scene isn’t just growing in these social networks, it now lives there. Bebo has 500,000 musicians registered, while MySpace has over 425,000 rock bands, 400,000 hip hop groups and 180,000 indie bands. As it stands right now iTunes will only be selling music from musicians who already are signed and are selling their music on iTunes. What happens if iTunes starts selling music for the most popular unsigned bands on Bebo or MySpace? What incentives do bands have to sign with the big labels?
- The Net Generation makes up the bulk of social networking site traffic. As I stated above, this is where the live, these sites are their social calendars and contact databases. It also happens that this Generation is enemy number one as far as the music industry is concerned when it comes to illegal downloads and piracy. Will offering youth easy access to digital music in the places they frequent have any effect on piracy? What if it the music they are selling is DRM free?
Where does this leave other social networking giants like MySpace or Facebook? Should they try and offer a competitive offering themselves? Will they partner with iTunes or develop an offering of their own? How the other large social networking sites proceed over the next few months should be interesting to see.
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May 30th, 2007, 05:02pm
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If you haven’t heard already, Apple and EMI are now offering DRM free music on iTunes. Apple is not the first company to offer DRM free music, but as the industry leader they are the most important. This may just be the first smart move the music industry has made in the last decade. As consumers we need to put all our past grudges behind us and support this initiative and reward EMI for taking the leap.
Sure big music companies and the RIAA have been accosting their customer base and suing children for the past decade, but we need to help them change. It took music companies over 6 years figure out that CDs are DRM free and anyone could rip and pirate them if they so choose, making DRM completely and utterly useless. Now that digital music has finally caught up with the CD, as consumers we are responsible to make sure that it’s successful.
My complaining and ranting about the incompetent and inept music industry is over for now, instead I am off to iTunes to buy some EMI music.
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May 17th, 2007, 08:07am
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Amazon’s new music-download service was announced yesterday, and it’s quite possible that it could amount to a whole lot of nothing. The reason is because the store will only sell music without DRM protection, which is hardly a new offer - eMusic has been doing the same for years. Amazon’s problem, like eMusic’s problem, is the same old problem that’s been plaguing the industry for years - most of the labels won’t sell DRM free music. Since they control most of the popular artists, most people will find the music selection available on Amazon quite poor indeed.
For example, the article notes that what will be missing from Amazon includes the top-10 selling albums from last week. So as long as most of the people that go onto the site don’t want to buy the music that they actually like, things might work out just fine.
But there is potential here, and it is because it’s just most of the labels don’t offer their music DRM free. EMI Group PLC, which is the third largest music company by sales, has decided to change teams and offer up their catalog DRM free, both on Amazon and iTunes. In turn, we’re headed for a very interesting test - will EMI’s artists start outselling artists from other labels? And if so, will the other big music companies come around? Even better, will some artists demand their labels do the same, and/or choose EMI if given a chance?
Maybe, maybe not. As the article notes, iTunes is still in control of 90% of the digital music market - and while most of these songs will continue to be sold with the Apple’s DRM protecting them, most people know by now that this protection is weak at best and might not really care in the short term. But Amazon’s new store combining with EMI’s jump into the “darkside” - you know, the side where companies try to please their customers - offers the best chance yet for sanity to be brought to the DRM mess that’s been going on for almost a decade.
The final step might require another device emerging that competes with the iPod in terms of popularity, with music over mobile phones being the best bet. If people keep buying music, and more and more things to play them on, and can’t get music from device A to device B, something will have to give.
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March 13th, 2007, 12:54pm
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In February Steve Jobs issued some thoughts on music that were tied mostly to the continued use of DRM. In short, Jobs said Apple would whole heartedly embrace DRM free music, but notes that if they license their current DRM to others, Apple could “no longer guarantee to protect music it licenses from the big four music companies.”
Now this would seem to imply that the big four have a problem with Apple licensing their DRM to others. So lets jump over to the response from Edgar Bronfman Jr., the CEO of Warner music:
“DRM and interoperability are not the same thing. We believe in interoperability… consumers want it and should have it. We at Warner, and I hope the rest of the music and content industry, will make it as easy as possible to achieve interoperability.”
Now lets think about this. Apple’s DRM continues to dominate the legal, digital music market. The easiest way possible to achieve interoperability, in turn, would be having them license that DRM to others. This is what the CEO of Warner says he wants, and he hopes that he speaks for the industry. Many, many other digital music competitors have requested the same thing, and there is extensive precedent for licensing systems working out in the entertainment industry. So what’s the problem Apple is talking about? Couldn’t we solve this within a couple of days if we really wanted to?
Well lets go back to Jobs again, and quote him on why licensing DRM would be difficult:
The most serious problem is that 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. The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute. Such leaks can rapidly result in software programs available as free downloads on the Internet which will disable the DRM protection so that formerly protected songs can be played on unauthorized players.
OK- so a single leak could render the DRM useless, which kind of makes sense. But for something to be potentially rendered useless, it must be useful in the first place. So lets see what Jobs says about the effectiveness of DRM (answering a rhetorical question he posed as to why the music labels would agree to DRM free music):
The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy.
Right - DRM doesn’t work. But Apple’s DRM dominates, and if they share it secrets could leak out and makes DRM useless. Curious logic. He goes on to note that much of this is because CDs remain DRM free. While this has a grain of truth to it, if you do an online search for something like “cracking iTunes DRM”, it’s easy to learn ways to break it. We’re not talking about NASA level of security here - burn a copy to an audio CD and then rip it back nicely sums up the easiest approach. There is a 100% chance Jobs knows such loopholes exist.
At the same time, all the music labels are moving away from DRM on CDs. In January EMI abolished it, and were the last major company to do so. Basically, they’ve given up because it doesn’t work. But they really, really want DRM online. Even though the CDs can be ripped onto any computer DRM free, and put online.
It is so, so infuriating as this “debate” rages on and everyone takes turns contradicting themselves. There are really only two choices for the long term: one common standard for DRM, or no DRM. Even if you believe in the latter, there seems to be no harm in at least trying the former, and it would be remarkably easy to do so.
This is what makes me sometimes think that Apple is the problem right now - if they’d just license their illusory DRM already we could get on with things. But my bigger theory on the industry paralysis issue focuses on the labels.
Whether there is DRM or not, once a single, legal, digital standard is established the conditions are set for a rapid decline in the influence of the large music labels. In turn, the pace at which they can be effectively disintermediated will accelerate. It’s not that there will be no role for them - just a smaller one, with less revenue, profits and control of the industry in the era of mass collaboration.
But as long as we remain in flux, and the physical format sales dominate, the old paradigm can hold on a bit longer. In turn, I think this debate is not about DRM at all. Rather, it is focused on protecting the other choke points the music labels have used to control the industry for years - the need for big capital investments tied to physical goods production in anticipation of demand that may or may not be there, access to scarce broadcast media channels, and all the rest.
It is important to remember amidst all of this what the model they are protecting really represents. While the labels like to talk about the needs of the artists, these same artists have typically recieved 10-14% of the revenue from a retail sale. In other words, about $1 once all the deductions are put through on a $16 CD.
Forget $9.99 for full albums or $0.99 a song - if we suddenly transitioned to the digital world and started from scratch, you can make a pretty good case artists selling full albums for $2-3, and giving a small percentage to the retailer and labels that support them, could make everyone outside the big-4 better off.
That’s where the industry needs to get to - the shifting of power to the ends of the network, harnessing the power of wikinomics. Forget the costs incurred in creating, packing and shipping physical products in anticipation of demand that may or may not be there - sell it online. Forget the access to expensive broadcast media channels - MySpace, YouTube et all are way cheaper. Forget the need to sell hundreds of thousands of albums to turn a small profit, and having successful commercial artists subsidize others - embrace the long tail.
I think Jobs knows this. While some find his statements about opening up DRM a bit hypocritical, remember what he was saying five years ago:
If you legally acquire music, you need to have the right to manage it on all other devices that you own
and:
We have Ph.D.’s here, that know the stuff cold, and we don’t believe it’s possible to protect digital content.
and (from the same interview):
We’ve talked to a large number of artists that really don’t like their record company, and I was curious about that. And the general reason they don’t like the record company is because they think they’ve been really successful, but they’ve only earned a little bit of money.
So it seems Apple’s strategy is just a staring contest with the labels - one where they hope continued dominance online will lead to DRM breaking all together. I personally think licensing their DRM to everyone would be a quicker means to the same end, with a dash of licensing revenue thrown on top as an added bonus. But hopefully one of the two will happen sometime in the next few years, the real power of the Internet for music distribution can be realized, and both artists and consumers can end up far better off than they are today.
Of course if this happens, it might add another bad chapter to the unmaking of a dynasty story that has dominated Warner Music CEO Bronfman Jr.’s business life thus far. You see he was correct in identifying the
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