Thoughts on Music
Steve Jobs
W
ith
the stunning global success of Apple’s iPod music
player and iTunes online music store, some have
called for Apple to “open” the digital rights
management (DRM) system that Apple uses to protect
its music against theft, so that music purchased from
iTunes can be played on digital devices purchased
from other companies, and protected music purchased
from other online music stores can play on iPods.
Let’s examine the current situation and how we got
here, then look at three possible alternatives for
the future.
To begin, it is useful to remember that all iPods
play music that is free of any DRM and encoded in
“open” licensable formats such as MP3 and AAC. iPod
users can and do acquire their music from many
sources, including CDs they own. Music on CDs can be
easily imported into the freely-downloadable iTunes
jukebox software which runs on both Macs and Windows
PCs, and is automatically encoded into the open AAC
or MP3 formats without any DRM. This music can be
played on iPods or any other music players that play
these open formats.
The rub comes from the music Apple sells on its
online iTunes Store. Since Apple does not own or
control any music itself, it must license the rights
to distribute music from others, primarily the “big
four” music companies: Universal, Sony BMG, Warner
and EMI. These four companies control the
distribution of over 70% of the world’s music. When
Apple approached these companies to license their
music to distribute legally over the Internet, they
were extremely cautious and required Apple to protect
their music from being illegally copied. The solution
was to create a DRM system, which envelopes each song
purchased from the iTunes store in special and secret
software so that it cannot be played on unauthorized
devices.
Apple was able to negotiate landmark usage rights at
the time, which include allowing users to play their
DRM protected music on up to 5 computers and on an
unlimited number of iPods. Obtaining such rights from
the music companies was unprecedented at the time,
and even today is unmatched by most other digital
music services. However, a key provision of our
agreements with the music companies is that if our
DRM system is compromised and their music becomes
playable on unauthorized devices, we have only a
small number of weeks to fix the problem or they can
withdraw their entire music catalog from our iTunes
store.
To prevent illegal copies, DRM systems must allow
only authorized devices to play the protected music.
If a copy of a DRM protected song is posted on the
Internet, it should not be able to play on a
downloader’s computer or portable music device. To
achieve this, a DRM system employs secrets. There is
no theory of protecting content other than keeping
secrets. In other words, even if one uses the most
sophisticated cryptographic locks to protect the
actual music, one must still “hide” the keys which
unlock the music on the user’s computer or portable
music player. No one has ever implemented a DRM
system that does not depend on such secrets for its
operation.
The problem, of course, is that there are many smart
people in the world, some with a lot of time on their
hands, who love to discover such secrets and publish
a way for everyone to get free (and stolen) music.
They are often successful in doing just that, so any
company trying to protect content using a DRM must
frequently update it with new and harder to discover
secrets. It is a cat-and-mouse game. Apple’s DRM
system is called FairPlay. While we have had a few
breaches in FairPlay, we have been able to
successfully repair them through updating the iTunes
store software, the iTunes jukebox software and
software in the iPods themselves. So far we have met
our commitments to the music companies to protect
their music, and we have given users the most liberal
usage rights available in the industry for legally
downloaded music.
With this background, let’s now explore three
different alternatives for the future.
The first alternative is to continue on the current
course, with each manufacturer competing freely with
their own “top to bottom” proprietary systems for
selling, playing and protecting music. It is a very
competitive market, with major global companies
making large investments to develop new music players
and online music stores. Apple, Microsoft and Sony
all compete with proprietary systems. Music purchased
from Microsoft’s Zune store will only play on Zune
players; music purchased from Sony’s Connect store
will only play on Sony’s players; and music purchased
from Apple’s iTunes store will only play on iPods.
This is the current state of affairs in the industry,
and customers are being well served with a continuing
stream of innovative products and a wide variety of
choices.
Some have argued that once a consumer purchases a
body of music from one of the proprietary music
stores, they are forever locked into only using music
players from that one company. Or, if they buy a
specific player, they are locked into buying music
only from that company’s music store. Is this true?
Let’s look at the data for iPods and the iTunes store
– they are the industry’s most popular products and
we have accurate data for them. Through the end of
2006, customers purchased a total of 90 million iPods
and 2 billion songs from the iTunes store. On
average, that’s 22 songs purchased from the iTunes
store for each iPod ever sold.
Today’s most popular iPod holds 1000 songs, and
research tells us that the average iPod is nearly
full. This means that only 22 out of 1000
songs, or under 3% of the music on the average iPod,
is purchased from the iTunes store and protected with
a DRM. The remaining 97% of the music is unprotected
and playable on any player that can play the open
formats. Its hard to believe that just
3% of the music on the average iPod is
enough to lock users into buying only iPods in
the future. And since 97% of the music on the
average iPod was not purchased from the iTunes
store, iPod users are clearly not locked into
the iTunes store to acquire their music.
The second alternative is for Apple to license its
FairPlay DRM technology to current and future
competitors with the goal of achieving
interoperability between different company’s players
and music stores. On the surface, this seems like a
good idea since it might offer customers increased
choice now and in the future. And Apple might benefit
by charging a small licensing fee for its FairPlay
DRM. However, when we look a bit deeper, problems
begin to emerge. 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.
An equally serious problem is how to quickly repair
the damage caused by such a leak. A successful repair
will likely involve enhancing the music store
software, the music jukebox software, and the
software in the players with new secrets, then
transferring this updated software into the tens (or
hundreds) of millions of Macs, Windows PCs and
players already in use. This must all be done quickly
and in a very coordinated way. Such an undertaking is
very difficult when just one company controls all of
the pieces. It is near impossible if multiple
companies control separate pieces of the puzzle, and
all of them must quickly act in concert to repair the
damage from a leak.
Apple has concluded that if it licenses FairPlay to
others, it can no longer guarantee to protect the
music it licenses from the big four music companies.
Perhaps this same conclusion contributed to
Microsoft’s recent decision to switch their emphasis
from an “open” model of licensing their DRM to others
to a “closed” model of offering a proprietary music
store, proprietary jukebox software and proprietary
players.
The third alternative is to abolish DRMs entirely.
Imagine a world where every online store sells
DRM-free music encoded in open licensable formats. In
such a world, any player can play music purchased
from any store, and any store can sell music which is
playable on all players. This is clearly the best
alternative for consumers, and Apple would embrace it
in a heartbeat. If the big four music companies would
license Apple their music without the requirement
that it be protected with a DRM, we would switch to
selling only DRM-free music on our iTunes store.
Every iPod ever made will play this DRM-free music.
Why would the big four music companies agree to let
Apple and others distribute their music without using
DRM systems to protect it? The simplest answer is
because DRMs haven’t worked, and may never work, to
halt music piracy. Though the big four music
companies require that all their music sold online be
protected with DRMs, these same music companies
continue to sell billions of CDs a year which contain
completely unprotected music. That’s right! No DRM
system was ever developed for the CD, so all the
music distributed on CDs can be easily uploaded to
the Internet, then (illegally) downloaded and played
on any computer or player.
In 2006, under 2 billion DRM-protected songs were
sold worldwide by online stores, while over 20
billion songs were sold completely DRM-free
and unprotected on CDs by the music
companies themselves. The music companies sell the
vast majority of their music DRM-free, and show no
signs of changing this behavior, since the
overwhelming majority of their revenues depend on
selling CDs which must play in CD players that
support no DRM system.
So if the music companies are selling over 90 percent
of their music DRM-free, what benefits do they get
from selling the remaining small percentage of their
music encumbered with a DRM system? There appear to
be none. If anything, the technical expertise and
overhead required to create, operate and update a DRM
system has limited the number of participants selling
DRM protected music. If such requirements were
removed, the music industry might experience an
influx of new companies willing to invest in
innovative new stores and players. This can only be
seen as a positive by the music companies.
Much of the concern over DRM systems has arisen in
European countries. Perhaps those unhappy
with the current situation should redirect their
energies towards persuading the music companies to
sell their music DRM-free. For Europeans,
two and a half of the big four music companies are
located right in their backyard. The
largest, Universal, is 100% owned by Vivendi, a
French company. EMI is a British company,
and Sony BMG is 50% owned by Bertelsmann, a German
company. Convincing them to license their
music to Apple and others DRM-free will create a
truly interoperable music marketplace. Apple
will embrace this wholeheartedly.