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  • Steve Jobs One-Ups the Music Industry Again!

    April 2nd, 2007

    At the time they said it was probably a publicity stunt, but it appears that Steve Jobs had the right idea when he suggested that the music industry would be better off without putting DRM on the tracks sold by online retailers. Sure, Monday’s agreement with EMI may just be a grand experiment that could come crashing down, but I don’t think so.

    I feel certain that Steve was right on the money this time, and that — if they are smart — the rest of the music industry will catch up with EMI real fast and institute the very same program.

    For those of you who tuned in late, I won’t belabor the details. Instead, I’ll just cover them briefly, and you can go to Apple’s site to read the full press release. Basically, beginning in May, the songs you buy from iTunes will be available in two forms. The “standard” version will be the same ones you can download now at 99 cents per copy, and they will still include the “FairPlay” DRM encumbrance. However, there will also be a “premium” version, encoded at 256K instead of 128K, which will be DRM-free. It will sell for 30 cents additional.

    Album prices will go unchanged and — once the new versions are available — you’ll be able to upgrade your existing iTunes music repertoire simply by paying the price difference.

    This is the second recent policy change for iTunes. Just last week, they added a “Complete My Album” feature that allows you to upgrade from one or more singles to the full album simply by paying the difference in price. You have to upgrade within six months, though I’ve heard reports that older tracks may be included as well.

    This is certainly a boon to the music industry, which has been long complaining that they want to sell albums, not singles. Now they have a chance; that is, of course, if you really want the album. That has always been a vexing issue, because lots of pop albums contain one or two hits and lots of filler. Customers know that, and perhaps the music industry will figure it out too one of these days.

    In any case, now that DRM is being ditched at a premium price, the music industry gets something else it wanted, which is variable pricing. This may be a back door method to support a price increase, since supplying a higher-definition version of a song doesn’t cost them any extra, and not encoding the file in a DRM wrapper probably reduces processing time somewhat. In other words, as a practical matter, except for the additional storage required for the larger files, premium songs ought to be cheaper. But when is the music industry practical or even logical?

    From a user standpoint, though, I suppose it makes sense to pay more for something better. How much better, only time will tell. Apple claims a 256K AAC file is “indistinguishable from the original recording,” and I suppose the golden ears out there will be quick to put that promise to the test on material that they regard as sufficiently revealing. One example might be acoustic piano, particularly when recorded in an intimate setting where every nuance of the original instrument is audible.

    The next question is how the rest of the recording industry is going to react.

    EMI is the smallest of the “big four,” and it has been flirting with DRM-free product for a while. So it probably isn’t a huge jump for them to agree to this new distribution scheme. I also expect that it’ll put the pressure on the rest of the industry to join them, and clearly that’s what Steve expects, since he claims that half of the iTunes catalog will be free of digital rights management protection by the end of the year.

    Of course, the big question is whether this new marketing setup will help rescue the industry, which has seen sales fall steadily. Will music pirates simply take the superior tracks and put them up their peer-to-peer sites, without a corresponding increase in sales from people who choose to buy their music legally?

    That’s a huge question, and I hope Steve is right that digital music sales will actually improve when you know that the songs you buy are not exclusive to a single supplier, or a single company’s line of music players. And, of course, that you’re getting a superior product. Already, some analysts are suggesting that Apple may even see an increase in iPod sales because customers have greater freedom to handle their music the way they want.

    But what about the other companies? Well, Microsoft, which never met a DRM scheme it didn’t like, may really be caught with its knickers down here. Sure, after a period of exclusivity on iTunes, they can benefit from the same product, and offer it to their PlaysForSure” partners and to owners of the Zune player.

    It will even mean, for example, that you can buy a song from iTunes and play it on a Zune, unencumbered by any restrictions. That is, except when you “squirt” the track by Wi-Fi to a fellow Zune owner — if you can find one. In theory, the song will still self-destruct after three plays or three days, whichever comes first.

    How will Microsoft explain their way out of that dilemma?

    More importantly, I wonder how the RIAA is going to treat the customers it has been suing with great vigor after this unlikely development? Alas, I do not expect that to change anytime soon, unless the RIAA sustains a few big losses in court.



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    15 Responses to “Steve Jobs One-Ups the Music Industry Again!”

    1. Michael says:

      “Will music pirates simply take the superior tracks and put them up their peer-to-peer sites, without a corresponding increase in sales from people who choose to buy their music legally?”

      I suspect EMI thinks that’s possible and that’s why they want more money – to cover possible losses from that. But I can’t see it at all. At the press conference Steve Jobs reiterated a point he’s made before: that anyone who’s going to put music tracks up on p2p sites can do so *already* – because 90% of the product is sold on CDs, which are not copy-procted and can be ripped.

      “Microsoft, which never met a DRM scheme it didn’t like, may really be caught with its knickers down here.”

      As Wired is pointing out this morning, this is also a welcome blow against Microsoft’s wma format:

      http://www.wired.com/entertainment/music/news/2007/04/emihardware_0403

      Apple is offering the new downloads as AAC, which is part of the industry-standard MPEG suite, and which was designed as the successor to MP3. Microsoft, as always, has eschewed open standards and tried to trap people in its own format. Nice try; it’s not going to work.

    2. Andrew says:

      I think this is great news, and really hope that the upgrade feature for older music is made available. The biggest DRM annoyance for me has been the inability to burn MP3 CDs from iTunes content to play in my cars. Both of my cars have single CD players that are MP3 capable. An MP3 disc is, in my opinion, a far better solution than plugging my iPod into the AUX jack. No extra cables to connect to the player, and no worry about either power cables or battery life for the iPod, just a single CD that holds over 100 songs.

      My favorite example is The Beatles, which hopefully will be online shortly. I have THE ENTIRE Beatlies studio catalog on a single disc as well as most of the stuff from the Anthologies and the Love soundtrack. Ditto for Beethoven’s symphonies, all on a single MP3 CD. picking my music is even easier than navigating an iPod while driving, and my entire music collection (except for my DRM-protected iTunes content) fits on about 20 instead of over 400 CDs.

      Way to go Apple and EMI, now lets see the rest of the industry follow suit.

    3. Tom B says:

      I’m enjoying this; MSFT bet big on DRM schemes with various annoyance levels. This changes the rules of the game, as well as making legacy formats, like wma more obsolete.

      I’m looking for H.264 video to be much more of a player by year’s end, too.

    4. I’m enjoying this; MSFT bet big on DRM schemes with various annoyance levels. This changes the rules of the game, as well as making legacy formats, like wma more obsolete.

      I’m looking for H.264 video to be much more of a player by year’s end, too.

      We do need to clarify the fact that the music files from EMI will be available DRM-free in a variety of formats. It is not restricted to AAC, which is what Apple offers. I gather that some tech writers have gotten that one screwed up, although it’s clear what’s really going on if you read EMI’s actual statements.

      Peace,
      Gene

    5. Michael says:

      We do need to clarify the fact that the music files from EMI will be available DRM-free in a variety of formats. It is not restricted to AAC, which is what Apple offers. I gather that some tech writers have gotten that one screwed up, although it’s clear what’s really going on if you read EMI’s actual statements.

      Peace,
      Gene

      The Wired article I linked makes that mistake. I realized that wasn’t so, but I thought they were overall right in saying this was a blow against wma.

      Magnatune currently offers MP3, AAC, Ogg Vorbis, FLAC, and WAV. They’re a special case, and I’d expect less choice from most stores. My guess would be stores other than Apple selling EMI’s catalogue might well go not for AAC but for MP3 at a fairly high bitrate – anything up to 320kbps.

      I’m guessing the deal could also speed the adoption of AAC – and support for it on portable players, since some people are likely going to be buying from iTunes even if they haven’t yet got a player, and people who have got an iPod now might get something else next time round. It’s best for the player makers to cover the possibility.

      Microsoft’s Zune supports AAC, because they knew darn well that people have existing libraries of unprotected AAC they’ve ripped themselves in iTunes that they’re not about to abandon. I bet having to support an open standard like that that stuck in Redmond’s throat.

    6. Jon says:

      What I’m interested in knowing is how this is going to affect the independent labels on iTunes. The ones who have been harping on Apple to offer their tracks without FairPlay, and that Apple has been resisting by saying it wasn’t technically feasible to offer nonDRM tracks.

      Well…now it obviously is technically feasible.

      Here’s my question: What if you are and indie label and want to sell existing iTunes AAC encoded tracks at the current bit rate and at 99¢, but…you want to do so without FairPlay DRM?

      Think Apple will allow this?

      I don’t. I think they are going to “tie up” nonDRM tracks with higher AAC encoding and the $1.29 price.

    7. What I’m interested in knowing is how this is going to affect the independent labels on iTunes. The ones who have been harping on Apple to offer their tracks without FairPlay, and that Apple has been resisting by saying it wasn’t technically feasible to offer nonDRM tracks.

      Well…now it obviously is technically feasible.

      Here’s my question: What if you are and indie label and want to sell existing iTunes AAC encoded tracks at the current bit rate and at 99¢, but…you want to do so without FairPlay DRM?

      Think Apple will allow this?

      I don’t. I think they are going to “tie up” nonDRM tracks with higher AAC encoding and the $1.29 price.

      I agree that this is a two-sizes fit all plan. Apple wants simplicity, which means that indies will have to agree to the same plans as the other music companies. On a practical level, yes, it’s technically feasible, but Apple wants you to be able to set a specific purchase preference and have it apply across the board.

      That’s not going to work if you offer alternatives of the type you suggest.

      Peace,
      Gene

    8. Andrew says:

      No DRM and higher bitrate are worth 30 cents to me any day of the week.

    9. [Comment ID #6053 Will Be Quoted Here]

      We’ll be featuring a discussion about whether the higher bit-rate truly makes the music “indistinguishable” from CD, as Apple claims, on this week’s episode of The Tech Night Owl LIVE. We’ll call upon the golden ears of our David Biedny (who is also a musician among his many, many talents) to perform a listening test of an acoustic piano selection involving the original CD, a 128K AAC rip and a 256K AAC rip. Don’t assume that the results will be predictable when it comes to David.

      Peace,
      Gene

    10. Jon says:

      I agree that this is a two-sizes fit all plan. Apple wants simplicity, which means that indies will have to agree to the same plans as the other music companies. On a practical level, yes, it’s technically feasible, but Apple wants you to be able to set a specific purchase preference and have it apply across the board.

      That’s not going to work if you offer alternatives of the type you suggest.

      Peace,
      Gene

      Are you saying that once I buy a track of a given type (FairPlay or nonDRM AAC), then that is the only type I will find available to me whenever I return to the iTMS? I was under the imprssion that iTMS was going to have a choice of two formats any time we wanted to purchase a track.

      At any rate, if technical limitations don’t prevent Apple from offering two choices (lower bitrate AAC tracks with DRM or higher bitrate AAC tracks without DRM), I’m dubious they prevent Apple from offering three choices. Or more precisely, a different TWO choices (lower bitrate AAC tracks OR higher bitrate AAC tracks – both without DRM)

      I say this because it is my understanding (from a number of things I’ve read online and off) that FairPlay is added to iTunes tracks as they are downloaded. I have to say that if this is true, then I doubt there is any serious technical issue to elminating that step (adding FairPlay DRM) from the tracks of those labels whose customers are willing to buy lower encoded AAC files.

      In the end, it wouldn’t be about offering iTunes customers three choices, we would never see more than two choices anyway. It’s about Apple offering their independent music label clients three options instead of two…provide, of course, that the option I’m describing is a choice that any of them would want.

      They may not, but I think some of them might and they may not be happy if Apple doesn’t provide it.

    11. Michael says:

      Are you saying that once I buy a track of a given type (FairPlay or nonDRM AAC), then that is the only type I will find available to me whenever I return to the iTMS? I was under the imprssion that iTMS was going to have a choice of two formats any time we wanted to purchase a track.

      At any rate, if technical limitations don’t prevent Apple from offering two choices (lower bitrate AAC tracks with DRM or higher bitrate AAC tracks without DRM), I’m dubious they prevent Apple from offering three choices. Or more precisely, a different TWO choices (lower bitrate AAC tracks OR higher bitrate AAC tracks – both without DRM)

      I say this because it is my understanding (from a number of things I’ve read online and off) that FairPlay is added to iTunes tracks as they are downloaded. I have to say that if this is true, then I doubt there is any serious technical issue to elminating that step (adding FairPlay DRM) from the tracks of those labels whose customers are willing to buy lower encoded AAC files.

      In the end, it wouldn’t be about offering iTunes customers three choices, we would never see more than two choices anyway. It’s about Apple offering their independent music label clients three options instead of two…provide, of course, that the option I’m describing is a choice that any of them would want.

      They may not, but I think some of them might and they may not be happy if Apple doesn’t provide it.

      No Steve did *not* say that. He said:

      “Well I think what’s going to happen is really simple: which is, people are going to have a choice. And people are going to make that choice and they’re going to set iTunes one way or the other. So as an example for myself, I’d rather pay the extra 20 pence and get the higher-quality DRM-free music. And I’ll just set iTunes to say, “whenever that’s available, buy that.” So I won’t be presented with two choices, I’ll just be presented with one.”

      That’s a pretty clear implication: first, that the details aren’t worked out yet (hence “I think …”); and secondly, that there’ll likely be a preference that you can *set* to get the simplicity back (not that you can’t have a choice on a per-song basis if you want it).

      http://www.appleinsider.com/article.php?id=2624

      As for other wholesalers not being “happy” if Apple doesn’t agree to accept further complexities and pricing levels, well, they can offer what they have to sell to other retailers instead then, can’t they? The same applies, at the other ends of the chain, to any potential customer who doesn’t like what’s on offer. As it is, with the current deal even among those who own iPods, songs from the iTunes Store make up only about 3% of what they have on there. Over 90% of the music companies’ product is sold on CDs. But when the new deal comes along, those who want CD sleeve notes, those who would like a CD as a hard copy as ultimate backup, those who think they can tell the difference between 256kbps and lossless – and whoever else for whatever reason or none – will be able to continue not to buy. Buying from the iTMS is not compulsory.

    12. Jon says:

      No Steve did *not* say that. He said:

      “Well I think what’s going to happen is really simple: which is, people are going to have a choice. And people are going to make that choice and they’re going to set iTunes one way or the other. So as an example for myself, I’d rather pay the extra 20 pence and get the higher-quality DRM-free music. And I’ll just set iTunes to say, “whenever that’s available, buy that.” So I won’t be presented with two choices, I’ll just be presented with one.”

      That’s a pretty clear implication: first, that the details aren’t worked out yet (hence “I think …”); and secondly, that there’ll likely be a preference that you can *set* to get the simplicity back (not that you can’t have a choice on a per-song basis if you want it).

      http://www.appleinsider.com/article.php?id=2624

      As for other wholesalers not being “happy” if Apple doesn’t agree to accept further complexities and pricing levels, well, they can offer what they have to sell to other retailers instead then, can’t they? The same applies, at the other ends of the chain, to any potential customer who doesn’t like what’s on offer. As it is, with the current deal even among those who own iPods, songs from the iTunes Store make up only about 3% of what they have on there. Over 90% of the music companies’ product is sold on CDs. But when the new deal comes along, those who want CD sleeve notes, those who would like a CD as a hard copy as ultimate backup, those who think they can tell the difference between 256kbps and lossless – and whoever else for whatever reason or none – will be able to continue not to buy. Buying from the iTMS is not compulsory.

      I did not say that Steve said anything. I was quoting Gene’s reply and referencing nearly every online article (which did not quote Jobs as you did) that I’ve read which have simply said that iTunes customers will have a choice.

      What this appears to be shaking out to is; 1) we are going to have a choice, but 2) not really even though 3) we will. It may appear I am confused, but I do understand what Steve Jobs says in your quote.

      If one wants to talk about adding complexity to the iTunes system, adding “choice” in the manner Jobs talks about is certainly adding complexity. The indie labels that have wanted their tracks to be offered without DRM were not asking Apple to provide iTunes customers with a choice to begin with. If FairPlay is “wrapped” around tracks at the time they are downloaded, skipping that step isn’t adding complexity, it’s simplifying the process.

      As for “other wholesalers not being happy…” well, all I can say (coming from a business to business background) is that this sort of corporate “take it or leave it” attitude doesn’t sit well with clients. It smacks of MS.

      I know some (typically Wintel fanboys comparing Apple choices to Dell or Gateway’s falsely perceived, nearly infinte choices) will say such a “take it or leave it” attitude is just an extension of what Apple does at the computer consumer level. Except that Apple actually does offer consumers many choices. Just not the ones such Wintel whiners want.

      Listen…I’m not complaing about this whole Apple/EMI deal. I think it’s great and hopefully is the first step down the road to eliminating DRM.

      I’m just saying I think there may be a few (justifiably so, IMHO) unhappy campers, and I’m just pointing out that it could be just a tinsy, itty-bitty bit better.

    13. Michael says:

      “As for “other wholesalers not being happy” well, all I can say (coming from a business to business background) is that this sort of corporate “take it or leave it” attitude doesn’t sit well with clients. It smacks of MS.”

      So now you’re claiming to know what Apple is saying to wholesalers it’s dealing with and what that “smacks” of. Good grief!

      I was merely making the point that any transaction between any two parties must be mutually agreeable. At least, that’s so in free countries. Why should any wholesaler think it incumbent upon it to try to dictate the terms of the transactions a retailer makes with its customers anyway? They are the retailer’s customers not its. And the retailer knows a lot more about dealing with end users and what will be attractive to them, anyway, than any wholesaler does. The wholesaler’s deal is with the retailer; and the retailer’s is with the customer. As a customer, as far as I’m concerned, what’s between me and the retailer is none of the wholesaler’s damn business: It can butt out. And if I can’t agree satisfactory terms with a retailer, I’ll go elsewhere. This “take it or leave” high-drama language of yours is nonsense. If the deal on the table doesn’t suit any party to any transaction in any area of life they “leave” it. If the deal Apple are offering me doesn’t suit me I’ll “leave” it rather than “taking” it.

    14. Jon says:

      “So now you’re claiming to know what Apple is saying to wholesalers it’s dealing with and what that ‘smacks’ of.”

      I made no such claim. I was responding to your previous comments (which I interpreted to mean) that Apple engages in business transactions with a “take it or leave it” attitude. If I intrepreted wrongly, I apologize, but your comments in this response lead me to believe that my initial interpretation was correct.

      “I was merely making the point that any transaction between any two parties must be mutually agreeable”

      I wholeheartedly agree and I did not claim otherwise.

      However, real world transactions are seldom as cut and dry as your comments would appear to make them. Transactions, such as those between Apple and the music labels, no doubt involve a lot of back and forth negotiating.

      “Why should any wholesaler think it incumbent upon it to try to dictate the terms of the transactions a retailer makes with its customers anyway?”

      I can only surmise that you have little experience in business. What you describe is quite common and some would say it is SOP for many businesses, although “dictate” may be the wrong word. It’s why MSRP exists. As for “why,” that is because those “wholesalers” (indie music labels) want their customers to keep buying their product.

      “They are the retailer’s customers not its. And the retailer knows a lot more about dealing with end users and what will be attractive to them, anyway, than any wholesaler does. The wholesaler’s deal is with the retailer; and the retailer’s is with the customer. As a customer, as far as I’m concerned, what’s between me and the retailer is none of the wholesaler’s damn business: It can butt out.”

      Well…you really got me there.

      I guess Apple should have listened to all their retailers (CompUSA, Best Buy, Circuit City, etc.) and not opened their own stores. Because (by such reasoning) it’s obvious those retailers had to know “a lot more about dealing with end users and what will be attractive to them.” Apple should have just butted out.

      How dare Apple open their own stores.

      To Gene,

      This is the end of this little tete-a-tete, as far as I’m concerned. I’m not one for histrionics and it’s becoming quite clear that my educated (if not fully informed) opinionated speculation and replies have struck a raw nerve with some people. Similar posts made at other sites have elicited emotional responses that make me wonder if the Wintel fanboys aren’t correct in their opinions of Mac users. Maybe we just live in intolerant times. At any rate, replying appears to be pointless, so I don’t see any reason to continue.

    15. Michael says:

      “How dare Apple open their own stores.”

      What are you talking about? If this wholesaler who you claim wants to minutely control relations between the retailer and its customers wants itself to go into the retail business – “to open its own store” – then I’m all for that. Let it sell to me direct. Sure. Let it “dare” to open its own store and make its offer to me, and I’ll consider its terms when I’m in the mood to buy.

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