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Chances of DRM-free iTunes Store are low, says firm

post #1 of 29
Thread Starter 
Despite calls by Apple chief executive Steve Jobs for major record labels to drop their anti-piracy requirements for songs sold over online music stores, there is less than a 25 percent chance the labels will bite, says research and investment firm PiperJaffray.

In an open letter posted on Apple.com this Tuesday, Jobs responded to demands from European nations that Apple open its FairPlay DRM (Digital Rights Management) system that it uses to protect music downloaded on the iTunes store.

Essentially, Jobs absolved Apple of the criticism of a "closed" music system and redirect it toward the labels. He suggested those labels abolish DRM on downloaded music and that they license their music to Apple and other online stores without restrictions.

"In posting this letter Jobs is making a statement that Apple does not advocate DRM - it is the music companies that require its use," PiperJaffray analyst Gene Munster told clients in a research note on Wednesday. However, the analyst believes there is a "less than 25 percent chance" the music industry will take Jobs up on his calls and license music to online stores without DRM.

"Record labels have worked hard to protect their product from theft by negotiating DRM requirements, so despite Jobs' request, DRM free online music services are not likely to be the norm any time soon," he wrote.

Still, Munster said there remains an unlikely possibility that the labels will "call Apple's bluff" and agreed to sell music DRM free online, which he believes would be a positive for the company and its market-leading iPod+iTunes ecosystem.

"Consumers choose a device first and a music service second," the analyst told clients. "Apple is confident, justifiably given the iPod's leading market share, that increasing usage of online music services based on an open platform will sell more devices and most of those devices will be iPods."

In a DRM-free online music world, Munster notes that consumers may choose a service other than iTunes to download music but said that would be somewhat inconsequential to Apple if iPod sales increase.

"The reason for this is that iPods are significantly more profitable to Apple than iTunes; iPod (35 percent of sales) gross margins are in the 30 percent range while iTunes (5 percent of sales) gross margins are in the 5 percent-10 percent range," he wrote.
post #2 of 29
Chances of DRM-free iTunes Store are low, says firm





agreed
post #3 of 29
Surely the chance of the labels reconsidering is slightly higher than 25-percent. In fact I'm inclined to side with Jobs on this one (obviously \ ). In Jobs' open letter he writes that CDs are sold without any DRM, and have done for many years, I can purchase a CD for £7.97 or less on Amazon compared to £7.99 on iTunes, and on that CD I get better quality and DRM free.

I think the labels are about to come under some severe pressure over this.
post #4 of 29
Personally, I do not buy anything on iTunes, since I want to make sure I can use it how I want to. If the DRM was removed, I'd buy all of my music there. I don't think that the record companies really appreciate how they are affecting the market.
post #5 of 29
The recording industry has a brain but paranoia seems to be ruling their actions.

Case 1:
I buy a lot of music. I then burn CDs for our cars. Neither car CD player knows anything about DRM, so standard mix CDs could be copied.

Case 2:
I buy the physical CD when I really want the printed contents. Standard CDs can, and have been since day one, copied everywhere on Earth.

Case 3:
Let's say that my wife buys a different player which can not work with iTunes. Is she screwed? Nope! Re-read the two cases above.

Hello! The recording industry gains nothing while pissing off those that keep them fed.

Thank you, Steve Jobs... the spotlight is now on the record companies, their paranoia, and their poor long range business sense. They should be smart enough to do the right thing -- it will cost them nothing!
post #6 of 29
Quote:
Despite calls by Apple chief executive Steve Jobs for major record labels...

He wasn't telling them anything about what they must do. It was 1 of 3 possible paths how online music distribution could be handled.

Blogging: Quickly scan. Copy/paste. Inaccurately quote and state as fact. Submit.
post #7 of 29
Quote:
Originally Posted by AppleInsider View Post

Despite calls by Apple chief executive Steve Jobs for major record labels to drop their anti-piracy requirements for songs sold over online music stores, there is less than a 25 percent chance the labels will bite, says research and investment firm PiperJaffray...

Then they won't be getting my money. Period. No more DRM in my iTunes Library.
post #8 of 29
It's obvious that these European entities are well aware of who feeds them. As Jobs stated 2 1/2 of the big four are based on this continent. So they have no profitable reason to attack them, and to a greater sense, not a prayer of a chance in forcing them to change. So these countries go after the single company they possibly can "bully".

Their responses this morning ("It's not good enough to say they have problems with suppliers and their hands are tied.") show they did not, or will not, understand the fundamental issue Jobs tried to address. Whether it's Apple, Microsoft, Sony, Wal-Mart, etc., DRM will be dictated by the record companies. Europe is putting their heads in the sand with these responses.

To say Apple must open its system to other players does not address the fundamental issue, that should anything happen to the DRM, all music is lost, regardless of where you bought it or how "open" the system is. DRM is the key issue. And Europe's paper tiger approach by muscling Apple is purely theatrics and will in the end benefit not a single European music consumer.
post #9 of 29
Quote:
Originally Posted by cwoloszynski View Post

Personally, I do not buy anything on iTunes, since I want to make sure I can use it how I want to. If the DRM was removed, I'd buy all of my music there. I don't think that the record companies really appreciate how they are affecting the market.

I suspect you're not very representative of the typical customer/potential customer.

It's not like mobile phone usage "sky-rocketed" when number portability went into effect. The vast majority of people who want to buy music online are going to buy music online.

Most downloaders use iTS, most MP3 owners have iPods, and most are completely unaware of the concept or the limitation of DRM. You may be in a significant minority, but I think it's a very small one.

This is all about negotiations in Europe.
post #10 of 29
Quote:
Originally Posted by crees! View Post

He wasn't telling them anything about what they must do. It was 1 of 3 possible paths how online music distribution could be handled.

Blogging: Quickly scan. Copy/paste. Inaccurately quote and state as fact. Submit.

This is not true. Jobs mentioned all of the options and said Apple would not do one of them, out of the remaining two options one was their current solution. Why would Jobs write an open-letter about something he did not want to change?

Jobs is strongly stating he wants to sell DRM free music.
post #11 of 29
25%? Not 10%? Not 33%? Not 24.439844%? Mkay.

Vinea
post #12 of 29
Quote:
Originally Posted by crees! View Post

He wasn't telling them anything about what they must do. It was 1 of 3 possible paths how online music distribution could be handled.

Blogging: Quickly scan. Copy/paste. Inaccurately quote and state as fact. Submit.

What is your problem with "call"? "Call" has more valid uses than you are letting on.
post #13 of 29
If DRM-less music does indeed come to pass, I suppose the individual record labels COULD set up their own online stores and sell their own label's music...and likely charge and arm and a leg for it. They would have no use for iTunes Store anymore.
post #14 of 29
Quote:
Originally Posted by AppleInsider View Post

unlikely possibility that the labels will "call Apple's bluff"

I actually don't believe that it was a bluff by Apple. Here's what I think is going on:

• Record labels want control back. They haven't been able to raise prices on iTunes songs and they have tried a couple of times to do that. Steve called them greedy and turned it down - even at the risk of losing the licensing rights to their music library.

• The record labels probably thought that Sony and Microsoft would wipe out Apple and then they would have "team players" who would surely do as they say - but that didn't happen, and since the Zune has been out and received less than stellar reviews - they know that Microsoft won't be able to do it.

• The record labels probably want to sell their own libraries via their own store - but how do they do that and make their songs play on the most popular player in the world? - They need to remove DRM.

• I think Steve knows they are probably conisdering this, and this open letter is a salvo saying - "Do it. We don't like DRM, we don't need no stinking DRM. We have the best player in the world."

Just my thought.
post #15 of 29
Quote:
Originally Posted by vinea View Post

25%? Not 10%? Not 33%? Not 24.439844%? Mkay.

Vinea

No, none of the above.

It is 23.2%.
post #16 of 29
Quote:
Originally Posted by boss1 View Post

Chances of DRM-free iTunes Store are low, says firm





agreed


Actually three weeks ago at one of the largest music industry conferences of the year, in Canne, France, this was discussed and several music executives from major labels openly talked this htis probably will be coming...sooner than later.
post #17 of 29
Quote:
Originally Posted by abrooks View Post

Surely the chance of the labels reconsidering is slightly higher than 25-percent. In fact I'm inclined to side with Jobs on this one (obviously \ ). In Jobs' open letter he writes that CDs are sold without any DRM, and have done for many years, I can purchase a CD for £7.97 or less on Amazon compared to £7.99 on iTunes, and on that CD I get better quality and DRM free.

I think the labels are about to come under some severe pressure over this.

Of course, everyone seems to look at this as a "CDs don't have DRM, so digital music shouldn't either!". Lest we forget, the record labels have viewed this in the past (and still, most likely, to this day) look at this as "Digital music has DRM, so CDs should too!". If they actually had any ability to create or replace CDs with DRM music discs, they would do it in a heartbeat.
post #18 of 29
Quote:
Originally Posted by mazzy View Post

Actually three weeks ago at one of the largest music industry conferences of the year, in Canne, France, this was discussed and several music executives from major labels openly talked this htis probably will be coming...sooner than later.

Do you have a link to a news article about this? This is something I'd like to show my friends and neighbors.
post #19 of 29
Quote:
Originally Posted by Louzer View Post

Of course, everyone seems to look at this as a "CDs don't have DRM, so digital music shouldn't either!". Lest we forget, the record labels have viewed this in the past (and still, most likely, to this day) look at this as "Digital music has DRM, so CDs should too!". If they actually had any ability to create or replace CDs with DRM music discs, they would do it in a heartbeat.

They could do this today, but they make far too much money selling CDs the way they are.

So far, it's all been about control. Before her departure from the RIAA, Hillary Rosen made several public statements saying that control is more important than profit. But you can't keep this attitude for too long. After a while, shareholders start saying "says who? we want profit." When that happens, progress will be made.

One interesting case study is the Baen Free Library. Baen, a publisher of sci-fi books, makes several titles available for free download - no DRM, no expiration, period. Everybody thought this was an incredibly stupid move, but a few authors decided to permit some of their works to be given away. So what happened? The authors made more money than before. People, after downloading one title, decide they like the author and buy the rest. Many times, they even buy the one they downloaded, preferring printed paper over a digital file.

I personally think the music and movie industries should learn from this. I'm not saying they should give away free songs (although I wouldn't object if they did), but that most customers are honest people and will make more purchases if they feel that they are being treated fairly by the companies they pay their money to.
post #20 of 29
Job's letter was a nice little shot across the bow of the music industry. How many others of you think that the Beatles announcement might include another bombshell: DRM-free Beatles from iTunes?

It all seems so simple now...
post #21 of 29
I suspect opening it up would make no difference for apple. I don't see the average user buying music from a different service and then importing it into itunes for use on their ipod. That's not convenient. Maybe people that care about having things all at once instead of jumping through hoops.

I always grill my cousin for downloading ring tones on his phone and downloading music but ultimately he doesn't care because he doesn't want to spend the effort required to save himself money.

It's definetly the same with most itunes users. I doubt they've even ever though about drm when buying music.
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post #22 of 29
Quote:
Originally Posted by ecking View Post

I suspect opening it up would make no difference for apple. I don't see the average user buying music from a different service and then importing it into itunes for use on their ipod. That's not convenient. Maybe people that care about having things all at once instead of jumping through hoops.

I might be one of those people. There may be a lot more of me out there. It would be great to get higher quality audio than 128AAC. I think it would be really good for the market to open up. Perhaps Apple would be forced to sell higher bit-rate files? Competition is good.
post #23 of 29
Why don't the record companies come up with the DRM?

I mean they've been attempting it on CDs as of late (of course, with a whole lot problems). So why not create the standard for all music distributors. It's not like Wal-Mart has to produce their own type of music CDs in comparison to Best Buy or Target. All music CDs are made by the music companies using a technological medium that has its standards.

So why must it be Apple's (or Microsoft's, or Sony's, etc.) responsibility to create the technological medium standard that all it's competitors get to reap from?

I mean, let's cut the BS here...isn't that what is being asked of Apple? "Thanks Apple for creating all the technology hardware and software as well as promoting the concept with your own business capital. Now that your digital music model is a success with no effort on our part, we need you to give it to your competitors, since they can't make it on their own. That way we can make more money."

Perhaps then, piracy is just that. It's the method by which the music industry has to drink its own medicine.
post #24 of 29
In my way of thinking you dump the DRM but add a watermark to the downloads. If someone then puts them up on the Internet the lables can find out who it was.

Just a thought.
post #25 of 29
Quote:
Originally Posted by Timon View Post

In my way of thinking you dump the DRM but add a watermark to the downloads. If someone then puts them up on the Internet the lables can find out who it was.

Assuming you can do this in a way that doesn't impact the sound quality.

Given the fact that lossy compression formats (like MP3 and AAC) work by discarding audio components that are not normally audible, it would be hard to come up with a watermark that can survive recompression and not significantly mess with the sound.
post #26 of 29
Quote:
Originally Posted by shamino View Post

Assuming you can do this in a way that doesn't impact the sound quality.

Given the fact that lossy compression formats (like MP3 and AAC) work by discarding audio components that are not normally audible, it would be hard to come up with a watermark that can survive recompression and not significantly mess with the sound.

I think the encoders can be tweaked a little, but most watermarking systems are easily defeatable simply by reencoding.
post #27 of 29
Quote:
Originally Posted by JeffDM View Post

I think the encoders can be tweaked a little, but most watermarking systems are easily defeatable simply by reencoding.

Although you suffer some loss of sound quality, file size bloat, or some compromise between the two, current DRM schemes are defeatable by a decode/re-encode cycle as well. Watermarking which doesn't impact sound quality -- because it's embedded in file wrapper info, not within the audio signal -- isn't great watermarking, but it would probably be good enough, protecting the record labels interest nearly as much (maybe even a little more) than current DRM does.
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post #28 of 29
Quote:
Originally Posted by shetline View Post

Although you suffer some loss of sound quality, file size bloat, or some compromise between the two, current DRM schemes are defeatable by a decode/re-encode cycle as well. Watermarking which doesn't impact sound quality -- because it's embedded in file wrapper info, not within the audio signal -- isn't great watermarking, but it would probably be good enough, protecting the record labels interest nearly as much (maybe even a little more) than current DRM does.

If the watermark isn't in the audio data, then it is trivially stripped, and is completely useless.
post #29 of 29
Quote:
Originally Posted by shamino View Post

If the watermark isn't in the audio data, then it is trivially stripped, and is completely useless.

All I'm saying is that current DRM is pretty much just as useless as such watermarking would be, yet current DRM seems to (at least partially) satisfy the record labels need to feel in control. If the labels going to be stupidly placated by the one, why not by the other instead? At this point, none of it amounts to more than creating an annoyance and having token control over the situation anyway.
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