PJ: Apple more likely to drop out of France than open iPod and iTunes

Posted:
in iPod + iTunes + AppleTV edited January 2014
Reacting to the French National Assembly's vote today to force Apple to open its closed iPod and iTunes ecosystem, analysts for PiperJaffray said they believe Apple is more likely to drop out of the French market than open up its FairPlay DRM to competitors.



Earlier today, French lawmakers voted 296-to-193 to approve an online copyright bill that would require online music services and MP3 player makers to open DRM technology up to competitor's devices and services. The proposed bill now moves on to the French Senate for a final vote before becoming law.



"Given 61 percent of lawmakers in the French National Assembly voted in favor of the new online copyright bill, we believe the French Senate will vote for the bill and it will become law," analyst Gene Munster told clients in a research note Tuesday afternoon. "This will force Apple to open up iTunes (FairPlay DRM) to competing device manufacturers if the company continues to operate in France."



The analyst said that Apple is more likely to drop out of the French market than open FairPlay.



"While this sounds like a drastic move, we believe it would not materially impact business," Munster wrote. "We estimate that approximately 20 percent of iPod and iTunes sales occur outside of the U.S. The French market alone is likely less than 2 percent of iPod and iTunes business."



In the analyst's opinion, Apple would prefer to remove itself from the French market than "start what could be a slippery slope of other countries passing similar legislation."



"In the end, we believe that even if we are wrong and Apple does open up iTunes in France and other geographies, iPod sales will not be measureably impacted," Munster wrote. "Over the last several years, we have seen that, despite the presence of many highly functional online music services, sales of non-iPod devices have not taken off." He said the reason for this is that sales of iPods drive demand for online music sales on iTunes and not the other way around.



"Apple would be at risk to losing some iTunes business if similar laws to the proposed French online copyright bill were passed in other geographies, but it is important to keep in mind that the profitable component of the 'portable device + music service' equation is the portable device and a loss of some portion of music service would not have a dramatic impact on bottom line results," the analyst added.



PiperJaffray maintains its "Outperform" rating on Apple shares with a price target of $103.
«13

Comments

  • Reply 1 of 53
    melgrossmelgross Posts: 30,645member
    I posted this in an ARs discussion about this very issue.



    To start, I responded to the idea that we needed a good translation:



    "I agree, we need to know the exact wording. A very good translation is required. Even one word out of place can destroy the meaning.



    It seems that this bill can be contradictory. Since we don't have the exact wording, and, by the way, can the bill be changed as it moves to the other part of the government the way it does in the US? In other words, the House bill here has to be compatible with the bill in the Senate. They have to negotiate a compromise before sending it to the President.



    Will that happen there as well?



    If so, that might change this bill again.



    But, otherwise, it seems possible that the dual nature of this bill could be a problem.



    If, on one hand, the bill was written to protect DRM, but on the other hand, requires interoperability between many devices, how does it treat devices than don't recognize DRM?



    I don't believe that this would actually hurt Apple. Apple now has a very large iPod market, and a very large iTunes market. There is no reason why most people would change their buying habits, even if this bill does pass.



    The only difference I can see, is that people could now buy content that is NOT available on the iTunes site. This holds true for all the others even more so, as Apple seems to have the most content.



    If anything, this would require all of the sites to attempt to acquire even more content, so that their customers wouldn't go off site. Most people like to do business with one company, if possible.



    Sometimes I wonder if Apple wouldn't even want something like this to occur. It would give them the excuse to open their system up, as others have said they must do eventually, without seeming to be weak in doing it.



    There is also no evidence that Apple was the one to want the DRM in the first place. It's likely that the content providers demanded it."
  • Reply 2 of 53
    deepkiddeepkid Posts: 97member
    It'd be interesting to know exactly what the recording industry is doing at this time to kill this proposal and the likelihood of their influence helping its defeat.



    What's annoying about the press' presentation of this issue is the iPod's perceived dependence on iTMS. It's silly to present the story as if iPods would quit selling if there was no French version of iTMS.
  • Reply 3 of 53
    crees!crees! Posts: 501member
    I can't wait for the French citizens to call up their lawmakers and give them an earfull.
  • Reply 4 of 53
    What the fcku does Gene Munster know about French politics?



    Once Apple threatens to pull out of France if this bill passes the French Senate and goes into law, the consumers ought to let their Senators know that they want them to reject the bill. If enough consumers got involved, the bill will fail. On the other hand, if not many complain, au revoir, suckers.



    And if that fails, there's car-burning!
  • Reply 5 of 53
    FOLKS!!! The iTMS store for France operates out of Luxembourg. Last I checked, Luxembourg is a sovereign country and won't be affected by this law. Apple does not have an iTMS store actually operating from France.
  • Reply 6 of 53
    mattyqpmattyqp Posts: 26member
    I'm confused. If this bill both strengthens DRM and forces everyone to an interoperable standard, what about Windows Media DRM or any other?
  • Reply 7 of 53
    maccrazymaccrazy Posts: 2,654member
    Quote:

    Originally posted by macFanDave

    What the fcku does Gene Munster know about French politics?



    Once Apple threatens to pull out of France if this bill passes the French Senate and goes into law, the consumers ought to let their Senators know that they want them to reject the bill. If enough consumers got involved, the bill will fail. On the other hand, if not many complain, au revoir, suckers.



    And if that fails, there's car-burning!




    Consumers would surely prefer more choice and fair competition. I, for once, agree with the French and their bureaucratic system.



    Opening up FairPlay means I can buy the best MP3 player and buy my music from anywhere I want. This is great news for everyone. iTunes could still work just with the iPod - that way it doesn't really help other manufacturers and iTunes could then host other download stores. Monopolies are bad for consumers - less choice means less competition and therefore higher prices.
  • Reply 8 of 53
    pmjoepmjoe Posts: 565member
    Quote:

    Originally posted by AppleInsider

    In the analyst's opinion, Apple would prefer to remove itself from the French market than "start what could be a slippery slope of other countries passing similar legislation."



    Well this has to be the stupidest bit of analysis I've read on this site yet (and some of them are pretty bad). If Apple did not remove itself from the French market, that would mean they came up with a solution for this legislation and they wouldn't have to worry about other countries passing similar legislation. So, staying in certainly does not "start [...] a slippery slope" nor does getting out "prevent other countries passing similar legislation". Do people seriously get paid to come up with this kind of "analysis"?



    Since all this appears to require is for Apple to license its DRM to competitors, this could just as easily be a win-win for Apple. Now that doesn't mean that Apple might not choose to drop out of the French market until it would determine a way (if one exists) to make this profitable. In fact, the analyst goes on to say that doing so would not significantly impact their profits. One could just as easily argue that Apple is in the best position to profit from such a move given the populatity of the iPod, iTunes, iTMS, etc.



    As often gets posed in other threads, this "analyst" seems to be dredging his opinions directly from these rumor sites. I wish I could get paid good money to do that. Big hint to the PiperJaffray folks who apparently read this site: I'd suggest taking a course in philosophy dealing with simple logic.
  • Reply 9 of 53
    irelandireland Posts: 17,295member
    Ah if iTunes goes they always have snails!
  • Reply 10 of 53
    melgrossmelgross Posts: 30,645member
    Quote:

    Originally posted by pmjoe

    Well this has to be the stupidest bit of analysis I've read on this site yet (and some of them are pretty bad). If Apple did not remove itself from the French market, that would mean they came up with a solution for this legislation and they wouldn't have to worry about other countries passing similar legislation. So, staying in certainly does not "start [...] a slippery slope" nor does getting out "prevent other countries passing similar legislation". Do people seriously get paid to come up with this kind of "analysis"?



    Since all this appears to require is for Apple to license its DRM to competitors, this could just as easily be a win-win for Apple. Now that doesn't mean that Apple might not choose to drop out of the French market until it would determine a way (if one exists) to make this profitable. In fact, the analyst goes on to say that doing so would not significantly impact their profits. One could just as easily argue that Apple is in the best position to profit from such a move given the populatity of the iPod, iTunes, iTMS, etc.



    As often gets posed in other threads, this "analyst" seems to be dredging his opinions directly from these rumor sites. I wish I could get paid good money to do that. Big hint to the PiperJaffray folks who apparently read this site: I'd suggest taking a course in philosophy dealing with simple logic.




    A lot of misunderstanding here.
  • Reply 11 of 53
    I'm all for Apple licensing FairPlay so that people have more options?but if the DRM translation also transcodes to WMV or whatever, this legislation essentially makes what was once a "perfect copy" a "self degrading copy" like VHS or cassette tape, at which point the argument for having DRM at all falls flat.



    In that scenario the legislation really only trades the convenience of a less involved translation for the inconvenience of having the DRM still intact after the translation (I'm comparing to the process of burning a CD and then re-encoding in another format).



    I'm inclined to believe this legislation is a compromise come up with by French lawmakers to make stricter DRM enforcement laws more palatable to their constituents. If so, it's another excellent example of why politicians have no business legislating technology of any kind.
  • Reply 12 of 53
    splinemodelsplinemodel Posts: 7,311member
    Clearly French pork-barreling to try to come to the aid of Arcos.
  • Reply 13 of 53
    melgrossmelgross Posts: 30,645member
    Quote:

    Originally posted by ChevalierMalFet

    I'm all for Apple licensing FairPlay so that people have more options?but if the DRM translation also transcodes to WMV or whatever, this legislation essentially makes what was once a "perfect copy" a "self degrading copy" like VHS or cassette tape, at which point the argument for having DRM at all falls flat.



    In that scenario the legislation really only trades the convenience of a less involved translation for the inconvenience of having the DRM still intact after the translation (I'm comparing to the process of burning a CD and then re-encoding in another format).



    I'm inclined to believe this legislation is a compromise come up with by French lawmakers to make stricter DRM enforcement laws more palatable to their constituents. If so, it's another excellent example of why politicians have no business legislating technology of any kind.




    It's an interesting question as to whether this law would require changing the format, or just the DRM.



    If it requires changing the format, the transcoding itself, you are right. There would be no more advantage in that than there is to burning it to a cd and doing it that way. Unless, the company would have to offer its files in multiple formats?a logistical nightmare! And, very expensive.



    But, I suspect that it would only involve the DRM. So that we would see Fairplay WMA files, and visa versa (did I spell that right?).



    The other question is would this have to be implemented in the players themselves, rather than in the content? That would solve many of those problems in that nothing would have to be done about the sites, or the content they sell. But current players would have to be exempted.
  • Reply 14 of 53
    asciiascii Posts: 5,778member
    Quote:

    Originally posted by crees!

    I can't wait for the French citizens to call up their lawmakers and give them an earfull.



    Yes, Apple has used consumer pressure in the past. For example they rolled out the Intel Macs early to bring pressure on to software makers.



    Hopefully closing iTMS France will cause lots of letters to be sent to lots of French senators.
  • Reply 15 of 53
    mdriftmeyermdriftmeyer Posts: 7,127member
    About 2% of their iTunes sales?



    Compare the loss of 2% vs. opening up their DRM?



    Apple will legally "not sell" within France.



    As someone pointed out, Luxembourg is it's own sovereign nation. If they provide a localized version of the iTunes store that currently is the "french" equivalent, so be it. This will leave it up to the end consumer to purchase or not purchase music from the iTunes store.



    If people really gived two-shits about cd quality non-compressed music they'd be buying cds of their music and burning them to their iPod or whatever mp3 player they own.



    People are inherently lazy and want as little effort necessary to have music appear on their devices.



    You don't like that iTunes is married to iPod? Don't buy from Apple. There are other competitors out there.



    You don't like the fact that Apple is the big player on the Mac regarding the store? They don't exist to cater to your "whims." They exist to sell products that best serve their interests and stay within the laws of each country products are sold.



    You don't like that your Creative mp3 player doesn't work with iTunes, then bitch to Creative and request they create a partnership with Apple that benefits Apple and Creative. It won't happen but then again Creative doesn't want to help Apple anymore than Apple wants to help Creative.



    Solution: Creative delivers a better iTunes/iPod seemless solution and garners contracts with the music industry equal or surpassing that of Apple.



    Perhaps people should rethink what they really don't like: they are becoming slaves to their own material needs.



    Keep buying the iPods, iTunes, etc. I own stock and I don't own an iPod or use iTunes other than to play a CD.
  • Reply 16 of 53
    Quote:

    Originally posted by melgross

    The other question is would this have to be implemented in the players themselves, rather than in the content? That would solve many of those problems in that nothing would have to be done about the sites, or the content they sell. But current players would have to be exempted.



    It's this trip up that makes me believe that transcoding would be necessary. Otherwise to comply with the French laws WMA players will require AAC playback functionality, and vice versa. It also brings up the question of Sony's ATRAC format, and whether or not Sony would allow other manufacturers to add ATRAC to their hardware.



    Another thought crossed my mind. If France does end up forcing some sort of "DRM portability" utility, how long before it gets hacked into a "DRM removal" utility?
  • Reply 17 of 53
    mr. hmr. h Posts: 4,697member
    Quote:

    Originally posted by melgross

    It's an interesting question as to whether this law would require changing the format, or just the DRM.



    But, I suspect that it would only involve the DRM. So that we would see Fairplay WMA files, and visa versa (did I spell that right?).




    As I understand it, the law is about forcing companies (read: Apple and Sony) to licence their DRM (Microsoft already licence their DRM to anyone who wants it), such that anyone can write software able to enconde/decode any format, as long as they have the appropriate licenses. So, if this bill were to pass, it wouldn't actually result in the iPod being able to play PlaysForSure, as Apple can do this already if they wanted to, but they don't. Rather, it would mean that stores other than the iTMS could sell AAC+FairPlay to be played on iPods, and hardware manufactures such as Roku, Sonos, Creative etc., would be able to implement AAC+FairPlay decoders.
  • Reply 18 of 53
    jegrantjegrant Posts: 45member
    Quote:

    Originally posted by Mr. H

    ... (Microsoft already licence their DRM to anyone who wants it) ...



    Really?



    They won't license it to Linspire OS -

    http://www.desktoplinux.com/news/NS3080897910.html

    http://www.theinquirer.net/?article=19789



    And they have not licensed it to Flip4Mac (the current makers of the official Microsoft-recommended Windows Media Components for Mac OS X). I was hopeful they would, but I become less hopeful as time passes.



    If anything, maybe this law will encourage MS to actually have an open licensing policy, instead of one that seems to be aimed at preserving their desktop operating system monopoly.
  • Reply 19 of 53
    aplnubaplnub Posts: 2,569member
    Quote:

    Originally posted by macFanDave

    ...On the other hand, if not many complain, au revoir, suckers.



    And if that fails, there's car-burning!




  • Reply 20 of 53
    melgrossmelgross Posts: 30,645member
    Quote:

    Originally posted by Mr. H

    As I understand it, the law is about forcing companies (read: Apple and Sony) to licence their DRM (Microsoft already licence their DRM to anyone who wants it), such that anyone can write software able to enconde/decode any format, as long as they have the appropriate licenses. So, if this bill were to pass, it wouldn't actually result in the iPod being able to play PlaysForSure, as Apple can do this already if they wanted to, but they don't. Rather, it would mean that stores other than the iTMS could sell AAC+FairPlay to be played on iPods, and hardware manufactures such as Roku, Sonos, Creative etc., would be able to implement AAC+FairPlay decoders.



    It's more than just that. If they also require, as it now seems, players to play content from other sites, then it will be required to have this on the player as well, as you also mention.



    But, the other problem is this; Would this law also REQUIRE player manufacturers to license other companies DRM for their own players? That is a difference. To say that you must license it TO others is one thing, but to say that you must license it FROM others is something else.



    How would that be decided? If I invent a new DRM and start selling music on a site in France, would every other company be required to license my software?



    We don't know any of this yet. Laws are known as much for what they don't address, as for what they do. If the law isn't written tightly, and many aren't, then it could be a problem.



    This could be more complicated than anyone expects.
Sign In or Register to comment.