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“The DRM scheme Apple is using changes the agreement between music seller and music buyer in a fundamental way: Instead of purchasing a product, music buyers are paying for something that is somewhere between a product and a service.”
——Kevin Carlson,
The Perl Journal

WHAT’S THE CATCH?

Is Apple’s iTunes Music Store
Really as Simple as It Seems?
By Jon O'Hara

There’s no denying that Apple Computer, under Steve Jobs, has performed a near-miracle by putting together a way to sell music online that’s acceptable to both copyright owners and consumers. With marketing finesse typical of the Apple brand, it has done a remarkable job of presenting consumers with the good stuff—the hallmark of user-friendliness—while keeping the less-pleasant nuts and bolts of digital rights management out of consumers’ faces.

A million downloads sold in less than a week in spite of Apple’s small marketshare is a pretty good indication that the iTunes Music Store is an already-beloved product among those who have tried it. And the enthusiastic praise of high-level record executives has been hard to avoid.

The buzz is so positive, in fact, that since the debut of the Music Store, Apple’s stock price has jumped from $13.48 when the Store was unveiled last Monday (4/28) to $17.65 at the close of trading Wednesday.

But there wouldn’t be an iTunes Music Store if there weren’t significant controls in place to help curtail the unlimited sharing of music online that’s helped throw the business into an unprecedented tailspin. Such controls were, in fact, necessary to bring the labels on board. They're there, but for the first time, they haven’t been the focus of attention.

There are the things you can do with music purchased through the iTunes Music Store: Apple calls it “downloads done right,” and just about anyone who’s spent time with it will agree. It’s fast, easy and addictive. “In a nutshell,” the Apple summary goes, “you can play your music on up to three computers, enjoy unlimited syncing with your iPods, burn unlimited CDs of individual songs and burn unchanged playlists up to 10 times each.”

These capabilities are revolutionary in themselves, representing greater flexibility for music purchased by download than ever before. But despite press reports saying (as a recent Fortune article does) that Apple has managed to win for consumers “virtually unfettered control” of their downloads, there are important things that you can’t do with music purchased through the Music Store.

While “unlimited syncing” of iPods sounds like free love for music files, it’s not. It’s about personal use—and they do mean personal. “Syncing” identifies a particular iPod with a particular copy of iTunes. If you happen to have several iPods, you can sync them all to your iTunes computer, no sweat. Transfer any or all files at will. But if you take one of your iPods to a buddy’s house to score the Black Sabbath files he just bought, forget it—unless you’re willing to “re-sync” your iPod to his computer, which means you’ll lose whatever files are currently on it, and when you want to plug it back into your computer, you’ll have to re-sync again.

In essence, it means you can’t use the iPod to shuttle tunes purchased from the Music Store—which are in a secure AAC format—onto other computers (though that functionality reportedly remains intact for MP3 files). Likewise, you can’t “format shift” a purchased AAC file into an MP3—unless you’re fluent in the available workarounds. More on that below.

As for audio CDs burned from iTunes, any copies made from such discs will have seriously degraded sound, whether ripped and burned to other discs or encoded into MP3s or other types of song files. That takes the fun out of re-encoding your purchases and sharing them on KaZaA or whatever.

No one’s likely to cry foul at that, especially since the Music Store works so well and so seamlessly—so long as you’re not trying to run a pirate operation.

Clearly, record executives love it, and for good reason: The system affords their bread-and-butter content significant protection, while making people happy right off the bat. “Apple has shown music fans, artists and the music industry as a whole that there really is a successful and easy way of legally distributing music over the Internet,” WMG’s Roger Ames has said. “Apple definitely got it right,” says UMG’s Doug Morris. “I don’t think it was more than a 15-second decision in my mind [to license music to Apple] once Steve started talking,” Sony’s Andrew Lack tells Fortune.

But what about consumers who are used to more? Yes, a million sold in a week says those who try it like it, but as more and more people try it and discuss its merits, especially relative to the “free” file-sharing services, will the first blush hold up?

Apple senior VP for worldwide product marketing Phil Schiller, who oversaw the Music Store’s launch, tells Business Week Online, “Our goal is to make it transparent for the user so that they never have to think about DRM.” Ahhh. Often said, seldom achieved.

One aspect of Apple’s DRM some people are already thinking about has to do with managing one’s three “authorizations”—the ability to listen to purchased music on three computers at any one time and move that ability to different computers as necessary. Doing so relies on Apple continuing to be in the Music Store business and operating the servers required for it, since every time you change computers, your iTunes software must contact Apple’s servers, where a central authorizations database is stored.

Indeed, according to the Music Store’s Terms of Service (where one can find all the usage rules and plenty of good, old-fashioned legalese), “In the event that Apple changes any part of the Service or discontinues the Service [i.e. the Store]...you may no longer be able to use Products [i.e. your purchased music] to the same extent as prior to such change or discontinuation, and...Apple shall have no liability to you in such case.”

Says The Perl Journal’s Kevin Carlson in a recent Letter From the Editor, “The DRM scheme Apple is using changes the agreement between music seller and music buyer in a fundamental way: Instead of purchasing a product, music buyers are paying for something that is somewhere between a product and a service—part of the payment is for the music itself, and part is for the continued authorization service. Whether Apple succeeds in its music endeavor...depends on whether the buyers are willing to accept this change.”

Nevertheless, even in online hacker hangouts such as Slashdot, where discussions range from how to make an unchained MP3 file out of an iTunes AAC file to how Apple last week had to fix a “hole” in its software that threatened to allow enterprising geeks to hijack user accounts, reviews of the Music Store are grudgingly positive:

Notes user Daniel Staal, in a full-fledged review, “For most of us, it works. I can do what I want with a file, even get it to MP3 if I need it, though it is hard enough that I have to actually think about doing it (which means I won't do it unless I need to). I'd love it if it were cheaper, but I probably would not buy twice as many songs at half the price. Finding songs is easy, buying them is easy.”

Says a message-board poster identified only as ihatewinXP, “Well, being that I’ve been burning CDs since 1x drives and was a beta tester for scour.net, I thought I would never pay for an mp3. In fact, I would say I have moral qualms about doing so. Well, last night, after installing iTunes 4, I figured that I might as well see what all the hubbub is about. What a wonderful idea—there is no better place for a music store than in my music library. An hour, 15 song samples and two videos later, I broke down, gave them my credit card and bought a Massive Attack track.”

Adds goombah99, “I spent last night playing with the Store, and after I got it to accept my credit card...I bought five pieces of music before I realized this was like eating potato chips. Flawless instant downloads, pristine music. Fairly easy to find what I wanted, and though some things I wanted are missing, the breadth of their coverage in other musical forms is astonishing. I even bought some music from artists I had never heard before because I found it while browsing. I really enjoyed the ability to fill in my music collection with a few songs I used to have on vinyl, but would never be willing to buy the whole album again just to get those favorites.”

Are these guys on the payroll, or what? If even Internet-radical tech-head skeptics say so, Apple’s down-the-middle deal with content-owners and consumers must be a fair one. And it appears, in the early going at least, that many “civilian” consumers agree with that conclusion.

But as Apple’s Schiller tells Business Week (echoing what Jobs has said repeatedly), it really isn’t about DRM, anyway: “Our position...is that the solution to music piracy is not a technological one. No one can make the perfect safe to put things in. And it won't be a legislative solution of someone passing a magic law that stops all piracy. In the end, the solution will be a behavioral one. Many people will choose the legal and fair route. That's what we hope we've done here—create something that's in many ways better than the free services.”

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