DRM-free Music: The Difference Between Apple and Microsoft

Includes: AAPL, MSFT
by: Yankee Group

By Carl Howe

Steve Jobs has written an open letter defending Apple's (NASDAQ:AAPL) approach to music and Digital Rights Management [DRM]. He openly discusses why Apple employs DRM (because the labels have made it a condition of providing their catalogs) and the challenges associated with maintaining such a system (namely, that the labels have made it a requirement that should their DRM be breached for more than a few days, they have the right to withdraw their catalogs).

He also notes that despite iTunes' success, the vast majority of music sold today is on compact disks, which are DRM free. And that leads to a very compelling argument, which he makes in the final two paragraphs:

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.

I posed the same idea nearly a year ago; I embrace it wholeheartedly and applaud Jobs' effort and leadership even more.

I thought it might be useful to cite both Apple's and Microsoft's (NASDAQ:MSFT) public positions on DRM music and compare them.

First, an excerpt from Steve Jobs' letter:

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.

And now Microsoft's response, quoted in today's New York Times:

Jason Reindorp, marketing director for Zune at Microsoft, said Mr. Jobs’s call for unrestricted music sales was “irresponsible, or at the very least naïve,” adding, “It’s like he’s on top of the mountain making pronouncements, while we’re here on the ground working with the industry to make it happen.”

“He’s certainly a master of the obvious,” Mr. Reindorp said, adding that “the stars were already aligning” to loosen the restrictions.

In a nutshell, Apple asks consumers to imagine the possibilities of a different digital media world. Microsoft calls such vision irresponsible, naive, and obvious, while simultaneously claiming they are lobbying those same labels to make it happen anyway. In Jobs' letter, he mentions consumers once, but customers three times. In Microsoft's statements, consumers and customers are notably absent; its words focused only on competition and the industry.

With messages like these, is it any wonder that Apple has won the marketing war for music customers?