Apple’s refusal to license Fairplay DRM has nothing to do with past ‘OS Wars’

“In 1985, Bill Gates wrote a memo to Apple Computer, saying it should license its Macintosh operating system. Gates offered to help Apple find hardware partners with the aim of making Mac OS a standard. This would, of course, have created a much larger market for Mac applications, of which Microsoft was the leading supplier,” Jack Schofield writes for The Guardian.

“Recently, Rob Glaser, the founder of RealNetworks, has been sounding a similar warning about the digital music business, where Apple is the current market leader. He also wrote privately to Apple’s boss, Steve Jobs, suggesting an alliance against Microsoft – a letter that Apple somehow leaked to the New York Times,” Schofield writes.

“Both Apple and Real run music download services, and both use the standard, patented AAC (Advance Audio Coding) file format, but they use different copy-protection or DRM (digital rights management) systems. Thus, iPod users can only play licensed music if it is downloaded from Apple’s own music store: they cannot play music downloaded from Real’s music store. According to the New York Times, Real wanted to license Apple’s Fairplay DRM in exchange for making the iPod its preferred portable player,” Schofield writes.

“It’s not clear why Apple rejected this idea. It would provide iPod users with another large source of music downloads, increase Fairplay’s market share, and encourage sales of iPods. Real’s Rhapsody service would obviously compete with Apple’s iTunes Music Store, but Apple makes little, if any, profit from 99c (55p) music downloads. Its strategy is based on selling iPods, and Real’s proposal would surely help with that,’ Schofield writes. “Either way, rejecting the proposal makes Apple look proprietary and anti-competitive, and leaking the letter makes Apple look untrustworthy. Both of these are bad for Apple.”

Full article here.

MacDailyNews Take: Schofield just doesn’t get it. Again, we will repeat: If iPod holds a significant share of the market, there is no reason to let anyone into the party, as long as Apple’s iTunes Music Store offers similar content to the other stores. And iPod does hold quite a significant share of the market.

This is not a matter of developers having to choose which platforms to support. The developers in this case are the musicians (in most cases unfortunately shackled to the music labels). Encoding a song into AAC/Fairplay is just as easy as encoding in WMA. Musicians don’t have to rewrite each song for AAC or WMA. iPods demand AAC/Fairplay from an online music store (they also play MP3, MP3 VBR, Audible, AIFF and WAV formats). And consumers seem to be demanding iPods. Sorry, Real.

Also, Microsoft has a big problem here if they want to do the “music thang.” iPods don’t do WMA. Apple is currently selling iPods at the rate of more than one every nine seconds. Microsoft’s desktop monopoly cannot help them here. Do not be afraid, Jobs knows what he is doing; and this has nothing whatsoever to do with 1980’s OS wars.

An interesting side note: If Apple holds approximately 2% market share for personal computers based upon last quarter’s Macintosh sales, think about this: Apple sold slightly more iPods than Macs last quarter. What is the iPod? It is a platform itself. It contains an OS, a hard drive, input devices, a display screen, input and output ports, etc. iPod is a computer. So, in reality, Apple’s “computers” (Mac and iPod) now hold over 4% of the personal computer market. And Apple’s iPod controls over 50% of the MP3 player market (source). “Developers” will want to make damn sure their wares play on iPods, won’t they?

47 Comments

  1. And I suppose we need to remind everyone yet once again that Steve Jobs wasn’t around after 1985. If he had been, I don’t think there is any question that things would have turned out differently. Funny how nobody in the Wintel media world has noticed the true significance of the iPod, especially when Jobs blatantly sounded off with the re-release of “1984” at this year’s MacWorld Expo. His subtle hint when showing the revised commercial: Remember how significant the Mac was in 1985 and how it changed the world? Well here we go again, and this time, I’m here to see it though.

  2. MDN wrote, “Musicians don’t have to rewrite each song for AAC or WMA… And Apple’s iPod controls over 50% of the MP3 player market.” And that’s why MDN is correct about this. Apple is about to own the whole ball of wax.

  3. Who cares if you can buy songs from iTunes Music Store and most people have an iPod? With most people having an iPod, they have NO NEED FOR WMA! This has got to be killing Bill Gates. Your time has passed, you lying, cheating, Kermit The Frog-sounding, nebbish scumbag!

  4. No, no, no. It is absolutely in Apple’s best interest to see AAC/Fairplay become the real standard for digital music delivery. They want to be in a situation where *everybody* uses AAC/Fairplay. Then, they are really in the driver’s seat, for the following reason: they are in no danger of somebody switching away from their file format, and therefore not being able to switch back.

    In this world, they can let their real competitive advantage really shine, and that is in the design and delivery of their products, namely iPod and iTunes.

    However, if there are multiple standards, then those users who are using a different standard are not likely to switch to Apple’s standard, because they will no be able to play any of their current music!!! Just look at how hard it is to get people to switch to the Mac from the PC!!! People don’t want to re-buy all of their applications!!! Why would anybody want to re-buy all of their music? And Microsoft in this world has a *huge* advantage, because of their install base.

    Making AAC/Fairplay *the* standard would allow Apple to dominate the market long-term, not just for the next 18-24 months.

  5. What do they have to lose? They take the risk of Real turning out a buggy interface with the ipod…making the ipod experience less desirable than it is now. A smart move.

  6. The better question is, what does Apple stand to gain by allowing Real to license the technology? Would it help sell even one additional iPod? I highly doubt it. They need to stick with deals that funnel everything toward Apple (both iPod & iTMS) such as what they’ve done with HP, AOL and Pepsi.

  7. This story is getting more writeups than it deserves.

    What exactly is the “real” reason Rob Glaser wants the keys to Fairplay anyway? If they want iPod to be able to play songs embedded with their own DRM technology, they can!

    Why doesn’t Real write a player for their DRM for the iPod? Everyone else is writing apps for the iPod. Everything from news readers, to games are available on the web that can be downloaded and installed on the iPod. Why can’t real?

    I suspect they wanted something else.

    The Shadow Knows.

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