Why did Steve Jobs drop his anti-DRM bombshell?

According to “two sources in the online music biz,” Apple CEO Steve Jobs might have been influenced by EMI to release his anti-DRM “Thoughts on Music” open letter.

“Last year, RealNetworks (the company behind the Rhapsody subscription service) came up with a proposal for switching to MP3s and circulated it among the major labels. In response to that, or maybe just motivated by its need for a cash infusion, EMI started offering online music stores the once-in-a-lifetime opportunity to pay the label an extra lump sum in exchange for the right to sell MP3s. The money was described as a way to reimburse EMI for the increase in piracy that was sure to come once it abandoned DRM. Not surprisingly, that proposal didn’t go over well with executives at the online stores, whose margins are thin enough already. So EMI came back with a more acceptable offer, asking for an advance against future royalties,” Jon Healey writes for The Los Angeles Times.

Healey writes, “The deal was apparently not offered to Apple, however; evidently, EMI wanted to build up momentum among the also-rans before making Jobs and offer he might otherwise refuse. Before EMI could sign on the dotted line with the likes of RealNetworks and Napster, however, Jobs dropped his DRM bombshell. Go straight to the head of the parade, Steve! Then the Wall Street Journal reported EMI’s MP3 overtures, and suddenly the record company wasn’t in such a hurry to announce its initiative.”

Full article here.

[Thanks to MacDailyNews Reader “nerdbrain” for the heads up.]

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Macrovision posts pro-DRM open letter to Steve Jobs and digital entertainment industry – February 16, 2007
62% of music industry execs think eliminating DRM would increase music download sales – February 14, 2007
Warner’s DRM-loving Middlebronfman warns wireless industry it may lose music market to Apple iPhone – February 14, 2007
Windows Vista’s DRM is bad news – February 14, 2007
Monster Cable announces full support of Apple CEO Steve Jobs’ call for DRM-free music – February 13, 2007
Microsoft’s Bach talks Apple iPhone, DRM, Zune, and more – February 09, 2007
Recording Industry Association of America wants their DRM, calls for Apple to license FairPlay – February 08, 2007
Warner’s Middlebronfman: Jobs’ DRM-free music call ‘without logic and merit, we’ll not abandon DRM’ – February 08, 2007
Dvorak: Apple CEO Steve Jobs is dead right about DRM – February 07, 2007
Apple’s Jobs jolts music industry; Zune exec calls Jobs’ call for DRM-free music ‘irresponsible’ – February 07, 2007
Apple CEO Steve Jobs’ posts rare open letter: ‘Thoughts on Music’ – calls for DRM-free music – February 06, 2007

23 Comments

  1. Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.

    In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves. The music companies sell the vast majority of their music DRM-free, and show no signs of changing this behavior, since the overwhelming majority of their revenues depend on selling CDs which must play in CD players that support no DRM system.

    The answer is simple.

    When the music cd and player industry was created, computers didn’t have cd readers. The music industry thought they had a natural hardware lock for their content. Much like the record album before it.

    It was actually Apple who pushed the development of the cd for personal computers.

    Apple rocks.

  2. The question is not whether DRM works or not. As Steve pointed out, 90% of music sales
    are currently in the form of unprotected CD’s. So if you’re a music distributor and you’re
    doing alright without DRM protection on your CD’s, why are you so bloody terrified of
    giving up the DRM you’ve applied to the other 10% of your sales? It just doesn’t make
    sense. The clincher, of course, is that DRM is also a royal pain in the behind for your
    customers, who wish you nothing but ill will. So who really benefits from this pointless
    scheme? No one!

  3. When the music cd and player industry was created, computers didn’t have cd readers.

    Right, but this is now ancient history. I think the issue for music distributors is that CD’s must be playable in such a wide variety of devices that DRM protection is not practical. Customers would howl and stop buying CD’s.

  4. Steve was giving the Scandinavian countries and France a heads-up about DRM.

    Did you all get the message? He’s NOT FOR DRM!

    By the way, all music purchased from the iTunes music store IS and ALWAYS HAS BEEN compatible with all MP3 players.

    Just buy some music, burn it onto a CD, rip that CD into whatever music program you want and load it onto any player.

    And why is it that the Scandivavian countries and France have no real entertainment business?

    THEY SUPPORT COPYRIGHT INFRINGEMENT!

  5. EMI are having serious financial problems at the moment.

    http://business.guardian.co.uk/story/0,,2012904,00.html

    The headline is “EMI issues shock profits warning”.

    No wonder that EMI are desperately trying to find ways to get a large injection of cash as urgently as possible. Their folly was that they asked on-line record stores that are already losing money. Their financial position is not as good as EMI, because although EMI’s business isn’t making as much profit as before, it’s probably not yet making a loss, which is what some of the on-line stores are effectively doing.

    As far as I can see, other record labels are feeling the pressure too, so it’s quite clear that they can’t carry on as they currently do, so it remains to be seen what they will do. One option is to tighten up DRM and risk driving existing customers to P2P sites. Another is to sue people who use P2P sites, with the associated risk of annoying music lovers. Neither of those two options are likely to be popular with customers and they haven’t worked in the past either. The third possibility is to listen to what Steve Jobs says. He was right before, he generated two billion bucks of on-line sales and delivered it to the labels. Nobody else is saying anything that looks as though they can expand the customer base and sell more music – that’s what Steve is proposing. Only a fool would turn it down, but the record labels do have some incredible fools running the business.

  6. If EMI and the other labels want to stop hemmorhaging sales, they need to realize that their biggest problem isn’t piracy; rather, it’s the reasons for the rampant piracy: the overinflated price of CDs and the fluff content that they keep churning out. They don’t seem to realize that people would rather pay $1.98 on iTunes for the two decent tracks on an album than pay $15 for those plus a bunch of filler on a disc.

  7. I think what iTunes has proven is that less is more – more or less

    In that, more music is being sold from in-duh-vidual track sales than full compilation sales. And in the long run the antiquated idea of an artist having to produce “x” number of songs for a “cd” will fade when –<U> and only when</U> – the “industry” can figure out a way to keep all of the producers, sound men/women, techies, and manufacturing folks still in jobs…

    Maybe they need to cross-train as buggy whip makers. I hear there is a strong developing market there!! And they can beat their customers silly and no one will complain.

    I am liking iTunes more and more and “real world” CDs less and less

    MDN: less – but I am sure you guessed it was less ” width=”19″ height=”19″ alt=”raspberry” style=”border:0;” />

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