Music Execs Say Apple's DRM Hurting Industry

EMB Numbers writes "C-Net says last year saw a 131 percent jump in digital sales, but overall the industry still saw about a 4 percent decline in revenue. Some executives at this week's Digital Music Forum East conference lashed out at Jobs, blaming Apple and its CEO for their troubles. The impression at the conference was that Jobs' call three weeks ago for DRM-free music was anything but sincere. As the article puts it, 'Apple has maintained a stranglehold on the digital music industry by locking up iTunes music with DRM ... and "it's causing everybody else who is participating in the marketplace — the other service providers, the labels, the users — a lot of pain. If they could simply open it up, everybody would love them.""

Comments

Bullshit

[daveschroeder]

DRM is what's hurting the (online) music industry. It needs to be eliminated, not "opened up".[1] Looks like the industry is a little irked at Jobs' statement.

Apple has already laid down its cards. "Open" DRM (can there be such a thing?[2]) is just as bad as any other DRM. It does not serve the customer.

The labels are hurting the industry with DRM. Apple is willing to ditch it wholesale (i.e., isn't interested in iTunes/iPod "lock-in").

The ball's in the music industry's court, not Apple's.

[1] Arguments about whether or not there would have been an iTunes store in the first place aside. There is one now, and online music has made a good showing. It's up to the industry to decide how to proceed, not Apple. Simply changing the face of DRM isn't a "step in the right direction."

[2] Yes, I know what they mean by "open" DRM. But who's it open to? Only other competitive music stores? So we can have one universal DRM "standard"? Aside from the massive technical hurdles to coalescing DRM with all the disparate formats and stores, is that really the right step to take?

Re:Bullshit

[Aadain2001]

I agree. I read the summary and was simply dumb struck with how oblivious those Music Exec. are to the true cause of their suffering. Maybe instead of blaming everyone else, look in the mirror you idiots! You have fought digital online music since your first heard the term "MP3". Top that off with suing your own customers in mass, and its no wonder your revenue is falling! People don't want to buy from you!

Re:Bullshit

[daveschroeder]

Could you further explain that?

Sure.

Jobs said it would get rid of DRM in a heartbeat on all media on the iTunes Music Store. I believe that to be true.

Further, I think Apple believes that it would actually be in a better position without DRM than with in terms of sales volume and customer satisfaction.

Long before the iTunes Store existed, the iPod was already the best selling music player. That's because it didn't suck, not because people were "locked in" to iTunes. In another way, you could argue that even before the store, you still got the most benefit from iPod by using it in conjunction with iTunes.

So in some respects I agree that Apple definitely encourages people to use its products and the "ecosystems" that go along with them (iLife, iTunes Store, and so on), but Jobs doesn't feel that DRM is good for the industry as a whole, and indeed only hurts and confuses honest consumers, in addition to never stopping piracy, since it will always be able to be defeated.

So, to expand on this a bit, would Apple be happy if it lost customers? No. But I believe Apple thinks the iTunes/iPod combo is so compelling to most ordinary consumers that they'd get even more customers without DRM. Apple doesn't need DRM to keep people on iTunes and iPod.

Re:Bullshit

[daveschroeder]

This post of mine will answer your questions:

http://slashdot.org/comments.pl?sid=222358&cid=180 14768

In short, I think the conspiracy theories that Jobs only said he was against DRM for PR reasons and to look good are utter bullshit. Jobs' statement on DRM is the single biggest shot across the bow of DRM that anyone anywhere near this industry has taken, ever. From the CEO of the company with the largest online music store, no less. From a board member of a major motion picture house, no less.

This isn't just lip service. This is huge, and that's why all the DRM and music industry types have been reacting to it so vocally and aversely since it was made. Apple doesn't need DRM to keep people on iTunes and iPod. People get iPods because they don't utterly suck. Jobs also (likely correctly) feels that the entire online music industry - of which iTunes is a huge part - would be MUCH better off without DRM.

In fact, if it's true that online sales would explode if you could actually get lossless, no-DRM versions of music and media online, as so many staunch anti-DRM advocates argue, then it's true that Apple's business would significantly grow, as the existing market leader in this area. I know that people want to think that Jobs was just lying for PR's sake and really secretly wants to hold onto DRM as tightly as it can, but that simply doesn't stand up to logical scrutiny, considering the scope and impact of this statement. Further, iPods - which is where Apple makes its money - were already the market leader by far before the iTunes store even existed.

Re:Bullshit

[daveschroeder]

The solution isn't standardized DRM. It's no DRM. The music industry wants you to believe the only practical solution is the former. The real solution is the latter, for all the reasons Jobs outlined, not the least of which is that DRM will NEVER stop piracy and ALWAYS be able to be defeated.

Re:Bullshit

[Hawthorne01]

Apple doesn't make money on the downloads and they don't make money off of iPod's because of iTunes.

They do make some money from downloads from iTunes, but not a whole lot. Best estimates are consistently coming in at about $.04 a track.

Yippee.

What the labels are REALLY pissed about here is there's a medium that's successful and popular and growing over which they have little control. They subverted the radio long ago by Payola and it's more sophisticated successors, and MTV became irrelevant the minute they stopped showing videos.

What they just can't seem to grasp is the iTunes is the least of their worries. Once more and more bands become popular via MySpace and the like and home recording gets better and better, the label's usefulness to a band will get smaller and smaller. They should be more worried about acts like Bare Naked Ladies taking their music to the web: That will hurt them more than Apple ever did.

Re:Bullshit

[k2enemy]

in other words...

with DRM: apple gets a big share of the pie
without DRM: apple gets a slightly smaller share (debatable) of a much bigger pie

apple has huge market share because their products are better than everyone else's, not because consumers are locked into itunes. i don't think ditching DRM would hurt apple at all.

Re:Bullshit

[Yvan256]

You only have to watch the keynote where he introduces the iTunes Music Store. He says something along the lines of "and we've added DRM to keep the music labels happy".

It's not bullshit or a PR stunt. Besides, now that he posted his comments, he can't back down. How is that bullshit?

Re:Bullshit

[theelectron]

Yes, because a color coded circle next to the song title to indicate DRMness would really confuse users. /sarcasm

Lets look at the users first: there are those who won't have the capacity to 'get it' (the concept of DRM) and they will be using their iPod so it won't matter if it's DRMed or not. Then there are those who aren't using an iPod, this group of people is smart enough to know what DRM is and what it means about what they are buying. Oh, but wait then there will be songs they can play on their (non-iPod) player from iTunes but others that they want to buy but cannot play because they are DRMed. Now they will start complaining to Apple with the argument "how come I can get this song without DRM but not this one, please make it not have DRM". The who argument about 'confusing users' is utter bull crap. It won't confuse users. Apple just doesn't want to deal with users complaining to them. This has been the case with Apple for a long time.

Re:Bullshit

[syphax]

I think you've nailed it.

I try not to take anything Steve Jobs says at face value. That whole RDF thing. I am impressed by his business acumen, but I don't see him as a straight-talker.

I think the reason Jobs is willing to be very openly anti-DRM now is that he does not see Apple's DRM lock-in business model lasting much longer due to intense legal pressure in various regions (France, etc.). It looks like rather than fight an MS-style battle to the end to protect its lock-in model, Apple plans to suck it up and nimbly move to the next stage in the digital music business cycle, which involves smaller share of a bigger market. It should be clear to observers now that Apple isn't all that interested in market share- they are interested in profit (and superior design).

So, Apple sees that it's locked-in days are numbered, and that non-proprietary DRM doesn't help it's bottom line. The only remaining option is removing DRM and pushing to expand the total market. This option also just happens to provide Jobs with the opportunity to be a hero to the masses for publicly panning DRM, which has a not-insignificant impact on Apple's brand- Apple is just that much more cooler now.

So, kudos to Mr. Jobs. I think he's taken his current stance with Apple's bottom line in mind, but in this case it just happens to coincide with the best interest of Apple's customers. Nicely done.

Re:Bullshit

[MeanderingMind]

The "fanbois" fail to see it for a very good reason, Jobs delivers. He delivers what people want, and how they want it. His products work and work well. They are easy to understand, to use and to fix.

Microsoft delivers what they want first and foremost. They deliver it how they want it. These products "work" in the most basic sense, and detereorate over time. They are excessively complicated, confusing, and require more than a layman's knowledge to properly repair.

People make fun of Jobs and his Reality Distortion Field quite often. I'd posit that many of the people who do so are, like myself, technical types who are "in the know". We know how to use computers, even build them, and an easy to use interface and end-to-end experience aren't as important to use when installing complicated distrubutions of Linux is second hand to us.

However, for the vast majority of people who use Apple products that simplicity and ease of use is absolutely everything. Computers are hideously complicated compared to type writers and calculators. They are magical black boxes which perplex and baffle non-techies young and old. To have availible something that removes vast amounts of that complexity is valuable.

Jobs not only delivers, but has excellent delivery. His public appearances are masterfully executed, in both speech and presentation. Despite being a techie, he comes off as an artist and a dreamer. These are two things the layman can relate to.

Perhaps he is sneakier than Bill Gates, but I'd argue that this isn't hard to achieve. If even Microsoft's "fanbois" admit Bill is full of it, how sneaky can he really be?

For all intents and purposes, Steve Jobs has put his very reputation on the line with his statement. He's even put Apple on the line. To retract his statement would be a crushing blow to the Apple/Jobs mystique. It would be, in effect, to affirm what you claim. Apple would no longer be above other companies, they would simply be another giant spinning words at every turn in vain damage control attempts. Jobs has fully committed Apple by his statement, either to a DRMless future or to irrelevance.

If the "fanbois" are blind, it is because Apple has built up trust over the years. This doesn't mean Apple is flawless or perfect, but is instead genuine.

It's like a Far Side Cartoon

[thrillseeker]

No matter what the customers say, all the music execs understand is one word ... "blah blah blah blah DRM blah blah"

Math... duh...?

[nebaz]

From the article:
CD sales fell 23 percent worldwide between 2000 and 2006.
Last year saw a 131 percent jump in digital sales
overall the industry still saw about a 4 percent decline in revenue.

So CD sales... down... (a lot)
Digital music sales ... up (a lot)

Overall down... ( a little)

Blame Jobs!
Brilliant!

What color is the sky in their world?

Re:Math... duh...?

[Firethorn]

I've heard that limiting prints is indeed part of the problem. What the music industry doesn't talk about is that the number of albums they release is also down.

Fewer albums released -> lower sales -> less income

Moo

[Apocalypse111]

So do the music execs *WANT* DRM, or do they *NOT* want it? They can't have it both ways. They should just be happy that people are buying music at all lately, what with the production-grade excrement coming out of most labels lately.

Apple not at fault

[Silentknyght]

Cohen told the audience that if Jobs was really sincere about doing away with DRM, he would soon release movies from Disney--the studio Jobs holds a major stake in--without any software protection. An Apple representative declined to comment on Tuesday on remarks made by the panel.

As I understand it, Apple is the technological source of this DRM in question, but not the muscle that pushes for its incorporation into the files. If Disney wants DRM on its digital downloadable movies as a provision for Apple to sell them, then it's Disney that is failing to "open up." If Apple refuses to put DRM on their products, then I'd guess they wouldn't have those products to sell.

iTunes is not the problem, but the result.

[snowraver1]

iTunes is not the problem, but the insane rules that govern the content that is distributed through it. Recently Apple said that they would drop DRM if the industry allowed. NOW the industry is crying that the DRM that THEY mandated to be inplace are actually hurting sales!?!

Re:iTunes is not the problem, but the result.

[Panaflex]

Ohh, it's much worse than that.

Now iTunes/Apple is a monopoly - the music companies can only get their product distributed profitably through a single channel online. They're seeing the writing on the wall - and the choice is open up or get squeezed by the monopoly.

Hell, they can't even sell their OWN music on their on website because... it's not compatible with iPod!!! And even if they could - the marketplace is Apple iTunes, pure and simple. The purported 4 cent per-song "Apple tax" is so low, that they couldn't even compete fairly with their own distributor because the scale of operations would be money-loosing.

I don't think anybody saw this reaming coming...

So who wants it then?

[bokmann]

So the customers don't want it, the music execs don't want it, the vendors don't want it, and I don't think he musicians are clamoring for it either... Why do we have DRM again?

I say someone needs to call the bluff.

Re:So who wants it then?

[Coryoth]

So the customers don't want it, the music execs don't want it, the vendors don't want it, and I don't think he musicians are clamoring for it either... Why do we have DRM again? Oh the music execs want it. What this is all about is that they've started to realise that, in doing the deal they did with Apple, they are effectively stuck with Apple's DRM. Being the control freaks that they are, this is not an attractive prospect for them, and what they really want is their DRM where they get to define the standard, the restrictions and how it works so that they can dictate DRM to the vendors rather than having the vendors in control. What they want is an "open" DRM under their control that they can force all the different vendors to use, thus unifying on-line music DRM under them.

Re:So who wants it then?

[EasyT]

If you pay attention to what the music execs are actually saying, they're not saying they don't want DRM, they're saying they want Jobs to open Apple's DRM up (make it accessable to other companies that sell DRM music or digital music players). Which they know Apple can't do, as Apple would be subjected to a much greater risk of the DRM being cracked in a way they couldn't quickly fix (which contractually could cost Apple access to their entire music library).

If the music execs were serious about wanting Apple to open up Apple's DRM, they could renegotiate to reduce Apple's risk. But since there appears to be no actual effort on that front, it sounds more like diversionary finger-pointing by the music labels.

open DRM versus no DRM

[Talonator]

It seems like there are two dimensions to the 'DRM problem,' and that Apple and the music companies disagree on which of these needs to be changed:

In Jobs' letter (whenever that was) he called for DRM-free music, because he said an open DRM standard wouldn't work (it would be too easily reverse-engineered, since many entities would have access to the code, or whatever).

An open DRM standard is exactly what the music companies want, however, and that's the point of this story. The music companies don't want to give up their (ill-gotten) rights over the music they sell but they want to appear like they're doing something for the consumer, so they argue for open DRM and call Jobs insincere. Ahh, it makes me angry.

DRM = near-monopoly for Apple

[boyfaceddog]

Let's see, if I were Jobs and I had a near-monopoly on sales of digital music, would I give it away?

DRM is a financial fact of life, just like circumventing it is a technical fact of life. The only thing that will kill the DRM-monster is the sword of falling profits, and it looks like that is lost for the moment. No ammount of wishful thinking about open source DRM or Apple giving up its strangle hold will change this story.

Money. It is ALWAYS about money.

Why are they complaining?

[sehlat]

The music executives demanded that every bit of music that comes out be "protected" with ConsumerRightsArentPermitted, and got, at least with Apple iTunes, exactly what they asked for.

So now they are reaping the consequences of their own shortsighted greed and contempt for their customers and they blame the messenger?

iPod is open for others!

[fluch]

What is the porblem?!? I don't get it, the iPods are open for others. They happily support MP3's. Or don't they?! You just need to sell MP3's and the customer can play them. Ah, you do not want to sell MP3's?! Not my porblem, I am happy with it... :-)

Correction

[Overzeetop]

You spelled "MONEY" incorrectly

Re:Correction

[CelticWhisper]

So then what's the control all about? Yep, you guessed it: money. Money in the long run, money in the short run, it's still all about money in the end.

Re:It's like an episode of 24

[Tackhead]

> "We're running out of time," Ted Cohen, managing director of music consulting firm TAG Strategic, told the roughly 200 attendees. "We need to get money flowing from consumers and get them used to paying for music again."

Cohen then proceeded to shackle his brother to a chair and ordered a subordinate to inject 8 units of pain serum, all the while screaming "WE DON'T WANT TO DO THIS. JUST TELL US WHERE THE MONEY IS."

Captain subtext translates

[91degrees]

Music Industry: We want DRM.
Steve Jobs: You got it. Hey, it only works with iPods as well. Isn't product tying great!
Music Industry: Can we have more control over our product?
Steve Jobs: Nope.
Music Industry: Oh. Uhm... We'll leave
Steve Jobs: No you won't.
Music Industry: Oh. Ummm can you open up Fairplay. This will mean there's some competition and we can afford to ditch you.
Steve Jobs:: Nope. Why would I ever do that?
Music Industry: We'll make you look like the bad guy.
Steve Jobs: You can try. I made downloadable music viable, produce the gadget all the cool kids want and I don't sue children and old ladies. Not only that, but I can plausibly blame all your troubles on you.

Strategic

[creysoft]

Apple, in it's traditionally clever way, has turned the tables on the music industry. The music industry, in initial negotiations, simply stated that they wanted "DRM." Apple designed and built a form of DRM that (A) minimally inconveniences their customers, (B) complies with the letter of the agreement, and most importantly, (C) uses the DRM to lock iTunes to its player, thereby profiting from the arrangement and effectively killing any other competitors. (Even MS can't break into the market.) As Apple has the only digital music store anybody would want to use, they use their considerable muscle to bully the music industry into doing what they want.

This is NOT what the music industry wanted. When they say "DRM," they mean DRM that protects *them,* not resellers. So now they're crying for Apple to "open" their DRM. They still want DRM, just DRM that doesn't give Apple the above benefits, the goal being to effectively give their competitors a chance to flourish. If this happens, the music industry will regain the upper hand in negotiations, and start forcing Apple to do its bidding. This will, of course, result in higher prices and poorer service.

The music industry is betting the public won't understand the difference between "opening" DRM, and doing away with it. The former helps nobody but the music industry. If they succeed in convincing consumers that the industry is opposed to DRM, and mean old Apple is forcing it on them, they'll be able to turn public opinion against Apple and get their demands met. This has nothing to do with helping the consumer, and everything to do with the music industry trying to wrestle its way out of Apple's iron grip on its throat.

We'll see how this turns out.

I Laughed My Ass Off After Reading This

[canfirman]

"C-Net says last year saw a 131 percent jump in digital sales, but overall the industry still saw about a 4 percent decline in revenue. Some executives at this week's Digital Music Forum East conference lashed out at Jobs, blaming Apple and its CEO for their troubles.

Man, I laughed my ass off when I read this one. So, there's a 4 percent decline in overall revenue. The only reason they could find is Steve Jobs? Of course, it wouldn't have anything to do with the fact that their products suck, would it? No, they would never look at themselves and wonder why sales are down. I guess their latest "pop tarts" aren't bringing in the money they were a long time ago. Oh, and I'm sure the lawsuits aren't affecting the revenue line. Nah - it's got to be Steve Jobs, isn't it?

Please. How lame can you get?

And a side of re-hash...

[starglider29a]

How many songs are there that are on multiple "albums"? How often do record companies put out a "Greatest Hits" compilation and add a new song just to get the fans of that band to "need" to buy it?

Now, they don't need to. The iTuner gets the new "<fiction>Van HalenRunning With The Devil f. Alanis Morrisette on vocals</fiction>" for a buck, instead of shelling out $17.99 for that and 17 reruns. That's a 94.4% drop in revenue, and DRM has nothing to do with it.

Re:Nice.

[EasyT]

Don't believe the crap around here that "open drm" isn't possible. Thats exactly what MS has done, and exactly what the labels want out of apple.

Only that's not what MS has done. You'll note that MicroSoft didn't use their own "open" PlaysForSure DRM once they had their own Zune music player and music store. Instead they set up their own proprietary DRM that was incompatible with PlaysForSure.

Chances are they ended up in a contract that would hold them responsible if DRMed music sold for the Zune got cracked and pirated. If their contract is anything like Apple's, they could lose access to their entire music library if they can't plug the hole fast. And they can't ensure they can do that if other companies are involved with the maintenance of the same DRM.

MS only has only proven Apple's point. Anyone with a real stake in this game can't risk using an open DRM. (MS can license PlaysForSure to other companies because MS has no significant risk if PlaysForSure gets cracked.)

WHY apple DRM is GOOD for you and BAD for industry

[goombah99]

Counterintuitively, apple DRM being exclusive to apple's store is good for the consumer while being bad for the music industry companies. here me out.

Imagine apple opened up it's DRM to other stores. Now Sony goes to store B, C and D, which are rivals, and says we'll let the first one of you agree to our new rules have exclusive access toour top artists. Namely we want you will charge $7.99 and bundle them in sets of 5. No more singles and no more $1 songs.

Well duh, one of them will Kowtow. And it won't be apple which will sputter along trying to enforce the $1-single song rule.

Thus the only thing keeping the status quo which we all like ($1 songs and ability to buy singles) is apple's exclusive control of it's DRM. The moment that vanishes the Music INdustry has us in its claws.

So pray that apple does not open it's DRM to other stores.

Now on the flip side if all music is sold without DRM, well then there's another enformcement mechanism. If the music industry charges too much and forces song bubdling too much then Gnapster like trading services make a comeback, made all the easier by the lack of DRM on a much large song base.

So Jobs I think was right, but for different reasons than he stated. The most consumer freindly situation is that DRM be apple only or not at all. Apple is a good watch dog in this case because they profit from keeping song prices and tersm consumer freindly since that favors iPod sales as long as there is DRM. Second, they make a good watchdog because they are not threatened if DRM entirely vanishes. THe only thing threatening them is if the Music industry starts dictating higher prices and bundling songs because that will move sales off to crappy user unfreindly sites and diminsh the appeal of the ipod.

Re:the lord of lockin

[Golias]

The best argument Jobs made in his letter was that the music industry is already selling the same files they want locked down with DRM in a completely un-encrypted format on little plastic disks.

It's like they are insisting on having at least three deadbolt locks on their back door of their house, while they have no plans to even install a lock on the front door.

People who want to scatter their content to the four winds can already do so by getting a CD and ripping it.

Therefore, DRM on the iTMS files protects absolutely nothing.

The only effect it is having is that it hurts on-line sales, because DRM-encrypted files have less value than those on CD.

If I were a cynical person, I would suspect that this was their agenda all along. But since I'm not *cough*, I have no explanation for their position.