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iTunes Store and Apple’s DRM Safe Haven In Jeopardy

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Fortune has an article on an upcoming ruling by the Copyright Royalty Board where artists are proposing a 6 cent (66%) hike in the per-track royalties they receive for digital music retail sales. Needless to say, Apple is not happy with this situation and has indicated that the continued operation of the iTunes store would be questionable at best if the resolution is passed:

“Apple has repeatedly made it clear that it is in this business to make money, and most likely would not continue to operate [the iTunes music store] if it were no longer possible to do so profitably.”

We’ve heard for years that Apple operates the store on a tight margin and it is conceivable that this royalty increase could eat away at the per-song profit to the point where running it would be economically unwise.

Some may argue this is just chest pounding by the current king of the hill, but one should not take much solace in this point of view. We have seen many other DRM-based music sites go out of business, the most recent one being Wal-Mart. I find it amusing that Wal-Mart’s parting words (shot?) to their customers was “burn your tracks to CD and re-import them”, an unfeasible option for those with an extensive library. Not doing so would, however, render your digital collection utterly useless, as the home DRM servers will be offline permanently.

This same situation could happen with Apple – both audio and video – leaving a significant number of users with gigabytes (perhaps even terabytes) of digital garbage. With the loss of the iTunes audio/video stores I suspect the attraction of the iPod & iPhone would be greatly diminished, initiating a cascade effect no one really wants to see.

While there are solutions for making your library DRM-free, perhaps it’s time to demand the removal of FairPlay from all iTunes content so you do remain fully in control of your digital property. I know I make sure an iTunes audio purchase is in their new DRM-free format before buying, otherwise I turn to other sites such as eMusic, Noise Trade, Aime Street and the Amazon MP3 Store.

What do you think? Is this just an Apple ploy to protect their profit margin? Are you concerned that your DRM-laiden library may be inaccessible soon? Where do you (legitimately) get your tracks? Sound off in the comments!

8 Responses to “iTunes Store and Apple’s DRM Safe Haven In Jeopardy”

  1. Uh, well, you can only play DRM’d stuff on an ‘authorized’ computer, and if you try to play a DRM’d track on an unauthorized computer you get an “Oops, you can’t do that” message… so there’s clearly something non-local going on between you and your music. I’m not saying it’s the end of the world, but it’s just a fact that you don’t get to play a DRM’d track unless Apple lets you.

  2. I just thought I’d point out that you’re comparing potatoes and oranges when comparing the music download terms of Apple and Wally World. There simply is NO similarity. None. My DRM Apple library will be accessible even if there ceases to be an Apple. The DRM isn’t a remote activation, just a local copy protection.

    Apple is the single largest music seller on the planet. They’re in charge of this experiment. I have no worries about my collection, or about my legitimate source.

    Your post and subsequent questions indicate you don’t know what the hell you’re talking about.

    Have a nice day.

  3. I don’t understand how some people still think the FairPlay DRM is there because Apple wants it. They have said time and time again that the labels require the DRM. As proof of that, as soon as EMI made all their content available to Apple DRM-free, Apple put it up on iTunes as iTunes Plus tracks. Where are the other labels? Why won’t they let Apple remove the DRM?

    “Apples claim that they are not making money off iTunes is not true. They WERE not making money off iTunes in the past, They do so now… The main issue they had in the past was credit card transaction fees. If you have noticed, They batch it now”

    Actually, they have always batched sales, that’s nothing new. You also don’t understand that the more music they sell, the more bandwidth they require, which means costs go up, not down. Also, the more songs/content they provide, the more server storage space they need. These costs also add up, a lot in fact.

    Apple did not claim that they are not making money, they said they are currently making money and in fact are in business to make money, however if they had to eat this cost increase, then they would be running the store at a loss.

    The labels should eat the cost increase, after all, it’s their artists requesting the raise. I’m not even sure why Apple is involved in this discussion, they’re just a distributor of the music. Bottom line here is Apple doesn’t want to have to push this increase on their customers.

  4. Apples claim that they are not making money off iTunes is not true. They WERE not making money off iTunes in the past, They do so now… The main issue they had in the past was credit card transaction fees. If you have noticed, They batch it now.

    The profits may not be huge. But that does not mean it is a loss making business.

  5. Mike Arndt

    From Steve Jobs’ “Thoughts on Music”, Feb 6, 2007

    “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.”