DRM begins to work its magic

Analysis Apple's agreement with Motorola is certainly a masterpiece of diplomacy.But it's much more, besides.

As we pointed out earlier today: extending Apple's music DRM to allow the files to play on Motorola phones in a way that doesn't threaten the short-term interests of either company was always going to be a tricky announcement. In the agreement, Motorola will bundle a severely crippled version of iTunes with its mobile phones (although it's worth remembering that it's the carriers who'll make the final decision on what subscribers receive) thereby making the closed iTunes platform seem a little less closed. Apple retains the exclusive right to sell the locked music through its own iTunes store, as you'd expect, cementing the appeal of the brand against rivals like Napster and Real.

But more significantly it was also a triumph for Steve Jobs' Reality Distortion Field, and the first sign that the music industry is starting to see DRM as a real business opportunity. Having already sold you your old vinyl as cassettes, then CDs, producers old and new are going to sell you rights you already enjoy - only this time at a premium.

"Wouldn't it be great if you could take a dozen of your favorite songs with you," [on your cell phone] Jobs told the crowd.

Wouldn't it, just? For millions of users however this is already a reality. Much like a burglar giving the burgled householder first opportunity to buy their own stuff back, Apple is promising a right we already enjoy as a bonus. An innovation, even. It's the first of the large-scale multi-sale opportunities we discussed here).

"If people accept [DRM], the logic for the music industry is to apply the wonders of the Internet to the old vinyl-tape-CD upgrade gag, and to start selling different versions of playback rights (want a shedload of one-time play music for tonight's party? we can do that for you)," wrote John Lettice.

Having set the bar so low at 128kbps encoding - and the price at 99 cents per song, so high - one of the premiums that the music industry will now be able to offer is 'fair use'. In order to get the public to accept this proposition they must first forget that they ever had the right to make a copy of music they'd bought. And that's the true significance of today's announcement.

DRM on phones is in its infancy, and is crude compared to the sophisticated share denial options potentially available to the manufacturers, but it's already becoming an annoyance. (You can read a state of play here)

Conversations with equipment manufacturers and carriers both support the optimistic view of DRM explained by former Geffen CTO Jim Griffin earlier this year.

"When I was 14, I told girls I loved them to sleep with them too. It was a fiction. Steve Jobs just leaves a little money on the table," said Griffin. "We see Jobs and Gates making promises to the content industry that they have no intention of keeping. It's the promise you make to move forward. The content owner wants to hear it."

Neither device manufacturers nor carriers see DRM as a viable long-term solution, but more of a way of inducing the content owners to making music available digitally. They hope that the phone or portable player takes center stage as the transaction vehicle (which is why Apple will need a fully-functional mobile iTMS eventually) and the principle mass market music storage device; at first by allowing on the spot downloads from conventional stores, over WiFi or a future high-bandwidth wireless technology, probably UWB, and perhaps eventually over 3G or 4G. (Although that idea has much less support in the industry than you'd think. The carriers don't actually need you to download music over their network, they simply want to take a cut of the transaction).

On the other hand, the favorable press for online download sites such as iTunes, despite their insignificant volumes, is beginning to convince the music industry they can have their cake and eat it too. With the help of the online music stores, DRM can be a money-spinner.

With CD sales back on the rise, and a new marketing opportunity at hand, why would they think otherwise? ®

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