Why Apple Doesn’t Need the iTunes Store

by Smaran Dayal Feb 22, 2007

Does Apple really need the iTunes Store? That is a question many fans of the company have probably asked themselves at some point in time. I say Apple does not. Why? Because, as always, Apple is making money off the hardware, ie., the iPod. And though music, movies, and TV shows cannot be considered software, it’s the same old story. Apple is first a hardware company, and then a software and content vendor.

After the millennium had passed, and it turned out that Macs weren’t the only computers unaffected by the dreaded Millennium Bug, a feared computer glitch that inspired numerous articles, studies, and even books, Apple secretly bought out a popular Mac OS MP3 player called SoundJam MP. The reasons for this were, at the time, unknown, as was the deal itself. We all know now that it was part of Steve Jobs’ plan to dominate the world create an ecosystem the upcoming iPod music player would become a part of. SoundJam MP went on to become iTunes, the wonderful music organization and playback tool that millions of Windows and Mac users (and even some Linux ones!) utilize on a daily basis.

As we all know, the digital music craze really started with Napster (Macster, on the Mac). Jobs clearly wanted Apple to cash in on the phenomenon, and created two products that would become integral pieces of the puzzle, whether or not the music itself was something the company would be able to profit from. Even today with Napster gone and Grokster, WinMX, and Kazaa either shut down or “converted,” legal music downloads make up only a fraction of the music on the average iPod. Jobs recently stated in his letter titled “Thought on Music” that “only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM.” So, it’s a known and widely accepted fact that we all have some amount of music that’s either been “pirated” or imported from CDs.

Apple was smart and from the beginning focused on constantly improving iTunes, its music playback application, and marketing the iPod, its portable media player, and making sure it was always ahead of the game for features, portability, and usability. Both the iPod and iTunes are things that can’t be “pirated,” simply because they don’t need to be. iTunes is a freely downloadable application, and Apple is the only company that makes a portable music player that is remarkably easy to use and sync entire music libraries quickly with. So, that was one less, and very formidable, competitor for Apple: piracy. Having only to strive against large, stagnated corporations is something I am sure the executives at Apple were joyed by.

Why did Apple set up the iTunes Store at all, then? To offer its customers an easy and legal way to acquire music online, of course. And what an amazing job the company has done with it! I bet every one of the five big music companies would have loved to become the number one online music retailer in the United States. If you think about it, that is an impossible task. To achieve that, a company would have to be able to offer music from all five of the record companies, and a number of independent labels. Which one of the music houses would let another sell its artists’ music online, let alone sell music from independent artists? A third party was needed, and Apple was the perfect entity to launch a music store, considering it was about to release a Windows version of iTunes. Until then, Windows users were forced to use MusicMatch Jukebox to sync their music libraries with their iPods. But giving consumers an easy way to purchase music online wasn’t the only reason Apple launched the iTunes Store. It also knew that building in a legal alternative to the many peer-to-peer networks where people got their fix of copyrighted music illegally would potentially save Apple and its customers from the RIAA’s hounds.

Last month, a number of European countries, including France, Germany, and Norway, demanded that Apple open up Fairplay to its competitors, so that songs purchased from the iTunes Store aren’t locked into a single portable media player (iPod). European consumer groups say that people should be able to play their music on a device of their choice. Steve Jobs made it clear in his letter that there was no chance of Apple opening up Fairplay to other vendors, but at the same time urged record companies to give up on DRM altogether. I believe Apple has nothing to lose if it opens up Fairplay. As long as iTunes and the iPod remain the easiest to use and most appealing music application and portable media player, Apple has little to worry about. And though I have my doubts about iTunes 7, I see no alternative. iTunes’ only (possible) competitor is Songbird, an open source application that is still too buggy and complicated to make any self-respecting iPod owner even consider it.

When it comes to Europe, there are two possible scenarios.
The first: Record companies agree to sell their music without any DRM on the iTunes Store, and Apple continues business in Europe and probably sees a surge in revenue; a lot of people don’t want to invest in DRM’d music.
The second: Record companies don’t budge, and Apple gracefully bows out of Europe, but retains its grip on the portable media player market. Europe becomes just another Asia.

Despite the fact that Japan is the only Asian country with an iTunes Store, the iPod is still one of the, if not the most, popular MP3 players in all of Asia, if you exclude mobile phones. So my question is, does Apple really need the iTunes Store? I don’t think so. Apple makes its money off the hardware, in this case, the iPod. It always has. Despite being urged on various occasions to license Mac OS X to computer hardware vendors like Dell, Apple has stuck to selling its software, and content, only to support its own hardware products. Apple does not need the iTunes Store to succeed in Europe; it’s the record companies that do. If there’s a legal alternative that’s actually given piracy some competition, it’s the iTunes Store. Imagine what would happen if content bought from the store was DRM-free. We would undoubtedly see an increase in sales. If Fairplay goes away, Apple has nothing to lose, and consumers have everything to gain, as do content producers.

Comments

  • The people who complain the loudest are the ones with the most dishonest motives.

    Like the EFF and the Creative Commons community?  Heck, even Ben Hall calls DRM unethical.

    Frankly, this kind of baseless and pathetic smear is one the reasons I don’t get upset when you guys pretend that I’m somehow as brainwashed or irrational as you.

    Clearly in discussions of this kind, it is possible for one side to be right and the other wrong.  And given your total disassociation from anything approaching an actual facts, and given your baseless smear about the motives of DRM opponents, one can only guess that you simply have nothing else.

    Beeblebrox had this to say on Feb 27, 2007 Posts: 2220
  • Excuse me, Ben, but…
    I haven’t seen good evidence yet to suggest that this is inflicting actual harm,

    OK, but I did mean here that this isn’t inflicting actual harm from the specific perspective of lock-in. I have stated in post 28 that I think there is a certain amount of harm inherent in the simple inability to play songs on arbitrary devices, which one should be able to do: the detrimental effect of songs locked to one player is quite simply that those songs are sold under a hyper-restrictive liscenceThis is an irrelevant minor semantic point where I could have been more clear, not a good criticism of my position. It is only a point for contention from a view that is desperate to contradict.

    Name one thing in my post that is factually incorrect
    As I said in #28, this is not so much about being factually incorrect as being insubstatiated. You start off in #18 by simply stating that I am brainwashed, as I predicted in #16.

    You then go on, as I predicted to base the next part of your argument on what you had previoiusly written is Steve Jobs sincere about wanting to be rid of DRM and that he only applies it because the lables force him to?
    This bit of nonsense is easily refuted and I have already done so in previous posts

    We are left asking: what posts are these that are so much more convincing than your current argument?

    Then you give the defense:
    And the evidence is this, Apple wraps ALL songs purchased in the iTunes store in DRM, even if the labels or artists don’t want them to or haven’t asked them to.

    This point, which you barely touch on but declare as if it were completely solid, has been discussed extensively on the web, and there are strong counterpoints on the subject. Of course, these are not worth remarking upon because they don’t fit Beeblebrox’s opinion. Certainly this is not what you set yourself up for: an “easy refutation”. Instead it is a laughably brief mention of debate that is complex and has strong points in the opposing direction.

    You acknowledge this opposition, of course, saying I’ve heard a few apologist arguments for this contradiction. And this is *precisely what I was talking about* - the kind of completely unsubstatiated declaring of your argument’s correctness with a heavy tendency to avoid actually discussing why the opposing arguments are so “apologist”.

    You may say in response that I have also not gone into detailed discussion about these points. But what I have written here does not rely on their validity in the way that you must posit their invalidity for your so-called evidence.

    Then, breathtakingly, you use this so-far completely unsubstatiated line of thought to say that So if Steve Jobs is full of shit on that score, then doesn’t it undermine his credibility on the others?

    He says that the reason why is because sharing DRM technology will increase the chances of piracy.
    Well, no, actually. Presumably by “sharing” you mean liscencing, on which subject Jobs’s argument was that it was unfeasible without being unable to plug theoretical holes quickly enough that Apple’s suppliers, the labels, could pull their catalogue from iTunes. From his actual essay:
    An equally serious problem is how to quickly repair the damage caused by such a leak. A successful repair will likely involve enhancing the music store software, the music jukebox software, and the software in the players with new secrets, then transferring this updated software into the tens (or hundreds) of millions of Macs, Windows PCs and players already in use. This must all be done quickly and in a very coordinated way. Such an undertaking is very difficult when just one company controls all of the pieces. It is near impossible if multiple companies control separate pieces of the puzzle, and all of them must quickly act in concert to repair the damage from a leak.
    and:
    a key provision of our agreements with the music companies is that if our DRM system is compromised and their music becomes playable on unauthorized devices, we have only a small number of weeks to fix the problem or they can withdraw their entire music catalog from our iTunes store

    I can’t quite be bothered to go right through it in the same way, but your next post (#19) you say things like you concede that Apple locks users into the iPod, which I have explicity *not* conceded, and which you’re meant to be convincing us of.

    One of the reasons I can’t quite go along with people who say that the lock-in is significant is that it is so easy to circumvent the DRM. You say that It also harms consumers by raising the cost of switching to another brand of player by $1 for every song purchased either in a music store. In reality, however, for average users with the average of 22 iTS songs, it raises the cost of switching by far less than $1 in total, and about 20 minutes of time, or the cost of 2 CD-Rs, being generous. Or, for users with many more iTS songs, it costs the price of 1 CD-RW, and a couple of man-hours. Given that on amazon I can buy 12 CD-RWs for £1.50, that is a total cost of a breathtaking 25 American cents. Since most users will have a CD-RW lying around somewhere, the actual cost of this conversion is likely on average to come down rather close to 0 cents.

    I looked a few months ago for a different brand of audio player. I have 235 iTunes-bought songs, call it 200 allowing for free downloads. I decided against any of the alternatives, and the supposed THREE HUNDRED AND TEN DOLLAR switching fee* made no difference in my decision… wait for it… BECAUSE IT IS FICTITIOUS! The only reason I didn’t switch was because I couldn’t find a good rival from a company with the prescience to put together a product that matches Apple’s.

    If Apple is locking in customers by providing a great product then sure, nuke Cupertino if you think that would benefit the consumer.

    *(allowing for British iTS pricing & currency conversion)

    Benji had this to say on Feb 27, 2007 Posts: 927
  • (To my horror i realise that comment was 95.4% as long as the article itself… sorry everyone.)

    Benji had this to say on Feb 27, 2007 Posts: 927
  • Just to plug a potential gap giving rise to what I’m calling “quasimisunderstanding”, what I wrote in the last paragraphs of #32 is as explanation for why I think that “Apple’s lock-in [is] heinous and unethical… although it is an academic, ideological position”, which has seemed to cause a certain individual so much confusion and given rise to such gnashing of teeth.

    I am ideological enough to set some store by the notion that songs sold should be playable on all brands of a particular type of music player, at least. I am not ideological enough to think the actual situation in the real world is irrelevant to discussions of the subject, however.

    Benji had this to say on Feb 27, 2007 Posts: 927
  • (Not that that is actually the problem here.)

    Benji had this to say on Feb 27, 2007 Posts: 927
  • Honestly, Ben, you have provided no counter-argument of any substance.  Your point that my argument is based on my previous posts is absurdly stupid.  I’m saying that I am simply reposting points I’ve already made.

    Again, you’re making claims and then denying you’re making them:

    “I think there is a certain amount of harm inherent in the simple inability to play songs on arbitrary devices, which one should be able to do”

    vs.

    “I haven’t seen good evidence yet to suggest that this is inflicting actual harm…”

    And:

    “I started out thinking that Apple’s lock-in was heinous and unethical…”

    vs.

    “I have explicity *not* conceded [that Apple locks users to the iPod.]”

    This is not “semantics” or some “quasimisunderstanding.”  You are contradicting yourself repeatedly in an effort to have your cake and eat it too by portraying yourself as both anti-DRM and pro-Apple’s Fairplay.

    You start off in #18 by simply stating that I am brainwashed, as I predicted in #16.

    Predicting that I would call you brainwashed when you are isn’t exactly a counter-point to anything.  I think you’re a brainwashed Mactard.  That’s not exactly news.  I could say that I’d predicted you would keep claiming to be anti-DRM and yet you’d simultaneously defend Apple’s DRM as unharmful.  I’d be right, but what does that in and of itself prove?

    It does make me wonder, btw, about how you feel about sydneystephen’s assertion that those who loudly protest DRM are motivated by wanting to steal music.  Would you say that’s a fair assertion?  And what might motivate someone to not only defend Apple’s DRM so vehemently but declare that the only justification for opposing DRM is theft?

    This point, which you barely touch on but declare as if it were completely solid, has been discussed extensively on the web, and there are strong counterpoints on the subject.

    First of all, let’s acknowledge here that you find Sydneystephen’s assertion that Apple does NOT do this to be without merit.  They do it, we know that, but maybe they have a good reason why, eh?

    The argument is that there are technological reasons why they cannot sell both DRM-free and DRM music.  But why is Apple able to sell music, movies and TV shows, while giving away free podcasts, separate explicit versions of songs from clean, sell some songs as singles and others only as part of albums, and the only thing they CAN’T do is sell DRM free music alongside copy-protected?

    I say that the argument is apologist, because like with your comment about Jobs, you accept the explanation without question and with zero doubt.  You believe it because Jobs says it (or some other apologist says it) and have no reason to believe otherwise, despite Jobs’s contradictions within his own essay.

    But is it true?  Does it seem reasonable that Apple is able to overcome every technological hurdle except the one that would allow their customers to play songs on a player other than the iPod?

    The other counter-argument is that they are able to overcome this hurdle but are not motivated to do so for the very reason I say they won’t, because they have worked too long and hard to allow people to use the competition.

    which has seemed to cause a certain individual so much confusion and given rise to such gnashing of teeth.

    If you’re referring to me, I’m not confused.  Your approach to this subject isn’t substantially different from any other kind of brainwashed Apple-apologist rhetoric.  You’ve had no problem making the claim that Microsoft’s DRM is a total capitulation to the labels while absolving Apple of any such claim (or at least not stating so outright) even though Jobs himself admits as much.  You’ve stated that you are “staunchly anti-DRM” while going out of your way to defend Apple’s Fairplay.  It’s really quite pathetic.

    Beeblebrox had this to say on Feb 27, 2007 Posts: 2220
  • He says that the reason why is because sharing DRM technology will increase the chances of piracy.
    Well, no, actually.

    Yes actually.  When you posted a quote from Jobs’s letter, you skipped right over this:

    “Such leaks can rapidly result in software programs available as free downloads on the Internet which will disable the DRM protection so that formerly protected songs can be played on unauthorized players.”

    Gee, sounds like piracy to me.

    Is it any wonder I question your capacity for rational thought in regards to Apple?

    Beeblebrox had this to say on Feb 27, 2007 Posts: 2220
  • This is not “semantics” or some “quasimisunderstanding.” You are contradicting yourself repeatedly in an effort to have your cake and eat it too by portraying yourself as both anti-DRM and pro-Apple’s Fairplay.

    OK. This is not some big inconsistency in my opinion, it is just me using words badly, and I apologise.

    This sentence: “I started out thinking that Apple’s lock-in was heinous and unethical…” was posted before we began really discussing lock-in referring to iPod lock-in. As I have now explained, there is some theoretical track lock-in. That is what I meant by this.

    As I have said, I accept that tracks sold in the iTS are theoretically locked into iTunes, although they aren’t in practice. What I do not accept is that there is significant lock-in that affects users’ ability to switch to rival brands. As I have stated this several times in this thread alone, I hope you can understand why this feels like quasimisunderstanding.

    You start off in #18 by simply stating that I am brainwashed, as I predicted in #16. [me]
    Predicting that I would call you brainwashed when you are isn’t exactly a counter-point to anything.[beeb]

    You start off in #18 by simply stating that I am brainwashed, as I predicted in #16.
    The point I was making here was not simply that you would say I was a MacTard, but that you would give no evidence to support that claim. As well you know, to quote Eddie Izzard.

    how [do] you feel about sydneystephen’s assertion that those who loudly protest DRM are motivated by wanting to steal music?  Would you say that’s a fair assertion?
    No, absolutely not. I have no desire to pirate music, or “steal” it. My motivation is that I feel moving your music to another brand of a particular type of player is fair use, and this should be completely legitimate, and not merely trivially easy but illegitimate.

    Regarding Apple’s current non-offering of DRM-free music at all, you say first that the counterargument to your position is that it is technologically unfeasible. This idea I do not find persuasive anyway so I’m with you there. The user doesn’t have to even know. They don’t care.

    “The other” counter-argument, you say, is that they are able to overcome this hurdle but are not motivated to do so for the very reason I say they won’t, because they have worked too long and hard to allow people to use the competition.

    First of all a semantic point: this is not actually a counter argument to your view at all, but a re-statement of it. Secondly, there are other counter-arguments.

    The three of these I find most compelling are:
    1. Examine the true value of the efforts by some digital music stores (esp. Yahoo) to offer a minority of DRM-free tracks. They have been applauded for doing so, yet the minority of such tracks is such a minority that in the grand scheme of things offering them achieves nothing more than buying the idealism of a few short-sighted DRM antipathetics. Authorising indie-label artists to sell their tracks DRM free would merely be for show: irrelevant in the long-run.
    2. The argument here is that Apple has vested interest in maintaining its DRM and therefore will not allow the small minority of indie-label tracks on iTunes to be sold without DRM. However, even if they are right about brand lock-in, this small minority of tracks would have such a negligible impact on the overall lock-in that proponents of this view must accept that this cannot be a significant reason for Apple not to do so. Perhaps you would like to argue that indie music sans DRM would catalyse the industry. I find this improbable, and have not yet heard anyone making this argument.
    3. Apple’s stance on this matter is very likely catalysed by recent European anti-DRM legislative initiatives. That is, Apple is clearly in the position that, if it wanted to, it could not remove the DRM from the overwhelming majority of its catalogue, which as we have seen are what matter, because the labels would not allow it. The hideous alternative, leading to a world far worse than the current situation, is to liscence MS’s DRM and let it be all-encompassing. The point, though, is that Apple’s (Jobs’s) stance on DRM has been ushered into existence by rather recent events. Jobs is neither a saint nor a genius, and would likely not have come to the enlightened views expressed in his Thoughts on Music without this recent thought-provoking influence. Thus Apple may have in place existing contracts with indie labels that preclude the immediate alteration of terms. Apple may be going to allow DRM-free song uploads at the next significant refresh of these contracts.

    [The underlying point of number 3 is that we do not yet know with certainty Apple’s position on allowing DRM-free tracks to be sold alongside DRM-encumbered tracks.]

    At this juncture, I’d like to thank you for taking the time to put down some actual arguments in your post #36, paragraphs ~7 onwards (depending on what you count as a paragraph). It’s great to have some actual dialogue about these, and I really enjoyed responding to them.

    I do take issue with this, however:
    You’ve stated that you are “staunchly anti-DRM” while going out of your way to defend Apple’s Fairplay.

    I find this a bizarre thing to say, given that I have over and over again called for Fairplay’s abandonment. Of course I do not think that Fairplay ultimately is good for consumers, a point of view which would be wholly incompatible with my opinion that interoperability should be both easy and legitimiate.

    I do however defend Apple’s Fairplay against criticisms of it that I find unfounded. Of course. But this accusation is like someone accusing a politically erudite liberal of “defending” Bush when someone accuses him of, say, personally orchestrating 9/11, or being as bad as Hitler. Well, I would defend Bush in that scenario. Taking this out of context and saying I’d “defended Bush” would be highly misleading. [note about simile: Fairplay is not nearly as bad as Bush!]
    ———————

    He says that the reason why is because sharing DRM technology will increase the chances of piracy.
    Well, no, actually. [me]
    [beeb:]
    Yes actually.  When you posted a quote from Jobs’s letter, you skipped right over this:
    “Such leaks can rapidly result in software programs available as free downloads on the Internet which will disable the DRM protection so that formerly protected songs can be played on unauthorized players.”
    Gee, sounds like piracy to me.
    Is it any wonder I question your capacity for rational thought in regards to Apple?

    What you said was that the reason Apple cannot liscence Fairplay is that it will increase piracy.
    What Jobs actually said was that liscencing Fairplay will allow songs to be played on unauthorised players. This difference is vastly, humongously important. If you define “playing on unauthorised players” as piracy, you define playing iTS songs on unauthorised players as piracy. This is not what you believe. You and I believe that iTS songs being playable on other brands of player constitutes, and therefore is BY DEFINITION, not piracy.

    These players are only “unauthorised” from the point of view of Apple’s current contract with the music studios. Steve Jobs specifically did not mention piracy here, because whether or not playing iTS music on these players constitutes piracy depends on what you consider fair use. Steve Jobs’s advocacy of opening up the iTS is an answer, and an agreement, to those mounting challenges to DRM in Europe, who feel as I do, that interoperability should be “easy and legitimate”. His argument is predicated on the consensus that playing on what are currently “unauthorised players” constitutes fair use, and is not “piracy”.

    What he was saying, as I said, (as he said,) is that currently, the situation where this desirable ability to play music on “unauthorised players” was achievable by means other than those I mentioned at the end of post 32, the labels would be likely to pull their catalogue. Since this makes it unfeasible for Apple to liscence Fairplay without risking the likely sacrifice of their music store, Apple cannot do this.
    ——————-

    I hate to sound so dramatic, but Beeblebrox, you do not know me. You have no idea what sort of mind I have. You have no idea how I would respond to carefully laid-out arguments in favour of your position, because you have never done so. You have branded me a MacTard (actually, I invented the term. I rue the day!) and that has been that, in your posts, ever since.

    I am hardly unbiased, but I am far different from how you suppose. I am actually completely open to critique of my opinions expressed in this and any other post I have written. Please, please, just respond with the real analytical argument I know you are capable of. I’d be like, soooo respectful. You wouldn’t believe the difference it made around here. Pwomise.

    Perhaps we should do a podcast together.

    Benji had this to say on Feb 28, 2007 Posts: 927
  • Shit. That should read:
    You and I believe that iTS songs being playable on other brands of player constitutes FAIR USE!

    Quite an important omission!

    When the hell is this edit button coming!

    Benji had this to say on Feb 28, 2007 Posts: 927
  • @Ben Hall.
    Sorry Offtopic. I love Eddie Izzard.
    Please explain:  As well you know, to quote Eddie Izzard

    WAWA had this to say on Feb 28, 2007 Posts: 89
  • @WAWA: ‘La plume de ma tante est près de la chaise de ma tante… as well you know…’
    Tape says “OUI! -la plume de ma tante est pres de la chaise de ma tante…”
    ...‘Non, ce n’est PAS “bingy bongy dingy dangy”!’ Qu’est-ce que vous avez dit! Vous êtes une putain!’

    Stop now ben.

    Benji had this to say on Mar 02, 2007 Posts: 927
  • I didn’t get it, but since you are English… 40 years ago when I was 12 our family was having a vacation at the Belgian coast. I made friends with a English boy of my age. And, following that, his parents invited ours to their appartment. Jezus, Belgians invited by civilised people. We had to make a good impression. So don’t mention the FOOD. Before we went, I and my sister were explicitely briefed, that whatever these nice people from England would offer us, food or drink, we would say We love it.
    And then my mother, drinking her cup, said very firmly: O, this tea is wonderful!
    Actually it is coffee, our hostess said.

    WAWA had this to say on Mar 02, 2007 Posts: 89
  • :D I apologise for making you eat whatever it was. If ever we meet, fleeing on skiis from Microsoft henchmen in motorised skidoos over the Alps and have to take refuge in the woods, feel free to tell me my cooking is crap.

    Benji had this to say on Mar 04, 2007 Posts: 927
  • I never flee. I’m a coward. I will point to you and shout «that’s him. Hunt him, his skiis are incompatible. His whole person is incompatible. By the way, gentlemen, may I say, I love your zunes! Would you care to squirt me ?»

    WAWA had this to say on Mar 04, 2007 Posts: 89
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