How Apple cashes in on piracy prevention.

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Nov. 14 2005 5:47 PM

Digital Rights Mismanagement

How Apple, Microsoft, and Sony cash in on piracy prevention.

A couple of weeks ago, a motley crew of New York University students collected in front of the Virgin Megastore in Union Square for a digital rights rally. Protesters from the NYU chapter of the Free Culture Society brandished signs and snuck inside the store to stick leaflets into racks of CDs. Shades of the student movements of 1968—except that instead of protesting war or agitating for social justice, these college kids took to the streets because corporations are messing with their music.

Back in the days of Napster, MP3 trading was something of a free love movement, with music-adoring scofflaws swapping files under the noses of the record companies. As digital music has become a mass-market, big-money phenomenon, the corporations have succeeded in making digital music a lot less free. By now, thanks in large part to Apple, most people have gotten used to paying for music online. But the other half of the not-free-anymore equation is trickier: Not many music lovers have warmed to the idea that they don't retain all the rights to the music they buy.

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The crux of the debate is this: When you buy a song, an album, or a movie, are you buying the content only in the form it comes in? If you purchase a song from Apple's iTunes store, should you be able to play it on any hardware you want? Not according to Apple, which bundles each download with a "digital rights management" scheme called FairPlay. When you pay 99 cents for the latest Sheryl Crow hit, it's stored on your hard drive as an encrypted file. Every time you play it on your computer with iTunes or on your iPod, it is unlocked with a random encryption key supplied by Apple. FairPlay allows you to load a song on up to five computers and an unlimited number of iPods and burn as many CDs as you please. But you can't e-mail a song to a friend, you can't distribute it over the Web, and you can't play it on anything but iTunes or an iPod.

Companies like Apple claim that digital rights management—"digital restrictions management" to critics—is a tool to dampen the threat of piracy, which the record industry claims has cost it billions in revenues. But DRM also locks consumers into using their technologies over those of competitors. The term "FairPlay" is a classic example of technological doublespeak. Since Apple sells about 80 percent of legal music downloads in the United States, FairPlay effectively stunts competition and consumer choice.

Last year, when RealNetworks came up with a product that let users load music from its stores onto iPods, Apple denounced Real's "hacker tactics" and updated its software to block songs from the Real store. A class-action suit that's now winding its way through the courts accuses Apple of effectively forcing consumers to purchase iPods over less-expensive digital music players by unlawfully bundling the iPod and the iTunes Music Store. The stakes for Apple couldn't be greater, since iPod sales now represent a third of the company's revenue—and sales are growing at more than 200 percent a quarter.  

Besides Apple's FairPlay, there are two other prominent digital-rights-management technologies on the market. On the software side, Microsoft has licensed Windows Media Audio, which comes equipped with a proprietary copy protection scheme, to Apple rivals like Samsung, the most popular digital music player in Asia. On the compact disc side is Sony's "XCP" anti-piracy technology, which quickly earned a reputation as the most draconian system of them all. When you play an XCP-encoded compact disc on your computer, it covertly installs a "root kit" on your hard drive. The root kit software gives Sony complete access to your computer, as if it were the owner or system administrator.

A day after security firms announced that hackers had started using the Sony root kit to hide malicious programs on users' PCs, Sony announced it would halt production of CDs with XCP. Sony claims it only wanted to limit the number of copies a user could make of a particular CD. What it really did is confirm what many digital music lovers already believe about record execs—that they will do everything they can to wring every last penny from us, even if it means messing with our hard drives.

For decades, piracy has been an irritating song record executives can't get out of their heads. In the late 1970s, LP manufacturers instituted a "spoiler signal" to stop people from copying records onto cassette tape. A spoiler-encoded vinyl record couldn't be taped without an irritating squeal getting copied as well. By sabotaging home tapers, the record companies only alienated consumers and artists, so the spoiler signal was soon abandoned. More to the point: Home taping didn't kill the record industry. Just like the VCR didn't kill television.

While Apple stands alone and Sony self-destructs, Microsoft is practically giving away its digital-rights-management tool in an effort to pick up market share against Apple (so far with little success). We may even see a replay of the Apple-Microsoft battle over the desktop, which ended with Apple holding on to a tiny sliver of the computer market. There is, however, a big difference between then and now. Steve Jobs has a hefty market share and a massive content library made up of millions of songs at a price that people like. As long as the record companies license their content to Apple and consumers flock to the iPod, Apple is in a powerful—some might say Gatesian—position.

What's hardest for the consumer to swallow, then, is that anti-piracy schemes like DRM look like the subtle tactic of the monopolist. Neither Apple nor Microsoft is hurt by music piracy. Instead, they use it as a marketing ploy to force people to use their products. It doesn't have to be this way. The companies could agree on one standard that allows people to play the music they lawfully purchase on whichever player they choose. The music industry is supposed to sell music, not the medium it comes in, right?

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