A Growing Racket Over iTunes

Apple continues to anger consumers overseas with its restrictions on music downloading. But it's not the only company drawing fire

Dismay over how Apple Computer sells music downloads is deepening. Consumer regulators in Europe say the company places too many restrictions on consumers who buy songs from the online iTunes store. And The consternation is spreading west.

A group called the Free Software Foundation carried out protests on June 10 at seven Apple retail stores in cities including New York, Los Angeles, Chicago, and Seattle. The foundation is focusing its ire on so-called digital rights management technology (DRM). Used in an array of digital entertainment products including Apple's iTunes, DRM limits what consumers can do with purchased content.


  The "Defective by Design" protests are not aimed at Apple (AAPL) in particular, but at what the Free Software Foundation sees as a growing trend toward legal restrictions that bind digital content to particular playing devices.

"This isn't intended to attack Apple and its innovations, but really to draw attention to the existence of DRM technologies, and how they restrict what consumers can do with their music," says Ted Teah, who maintains a directory of free software for the Free Software Foundation in Cambridge Mass.

In San Francisco, about 10 people dressed in neon yellow biohazard suits descended upon Apple's high-profile store on Stockton St. They carried signs that read "Eliminate DRM" and other placards that mocked Apple's stylized iPod adds, with the profile of person whose wrists have been tied by white iPod earphone cords against a colored background. In a 30-minute flurry of activitiy, they handed out pamphlets to people passing by, and sought to talk to people going into the store.


  Another five people not wearing biohazard suits handed out leaflets quoting Apple CEO Steve Jobs as saying: "If you legally acquire music, you need to have the right to manage it on all other devices that you own," attempting to portray that statement as hypocritical in light of Apple’s use of DRM technology.

Similar protests were carried out at Apple stores in New York, Los Angeles, Seattle, Cambridge, Mass. and in Plano, Tex. among others.

Henri Poole, an organizer of the San Francisco event said the Defective by Design group has only existed three weeks but has already garnered the support of 2,000 people. He said the group has been in talks to cooperate with other activist organizations like the Electronic Freedom Foundation. He also said more protests like this are planned, but he declined to elaborate.


  Sony BMG's use of DRM sparked a firestorm last year after the company programmed CDs with a hidden code that secretly installed itself on users' hard drives, relayed information back to Sony, and left computers vulnerable to viruses (see BusinessWeek.com, 11/22/05, "Sony's Escalating 'Spyware' Fiasco"). That episode resulted in the recall of some 5 million CDs and customer boycotts and class action lawsuits.

The content-protection technology used by Apple and other companies isn't nearly as invasive, nor has it elicited as much outcry. But over time, Teah says, those restrictions may become more onerous. They may be used as a springboard for legal attacks against consumers by such organizations as the Recording Industry Association of America, which has sued consumers found to have downloaded pirated songs from the Internet. Says Teah: "A teenage girl making a mix tape for a boy she has a crush on could become a target for an expensive lawsuit in the future."

Jupiter Research analyst Michael Gartenberg dismisses concerns that the iTunes DRM system is overly restrictive. "It's fairly innocuous," he says. "You can easily get around the restrictions by burning your songs to a CD, and then reimporting them as an MP3 or any other format you wish."


  He says other services, such at MTV's Urge online music-download service, created by Viacom's (VIA) MTV Networks in partnership with Microsoft (MSFT) and the privately held MusicNet, sells song downloads for 99 cents per track, similar to Apple. "They following what Apple does because the market has shown that it works," Gartenberg says.

Apple isn't the only company targeted by the organizers of Defective By Design. In May, the group staged a surprise protest at a speech by Microsoft Chairman Bill Gates at Microsoft's WinHEC conference in Seattle. Protesters wore hazardous-material protection suits at the entrance to the venue where Gates was set to demonstrate Windows Vista, the next version of Microsoft's PC operating system. An Apple spokesman said the company would have no comment on the upcoming protests.

It remains to be seen whether concerns over Apple's technology are strong enough to result in much, if any, uproar in the U.S. But they appear to be on the rise on the other side of the Atlantic. Regulators in Norway and Britain are renewing calls for Apple to revise the rules that consumers agree to when they begin using the iTunes store.


  Norway's Consumer Ombudsman, at the request of the country's Consumer Council, ruled that certain provisions of Apple's usage agreement violate Norwegian law. The company has been given until June 21 to amend the rules. It also has been asked to defend its DRM scheme known as Fairplay, which restricts songs purchased on from the iTunes store from being played on portable players other than the iPod. Similar calls are coming from regulators in Sweden and Denmark.

Additionally in England, a recording trade association has told legislators that iTunes music should be made compatible with other portable players. This follows inquiries by European Union regulators into Apple's pricing structure for songs sold on iTunes in Britain, where users are charged 79 pence, or about $1.45, vs. 99 euro cents (about $1.25) in other European countries.

The latest flurry of activity follows a row between Apple and French legislators allied with a consumer advocacy group. This group wanted the company to make the music sold through its online music store compatible with portable players other than its popular iPod device. At the time Apple branded the effort "state-sponsored piracy," and suggested that it was more likely to shut down the French outpost of its iTunes store, rather than comply with the legislation.

(Editor's note: This story was updated after its initial publication.)

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