Steve Jobs Changes His Tune

Why he's willing to jettison industry restrictions on copying music and video

Apple (AAPL ) Chief Executive Steven P. Jobs stunned industry watchers on Feb. 6 when he urged the music industry to rethink its most fundamental antipiracy strategy. With the blessing of music companies, Apple's iTunes music store has thrived under a "digital rights management" system (DRM) that restricts how, when, and where users listen to the songs they purchase.

Now, in an apparent about-face, Jobs has called for a new model in which songs would be bought and sold without these DRM constraints. Here's why his pronouncement is causing such a stir:

What's behind Jobs' call for change?

Apple is under pressure from European governments to remove digital rights management technology from its iTunes Store so audio can be played not just on its dominant iPods but also on music players from rivals. Consumers have also complained that they should be able to do what they want with music they purchase.

What's all the fuss about DRM?

Consumers today have the ability to make pristine copies of music and video and distribute them over broadband connections in a matter of minutes or hours. Without restrictions on copying, content providers say they could be put out of business.

And why is it such a mess for consumers?

The biggest problem is the lack of a single, worldwide DRM standard that works on every device and download service. Right now, music purchased from Apple's iTunes store can be played on any combination of five iPods or computers, but not on any other music players. This is especially irksome when you have to lose or retire one of your legitimate devices. And under some DRM schemes, there are time limits. For example, you may only be able to view a downloaded movie for 24 hours after the first time you play it. Even if you are using only one service, the software may be buggy and confusing. This is all a huge step down from the world of compact discs, where you just buy the music, play it in any stereo, PC, or car system, and copy it as many times as you like.

Doesn't the very idea of digital rights management treat all people as if they were thieves?

It's not quite that bad. Many content providers believe consumers are entitled to fair use of their products, but they don't think people have an absolute right to do whatever they want with them once the money changes hands. Many providers are experimenting with pricing models that would charge a consumer based on intended usage, with some paying more for unlimited use.

But what's the point--haven't pirates and hackers managed to break all DRM schemes anyway?

As Jobs points out, all software can be cracked. Music labels themselves now seem to realize that the lack of a standardized DRM is hurting sales. But while DRM has not stopped rampant piracy, it has helped slow it. And a world with no DRM could be very tough for many businesses. Everybody loves free stuff, but the lost revenue could put some content providers out of business. They are testing out ad-supported revenue and pay-per-view models, but DRM remains a necessary evil until new models are in place.

Is there an alternative that can be used today?

The leading alternative at the moment is electronic watermarking, which allows content to be played anywhere but permits copies to be tracked to their source. It would be more onerous for content providers that need to do all the tracking, but it would create more choice for honest consumers.

If DRM goes away, how would Apple and Steve Jobs benefit?

Jobs' standing as a major advocate for the consumer could rise, even though Apple continues to tie its hardware closely to software and services. With or without DRM, Apple comes out looking like a winner.

By Cliff Edwards in San Mateo, Calif.

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