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News

The Real Issues Behind Apple Licensing its FairPlay DRM

If Apple were to license its FairPlay DRM to rival music stores, it would only weaken its negotiation leverage with the labels to keep music prices low. Licensing FairPlay to rival player manufacturers would merely eat into Apple's hardware profits. Those were the conclusions of Daniel Dilger in an editorial published Tuesday at Roughly Drafted.

The argument on the opposing side has been that customers who buy music from the iTunes store can only play that music on an Apple iPod. That has upset some customer rights groups, especially in Europe, who argue that Apple should license FairPlay to competitors so that iTunes music can be played on rival music players.

However, there is much more going on on the U.S. side according to Mr. Dilger. The record labels, who profoundly failed to develop an attractive system for the on-line purchase of music are now annoyed with Apple's power and influence. They would like to dilute Apple's leverage to keep prices low and seize control of music pricing -- namely raise prices in some cases to see what the market will bear.

Moreover, Mr. Dilger points out, "Apple's last effort in licensing the iPod was to franchise it for HP. Even when HP was selling the existing iPod through its own sales channels, it was unable to agree with Apple on its responsibility for unsold inventory and other details.

"Imagine the complications of a hardware partner wanting to build its own iPod designs and make sure Apple's DRM completely supported everything they chose to offer."

In summary, the article proposed that Apple has sound business reasons why they should resist giving up a leadership position in music sales and music players. Mr. Jobs explained Apple's position in his Thoughts on Music. Do away with DRM and everyone goes back to neutral ground. No shenanigans, back room deals, and maneuvering. The customers will be happy, and Apple gets to do what it does best, focus on developing its own products with out unnecessary entanglements.

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