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Analyst: Impact on Apple From French Law is 'Minimal'
Tuesday, March 21st, 2006 at 2:30 PM - by
Piper Jaffray analyst Gene Munster on Tuesday issued a second research report in which he reacted to the French National Assembly's vote on a bill that would open the iTunes Music Store's FairPlay DRM, assessing the impact as "minimal." He expects Apple would rather exit the French market than allow iTunes Music Store purchases to play back on competing MP3 players.
As The Mac Observer reported, the French Parliament on Tuesday approved a bill that would prohibit music from using a proprietary copy protection scheme that limits playback to only one brand of device. While it doesn't force companies to open their DRM formats, it does allow consumers to petition the courts and ask them to impose compliance.
However, the bill must be approved by the French Senate before it goes into law, a process that will take several weeks. While Mr. Munster expects the bill to finally become law, and Apple to react by pulling the iTunes Music Store out of France, he doesn't expect such a move to have a material impact on the company's overall business.
"While ths sounds like a drastic move," he wrote, "we estimate that approximately 20% of iPod and iTunes sales occur outside of the U.S. The French market alone is likely less than 2% of iPod and iTunes business." He believes Apple will take that hit rather than "start what could be a slippery slope of other countries passing similar legislation."
However, even if Apple remained in the country and allowed the FairPlay DRM to become compatible with other devices, Mr. Munster doesn't expect iPod sales to be "measurably impacted."
He added: "The iPod drives demand for online music sales in iTunes and not the other way around. Apple would be at risk to losing some iTunes business if similar laws to the proposed French online copyright bill were passed in other geographies, but it is important to keep in mind that the profitable component of the 'portable device + music service' equation is the portable device and a loss of some portion of music service would not have a dramatic impact on bottom line results."
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