Steve Jobs Goes for DRM

The Europeans are a critical lot when it comes to U.S. companies, and I don’t really blame them. Take Kroes’ comments last week about Microsoft being unique in not complying with their competition laws – even if I happen to be with Microsoft on this one (and so is the U.S. DOJ).

So it wasn’t too surprising to me when, on a recent trip through Europe, a number of people asked whether Steve Jobs’ recently-negotiated deal with EMI, dropping Digital Rights Management for a price, wasn’t just a smoke job, put up to appease the French courts currently going after him on related issues.

I said no, that he really did understand how DRM would limit iTunes’ success, and that he really had done an about-face on this issue.

I would suggest that Steve’s sincerity came out this week, as knowledge of a new round of negotiations became public, with the specific intent of getting the other four of the Big Five publishers to drop their own DRM requirements.

Will he succeed? Yes, I think he will. Steve has always been careful to pick off the weak in the herd first, and I expect him to get his next negotiated deal done in his favor on this issue. When that happens, the others will follow, as night follows day.

With all the CDs out there, why not?

But this isn’t really the primary issue, it’s just the enabling step. Once music is stripped of DRM on the iTunes channel, that doesn’t mean Apple has given up on its own version of DRM, only allowing iTunes on iPods.

In fact, with the DRM requirements gone, there is no good excuse (at the paid level) for such a requirement, other than monopoly lust.

Steve has two choices here, and they are quite stark:

1. Continue with the status quo, and watch iTunes lose share to other sites that will also benefit from his DRM negotations with the publishers, but whose downloaded songs will play anywhere; or,

2. Quickly drop the Apple-only requirement, before you lose the football game.

Which will happen?

Steve hates open systems, and Steve hates sharing. He loves beautiful systems and products he can create, close, and ship in perfection, for which he reaps top dollar.

I’ve always found it intellectually interesting that “the computer for the rest of us” (the Mac) was always the most expensive one. From a Marx-Engels perspective, it should have been called, “the computer for the Elite.” The deep truth here, of course, was that simplicity is hard, and you’ll pay more for it.

What about music?

I think Steve can’t afford to blow the iTunes story. He needs to convert his 80% market share of downloaded tunes into more than a revenue-neutral loser – or, worse, a revenue-neutral loser with declining sales.

Taking the Apple controls off the music should allow iTunes to retain (or even build) share, while expanding his player domain. Ultimately, it is the way he makes money on iTunes, keeps or grows his sharen of the music market, and serves everyone.

If you don’t serve everyone, who are you?