Apple and the Future of Digital Rights Management (DRM): How can we develop a new business model to sell copyrighted music and other media in a digital age?

In my paper, I will address the relevance of digital rights management today. According to the Mobile Entertainment Forum, DRM is at the core of every mobile transaction—every ringtone, music track or game, in which downloaded royalties must be sourced back to its content provider. In 2003, Apple iTunes and its DRM FairPlay technology served as a mechanism to make music marketable online. Apple has not only “cast something of a spell on both consumers and investors,” but also “the iPod and the iPhone have been major forces in the music and smartphone industries, respectively.”

At the end of 2010, according to the NPD Group, Apple iTunes had captured 66.2 percent of the online music market. Amazon came in second at 13.3 percent. Clearly, Apple holds a great deal of control over how Americans consume media, whether it’s a hit single or purchased movie. For example, Glee advertises www.itunes.com/glee immediately following each show, which is significant, especially since the Glee cast has broken the Beatles’ record with 90 singles on the Billboard Hot 100. The Glee tracks have dominated iTunes sales for months.

As a result of this extensive control over the digital music market, Apple raises questions central to the future of music and other media in a digital age. Apple was ultimately pressured to sell DRM-free songs through iTunes. In 2007, iTunes sold the tracks of EMI, one of the major music labels, DRM free. In 2009, the other three major music labels, Sony Music Entertainment, Universal Music Group and Warner Music Group, finally decided to follow the DRM-free model.  Other digital media sold through Apple, however, still remains DRM-encrypted.

For example, in the comparison of the Kindle, Nook and iPad, the Apple’s iBook application is only compatible with the iPad, iPhone and iPod Touch. Amazon’s Kindle and Barnes & Noble’s Nook, on the other hand, offer free apps available on the iPad, iPhone, iPod Touch, Android phones, BlackBerry phones, Windows PCs, and Macs. Amazon’s motto “Buy once, read everywhere” and Barnes and Noble’s application page suggests “Read what you love. Anywhere you like.” Apple discourages such interoperability between devices and thus, presents undue restrictions for consumers.

DRM does have its benefits in battling piracy, though a Harvard case study suggests its limitations: “While DRM can accomplish a reduction in the initial number of infringing uploaders, it does not lead directly to a reduction in actual piracy,” considering sharing between family and friends, for example.

For this reason, Apple serves as an illustrative example of the limitations of DRM in a digital age, especially when the company utilizes this technology to unfairly dominate the digital music market, rather than to primarily battle piracy. As of April 2011, Apple has been questioned in court over anti-trust violations related to DRM. RealNetworks, a Seattle based competitor in the digital music market, offered music compatible with Apple iPods. Apple, however, updated its software so that any music purchased from RealNetworks could no longer be played on an iPod. Since this problem between Apple and RealNetworks originated in 2004, when Apple’s music was still DRM protected, the courts are questioning the larger problem as to why Apple refuses to license its DRM technology to other companies for other media sold, such as movies, television shows and applications.

In turn, consumer groups have protested Apple’s DRM protections, which are often more restrictive than useful in preventing piracy. Advocacy group, Electronic Frontier Foundation, has suggested that “jailbreaking,” which “allows third parties to create application and add functionality to the iPhone” is not necessarily copyright infringement. In fact, EFF proposes that individuals should be allowed to circumvent DRM through jailbreaking.

The advocacy work of EFF actually enabled the passage of jailbreaking as an exemption in the Digital Millennium Copyright Act. In July 2010, the legislature added jailbreaking to the DMCA’s anti-circumvention provisions, suggesting that hacking or “jailbreaking” an iPhone was legal, in that there is “no basis for copyright law to assist Apple in protecting its restrictive business model.” Naturally, the DMCA exemption does not permit the piracy of applications, but instead the ability to “jailbreak,” which enables the installation of third-party applications on the iPhone. However, this DMCA exemption does not apply to the iPad. The fact that jailbreaking has actually been rewritten into the DMCA is a strong indication of the changing nature of the digital media landscape and how Apple’s hold on DRM technology may be slipping away.

However, it’s not just consumers who oppose DRM-encryption technology. It was actually iTunes DRM-free music that made the Beatles so reluctant to hand their albums over to Apple. In addition, Bon Jovi has actually been quoted blaming Steve Jobs for ruining the music business, suggesting that with the a la carte selection through iTunes, that most consumers rarely buy entire albums anymore.

If neither consumers nor some of the world’s most celebrated artists are content with the manner in which digital music and other media content is sold online, then what would an alternative monetized system without DRM-encryption look like? Ultimately, such a system would “foster semiotic democracy and more broadly to free consumers and artists to reproduce, modify, and redistribute recordings” (Fischer 247). I intend to discuss this question of how can we may develop a system in a digital age that both protects copyrighted artists, but does not severely limit consumer uses of the digital media we purchase.

One example of an alternative to DRM is the government graduated response model:

The ‘graduated response’ model to tackling piracy requires ISPs to assist rights holders in tackling copyright infringement on their networks. Graduated response is a proportionate approach that involves an escalating system of notifications about copyright infringement culminating in deterrent sanctions. ISPs are provided with evidence by rights holders identifying the IP addresses used to publicly disseminate copyright infringing material.

With this model, which has been implemented in France and other countries internationally, has significantly cut down on the volume of piracy online. This Creation and Internet Law, which alerts copyright infringers about their illegal activity, can either fine or suspend Internet access for up to 12 months for repeat offenders. This system, which is made possible with the cooperation of governments and ISPs, has had a staggering effect on piracy. According to the IFPI report, in France, fifty-three percent of those who had illegally downloaded stopped or cut back on their activity. I will further discuss this graduated response model and other DRM alternatives in my paper.