On content providers, noses and faces

Stephen Withers
Tuesday, 18 September 2007 13:32

Business IT - Technology

We have seen Universal Music loosen its links with Apple by first refusing to sign a new contract, instead opting for a month-by-month relationship, then refusing to offer DRM-free MP3 files through the iTunes Store. Amazingly, it did agree to sell them through Wal-Mart, which is one of only two music retailers that are bigger than the iTunes Store in the US. What's more, Wal-Mart is undercutting iTunes. Given Wal-Mart's reputation as a hard negotiator, it's hard to believe that Universal Music isn't absorbing part of the difference.

But even if the Wal-Mart music download site only works with Windows-based systems, once you've purchased the files they can be transferred to an iPod or to a computer running a different operating system for playback.

Then NBC Universal decided to discontinue offering new TV shows through the iTunes Store, shortly followed by an announcement that NBC shows would be available through Amazon's Windows and TiVo only Unbox service. Initially, episodes are being sold at the same $US1.99 as they were at the iTunes Store, though the new partners are talking up the possibility of various 'combo' deals that could reduce average prices.

So NBC has sacrificed compatibility with all those millions of iPods, not to mention as similar number of Macs - for what? Pricing flexibility? That seems to be the company's position, but I'm sceptical.

Most recently, we have seen Universal Music get into bed with SpiralFrog, which offers free, ad-supported music and videos. Demographic information is required from users, which is used to deliver targeted advertising.

The content is provided in DRM-protected Windows Media format, which is incompatible with iPods and Zunes. Furthermore, users must log onto the SpiralFrog site at least once a month to avoid their DRM keys expiring and rendering the files useless. Nor can the files be burned to audio CD, but they can be used with up to two compatible players or mobile phones.

As far as anyone outside the company knows, Apple's FairPlay DRM scheme does not support such a rental or subscription style model, but there have been persistent stories that Apple has done the groundwork in order to give it the option of adding movie rentals to the iTunes Store.

My suspicion is that these moves by content owners are intended to erode Apple's market position. Even if it works - and that would require most major content providers to follow suit - it won't be a speedy process. As a smaller proportion of DRMed content is available for iPods, Apple TVs and computers running iTunes, and more is offered for competing platforms such as Windows Media, there is a possibility that iPods will lose market share. In the meantime, music and video publishers will forego revenue, and there's no guarantee they will ever make it up.

It is quite possible that iPod (etc) owners will react not by changing to a different type of device, but by making use of what is euphemistically known as "alternative distribution channels' or "channel B" - ie, BitTorrent - to obtain the content they are currently buying so conveniently through the iTunes Store. And if the publishers have already pulled their content from Apple, what incentive would it have to implement any measures that might make that harder?