Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat.



If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.



Update: Thanks for the links, John and Jeff. I spotted an interesting idea in the comments on Jeff’s post: the labels may not succeed in breaking iPod, but if they can break iTMS, they might be able to salvage the ability to set arbitrary prices.



One of the things they really hate about iTMS (alongside letting you burn your own CDs, transfer the music between computers, and share your music over a LAN) is that all music costs exactly the same. Breaking iTMS will restore the biggest weapons they have against artists. That has been discussed before, I recall Joel Spolsky’s Price as Signal.





Let’s say you would like to listen to one of the most amazing performances ever made, Glenn Gould’s 1981 recording of Bach’s Goldberg Variations . And let’s say you have figured out the DRM is a really terrible idea, so you would like the hear it on high-quality MP3s.The good news is that there are a number of places to legally purchase the right to download DRM-free MP3s. Lots of music from the major labels is available on Amazon, and it costs the same or less per track than Apple’s iTunes Music Store (“iTMS”), and you can find more DRM-free tracks on Amazon than on iTMS.For example, Bach: Goldberg Variations, BWV 988 on 256-bit DRM-free MP3 is just $9.99 from Amazon. The same album is also $9.99 from Apple , but you get DRM. And there are tons of tracks on Amazon that are actually less expensive than on iTMS, so you get better music for less money without the DRM hassle. So is Apple screwing the customers?In a word, no.The reason you can find more music on Amazon at a lower price is that the Record Labels want it that way. Do you think they charge Apple and Amazon the same price for each track and Apple simply charges you more and pockets the difference as a higher markup? The labels would like you to think that, but they actually charge Amazon less for each track, and that’s how Amazon can charge you less.Do you think Apple insists on the DRM but Amazon has the vision to see that the future of music is DRM-free ? Do you think Jeff Bezos is a better negotiator and he was able to get a better price per track than Steve Jobs? Without putting up with DRM?Really? How does that work, when iTMS is now the third-largest music retailer in the United States? How does the lower-volume store get better selection with fewer hassles and negotiate lower prices from its suppliers? When Steve Ballmer—not an easy man to intimidate—asked them for music to put in his Zune marketplace, these nice people extorted a $5 tax on each Zune sold from him. So how did Amazon get such a sweet deal?Price fixing is how.The major labels want nothing more than to break Apple’s dominance of the digital music business. They spin it as a good thing. More retailers means more competition, which is good for consumers. But let me ask you: if Amazon selling music for 89 cents a track is good for consumers, why isn’t iTMS also selling music for 89 cents a track good for consumers?It would be good for consumers, but it wouldn’t be good for the music labels. The reason it wouldn’t be good for the music labels is that they really don’t want consumers paying 89 cents a track for DRM-free music. They want consumers to stop using iPods and start using devices with DRM that the labels can control.They want consumers using devices in proprietary silos like old-fashioned cell phones, where you pay for the track, you pay for the bits transferred over the air, and then you pay all over again when you want to use a few seconds of the track as a ring tone.As soon as they can break this pesky iPod-iTMS-iPhone nonsense, the labels want to get back to dictating what you pay and how often you pay. The labels want to do business with people like Microsoft. Microsoft gets it: all the people who bought music using MSN music ? They can buy it all over again at the Zune store.Do you think that the MP3 genie is out of the bottle and will never go back? You haven’t been paying attention to digital video media. The movie folks have succeeded in making DRM a standard for movies on DVD, and it is even worse on BlueRay. Have you seen the hoops a Microsoft PC has to go through to play video these days? Each piece of hardware has to promise to be a good boy and not let you actually do anything with the bits without permission.The movies people have imposed harsher DRM on movies, and the music labels like the look of that.The only—I repeat only—reason the labels allow competing stores to have DRM-free tracks is that it’s the only way to get music onto an iPod. Think about that for a moment: Apple’s dominance of the music player business is the actual reason you can buy a DRM-free track from Amazon. If anybody else had a substantial chunk of the player market, the labels would be busy trying to make the other player’s DRM the standard.I know, you’re going to bring up Apple’s DRM. Let me ask you a question: who do you think wanted DRM on iPods? Apple? Don’t make me laugh. Apple built a nice little business selling iMacs using the slogan “Rip. Mix. Burn.” They would love to keep building their nice little iPod business on the back of DRM-free music.Think about this: If you buy a 32 GB Apple iPod touch from Amazon for $472.54, do you think Steve Jobs stays awake all night worrying about whether you will buy tracks from Apple or from Amazon?If you answered yes, then you understand that Apple would be delighted to offer DRM-free music for the same price as Amazon. Or even less, since the profit selling you an iPod can subsidize their on-line store.I personally answered “no,” because in my opinion, there are only three threats to Apple”s iPod business: Someone will actually out-design a music player and make that is actually better designed, cell phones will become the dominant music players, or someone else establishes a DRM standard that locks Apple out of playing downloaded music. I am not going to worry about anyone making nicer music players, I think we see what Apple is doing about the cell phone business, and now we understand what Apple is doing about the DRM business: If nobody can establish a DRM business, if nobody can lock you into one player, then nobody can take the music business away from Apple simply by getting into a back room and doing secret, monopolistic deals.I’m looking at you, Sony and Microsoft. If the whole world has DRM-free music, you have to compete with iPod by building better music players. Sony, at least, has a chance. And if the whole world can sell DRM-free music, then Amazon and the like would have to compete with iTMS by building a better music store. Except, of course, they don’t have to compete with iTMS because the labels are colluding to place Apple at a disadvantage.It’s delightful that for the moment, we have a choice of where to buy DRM-free music. It’s wonderful that today, we can legally purchase the right to listen to a lot of major label music on DRM-free MP3s. But let’s not kid ourselves. If the labels break Apple, this will not last. The genie will go right back into the bottle.Buy what you like, where you like. But remember why things are the way they are. Apple is more expensive than Amazon because the labels want you listening to music on a Zune.