Thoughts on Apple's "Thoughts on Music"

Steve Jobs posted a surprising, but not shocking treatise on music DRM (Digital Rights Management) on Apple's website on February 6, 2007.
Much has been made of Steve Jobs/Apple's recent treatise of DRM'd music. Specifically, many pundits (ahem, Molly) seem to be wary of Apple's denouncement and are taking a cynical stance on it; it's hard to believe that Apple would be taking a pro-consumer stance on this issue.

I personally believe Mr. Jobs/Apple's declaration against DRM at face value simply because the consumers' interest and Apple Inc's interests are aligned in this instance.

Thanks to CNET's Buzz Out Loud podcast
, we know that consumers benefit from un DRM'd music. No need to explain anything further here.

What is a little less obvious is that Apple would ALSO stand to benefit from repealing DRM at this stage in the game. Here are a few reasons why:

1. Being "trapped" in Apple's fairplay isn't the main reason for stellar iPod sales:
Over the past few years the vast majority of iPod sales were to first-timers. Furthermore, the vast majority of repeat iPod buyers only have a few dozen DRM'd tracks on their iPods. The conclusion that Apple has reached at this time is that they DO NOT NEED DRM to be successful in the PMP market. Apple's near-monopoly is not due to their DRM scheme at this time. People aren't "locked in" to Fairplay. They're "locked-in" to the iTunes' and iPod's convenient interface. Sure, Apple's market share will drop, but it will drop DRM or not; there's no place to go but down when you're at 80% market share. Besides...Apple has other ways to lock consumers into iPods: hook-ups in many new cars, numerous accessories, NIKE + iPod, etc.
By dropping DRM, the iPod platform opens up and becomes more inviting to people on other platforms...people who made the mistake of purchasing a Dell DJ or Rio player, for example.

2. People aren't stupid - DRM is restraining iTunes music sales. People still buy CDs to rip onto their computers because they don't like buying DRM'd music. The stats bear this out: fewer than 2 billion digital tracks sold while more than 20 billion tracks sold on CD in 2006.
Apple currently holds the proverbial large slice of a small pie. Apple wouldn't even mind getting a smaller slice if the digital download (dd) market increases in size. Let's say hypothetically that the dd market increases to 10 billion tracks sold annually and Apple "only" captures 5 billion tracks of sales. Apple would benefit from $250 million in gross margin in this scenario (assuming they net 5 cents / itunes track). That's a number even a company the size of Apple can not ignore.
At this point in time, the easiest way to grow the dd market (and iTunes sales) is to drop DRM. Apple is keenly aware (as noted in Stevo's recent keynote) that iTunes competition isn't Napster or Zune. It's Amazon, Target, and Wal Mart's CD sales. Dropping DRM is the competitive advantage that iTunes needs at this point.

There are a few other reasons for Apple to drop DRM, but the above are a few key points that behooves Apple to drop DRM for their own benefit...as well as the benefit of music lovers everywhere.