A Few More "Thoughts on Music"

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A FairPlay Solution

My solution? Spin off FairPlay. Call a huge summit involving all the major companies that need to be involved, and turn over all the patents and all the secret sauce concerning FairPlay to a nonprofit, Apple-agnostic industry consortium. Make it responsible for the maintenance and future development of FairPlay. Companies that join the consortium will devote some of their resources, including smart people, to ensuring that FairPlay stays a step or three ahead of those individuals who consider it their mission in life to crack DRM schemes.

Apple has a history here on the hardware front, and to find it you need look no further than the Firewire port on your Mac. The technology behind Firewire was invented at Apple and then turned over to an industry consortium that still exists. It's called the 1394 Trade Association (1394 refers to its designation by the Institute of Electrical & Electronics Engineers.) Apple would be seen as the savior of the industry.

"Nonpersistent" DRM

There's another option that involves a different approach to copyright protection. It's called "nonpersistent" DRM. Karl Hirsch, the CEO of a DRM technology firm called Protexis described it to me like this: When you buy a song from an online store, it comes protected in such a way that it goes only to the person who bought it. Once you prove you're the person who paid for it, the song is "unwrapped," after which you have essentially no limits on what you can do with it. Put it on an iPod. And a Sansa. And a Zune, if you like. Plus three computers you have lying around the house—whatever suits your fancy.

This is pretty close to the way things works with a CD now. When we buy a CD, we can make copies for friends on a cassette tape or a recordable CD. A friend visiting with a laptop can rip the tracks from your CD to his computer, without having to pay the record label for the rights (although the industry considers this is a no-no—but that's another story, or column as the case may be). But the most important thing is that most people who buy a CD use it honestly after the initial transaction takes place.

And that transaction would be tracked by an independent third party, responsible to both the music retailer and the labels to make sure everyone gets paid. If Joe's Online Music Bistro sells 10,000 copies of the latest Norah Jones single, while iTunes sells 500,000 copies, each vendor's numbers get reported to the label the minute the song gets "unwrapped" by the consumer.

Under this nonpersistent model, the label and the artist still get paid for the initial transaction, which is by far the most important transaction, after which the consumer operates under an honor system, which in truth most people follow.

Most people. But not all people. You can augment a nonpersistent DRM system by adding limitations to the file once it has been unwrapped, Hirsch says. You could create a second layer within it that limits the number of copies you can make, but which is device-agnostic, meaning you could play that limited number of copies on whatever combination of devices you chose. Naturally Protexis offers just such a service—in the outlined scenario it would be the trusted third party that tracks and reports on sales. Hirsch's idea is certainly interesting.

A Post-DRM Beta Test

But here's the one I like best. Let's subject the elimination of DRM to a market test. It's happening on a limited basis now—but let's make it large scale. Let's call it a public demonstration of what the post-DRM world might be like. Let's get all the labels, and all the online music vendors together. Select a handful of album releases that are expected to have broad crossover appeal—not necessarily the blockbusters, but ones that are expected to be solid sales performers. Release them to all the interested online music vendors on unprotected MP3s for a limited period—say, six months. Then just wait and see what happens.

Consumers will do what they do best: Vote with their wallets. Sure, some may push the songs to their favorite file-sharing piracy network. But most won't and will like the option of having music that can be moved to whatever device they wish to use. And those who like that freedom will be back for more again and again.

Steve Jobs may be onto something here. More often than not his instincts have proved to be correct. And for that reason, record label executives should not be so quick to dismiss his "thoughts on music."

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Hesseldahl is a senior writer for BusinessWeek.com and his Byte of the Apple column, covering all things Apple, appears biweekly at www.businessweek.com/technology.