Music Fans: Dismantle DRM

New lawsuits are using antitrust law to challenge media giants' music download policies, claiming they unfairly restrict users' purchases

by Catherine Holahan

When it comes to legal action over downloaded music, the defendants are often individuals: The lone user downloads one too many copyrighted files and Big Media goes on the offensive. But now, the little guy is turning the tables.

A fresh crop of lawsuits filed on behalf of individuals argue that it's the big companies that are ripping off the consumer.

Melanie Tucker, a San Diego resident, says Apple Computer (AAPL) unfairly restricts how its iTunes Store customers can use legally purchased music. Apple uses its so-called Digital Rights Management, or DRM, software to prevent iTunes songs from easily running on media players that compete with its iPods. (The files can be converted but the process is time-consuming and can be confusing.) Apple's brand of DRM software, called FairPlay, also prevents music purchased through services other than iTunes from playing on the iPod.

Tucker maintains that the company, which controls between 70% to more than 85% of the legal music download market and perhaps a 90% share of the digital music player market, is behaving like an overly aggressive monopoly, stifling competition in violation of antitrust legislation. "Apple has monopoly power in both markets through iTunes and iPod and they have made a conscious decision to disable people from freely using other formats on their iPod and vice versa," says Andrew S. Friedman, one of Tucker's attorneys. Friedman is seeking class-action status for the suit.

My Tunes vs. iTunes

Tucker's suit comes on the heels of a March, 2006 class action filed by Scott Ruth against music industry players including Sony BMG Music Entertainment (owned by Sony (SNE) and Bertelsmann Media), Universal Music Group, Time Warner Music Group (TWX), and EMI (EMI). Ruth, an Arizona resident, argues that the labels are violating antitrust agreements by using DRM to prevent music from being sold by a variety of retailers, thereby stifling competition that could keep prices down. Both Ruth and Tucker's suits seek compensation for music download customers as well as a change in the restrictions.

The arguments in Ruth and Tucker's suits are not particularly new. Consumers have long complained that legally purchased songs cannot be played on all their devices in part because of restrictions on the number of devices that can hold a license for a song at any one time. Traditionally, the record labels and download services have argued that the restrictions are necessary to combat piracy and ensure artists are compensated. Seeing few alternatives, many music lovers have begrudgingly accepted this answer—or opted for illegal downloading.

But the lawsuits show customers are no longer willing to accept the status quo. Some DRM opponents have begun arguing that DRM restrictions are actually fueling piracy by forcing users to choose between buying music that they will only be able to play on a limited number of compatible devices or stealing music that they can play anywhere. "Right now the fact is that pirated music and pirated movies are actually worth more than the movies and music you buy," says Rob Enderle, principal analyst with the Enderle Group. "I can't think of another product that is actually worth more stolen than if you purchased it."

Music Biz Ready to Play

The music industry is showing signs of softening. While record labels aren't changing their tune on the need for DRM to prohibit piracy, the Recording Industry Association of America, which represents the major labels, wants changes that would let users play downloaded music across a variety of devices. "We are focused on interoperability," says RIAA President Cary Sherman.