In this third (and final) installment of our discussion of DRM (Digital Rights Management, the secret code attached to digital media to restrict usage to the person who paid for it) we’ll look into the future and try to envision a world without DRM-protected music. But before we gaze into the crystal ball, let’s look at where we’ve been and where we are today.

When online music store purveyors like Apple’s iTunes Store approached the music industry and offered to license music and sell it online, the music industry was adamant that the music be “protected” by DRM. DRM would hopefully prevent consumers from purchasing a song and then easily sharing it with the world via peer-to-peer networks (like LimeWire) over the Internet, helping to stem the tide of piracy and solidify profits. Apple and others spent time and money developing DRM schemes that would both assuage the music industry’s fears and give consumers reasonable access to the music they purchased.

All the while, however, the music industry continued to sell the vast majority (95%) of their music without DRM protection, in the form of music CDs. It takes only a few more minutes to rip music from an unprotected CD onto a computer and then distribute it via LimeWire than it would to buy an unprotected song online and do the same thing.

Has DRM put a dent in online music piracy? Not appreciably. Apple’s research shows that the average user’s 1000-song iPod is nearly full, and that only 22 of the 1000 songs (around 3%) are purchased from the iTunes Store. Where do the other 978 songs come from? While music lovers certainly rip CDs they’ve purchased in the past onto their iPods, there’s also certainly a lot of music on iPods that folks have acquired through LimeWire and other peer-to-peer networks.

Has DRM been beneficial to consumers? Not to those who have chosen to purchase music online. Due to DRM restrictions, music purchased from one online store cannot be easily played on computers or players hard-wired to another store. Apple has certainly benefited from this “lock-in”, as the profits from the iTunes Store (reportedly only four cents of the 99 cents charged for every song) dwarf the profit margins of their wildly popular iPods. Remember though, that, studies show that only 3% of the songs on a given 1000-song iPod are locked into the iTunes DRM structure.

So, the burning question is: if DRM hasn’t slowed down piracy, and consumers are possibly deterred from buying music online due to fears of being locked into one ecosystem, why does the music industry insist on DRM protection?

In a recent missive posted on Apple’s web site, CEO Steve Jobs wrote that if the music industry would agree to license DRM-free music to Apple and others to sell online, Apple would “embrace it wholeheartedly”.

It’s not hard to imagine a DRM-free music world. Consumers could purchase music from any online store and play it on any computer or player. Online stores wouldn’t have to spend time and money fixing leaks in the DRM. Theoretically, competition would result in a greater selection of better players, the ability for real audiophile consumers to opt for higher-resolution formats, and likely drive down the cost of the music for the consumer.

Ahh. Maybe that’s the answer to the question. Real competition would mean lower prices for the consumer, hence lower profits for the music industry.

There is one other hitch. Which format would become the “universal” format used in all players? Apple’s AAC (a likely candidate as they control 75% of the current market)? Or, Microsoft’s Windows Media Audio?

OK. Maybe a DRM-free world isn’t Utopia after all.

© 2007 Peter F. Zimowski