B. Mann Consulting

This article:

http://www.boingboing.net/2004/10/30/apple_to_ipod_owners.html

Rants about how Apple is fighting attempts to distribute software that allows people to download music from their software.  There was a question in the article that made me pause for a moment:
"Who is the customer, me or the RIAA and music industry?"

 The answer is quite interesting - both parties are the customer. The RIAA/music industry is Apple's customer, and so is the iPod owner. The analogy to the magazine business is quite similar, because magazines also have two types of customer: the advertisers, and the people buying the magazine.

Magazines generate revenue by capturing a target audience that industry-specific advertisers can advertise in, because the more specific the readership, the higher the advertising volume.The advertisers are the really important customers to the magazine because there are not many, and they account for all of the magazine's revenue. The people who buy the magazine, to the advertiser, are the target market. The magazine writers create content that is targeted at specific demographics, and in turn it presents its product, the readership, to advertisers to buy into.

If an advertiser has an issue with the magazine, the magazine sits up and listens. If someone who buys the magazine has an issue, the magazine at best will feign interest just so there is no bad PR from it, but the person that buys the magazine is being used to generate the magazine's revenue, and do not  have any priority within the company.

The iPod is the exact same situation. Apple's important customers are the music labels. The unimportant customers are the iPod owners. Apple is selling a strong DRM platform and market-leading product to the music industry. Prior to the iPod, the RIAA saw music sharing as Napster, Kazaa, and whatever new illegal sharing P2P program was next, eDonkey and Bit Torrent right now. After Apple developed the iPod, the RIAA and music labels bought in.

This is identical to the creation of a new magazine. Now consider the possibility that someone begins scanning the magazine and sharing it for free on the Internet - the magazine loses its distribution, and subscriptions, and advertisers bail and the market niche dies.

Now imagine that iPod owners suddenly discover how to download the music on their iPod to a computer. Hmm... what computer would they download it to? Their own? Wait... since the music came from their computer to begin with, that is a useless feature. So which computer? Another computer in their house? Maybe, but if it's on one in the house, how much more useful is duplicate copies of the songs? How about other peoples' computers? Oh yeah! It would be like Napster all over again! After the utility to get it off your computer, the next logical step for people would be to list all their songs on torrent, eDonkey and Kazaa. Remember what happens when someone scans and shares your magazine? You go hungry.

What do you think happens when hackers figure out how to get music off an iPod? Apple's delicate deal with the music industry goes up in smoke.

So, uh, who is the customer, the person who buys the iPod or the music industry? The answer is both, but if you think you are more important than BMG, Vivendi, Sony or any other label, you are sorely mistaken. Apple will sue, threaten, intimidate and insult everyone it has to in order to keep hackers from sharing tools that break Apple's DRM and it's deal with the music industry. I bet Apple's agreement obligates them to ruthlessly enforce their DRM protection, too.

Apple is starting something new with the iPod - they are trying to be the file sharing heroes and find common ground between consumers and content labels again, after the divide caused by Napster, Kazaa and all file sharing programs. Either Apple's attempt works, or the labels go back to suing file sharers.

If hackers expect to be able to hack the iPod's DRM, and get away with it, especially in this IP climate, they are sorely mistaken. There is little doubt that the ability to download music from the iPod would instantly break Apple's DRM and allow people to share music purchased through the Apple ITMS, and you know they would. When I first used Napster I wondered why fools would share music they had paid money for - they all did it anyway. You can be absolutely certain that is exactly what would happen with broken FairPlay. 150million+ songs potentially shared on new file sharing services that are much more difficult to stop than Napster. Then the labels pull the plug on ITMS, and suddenly nobody can buy music legally anymore. After the iPod, hackers will move on to whatever other highly successful MP3 product is available and slowly break all deals if the labels don't break them.

Apple's magazine happens to be entirely composed of copyrighted content owned by giant music companies. As an iPod owner, and not one of those companies, iPod owners are definitely a distant second when it comes to importance, and Apple will not let anyone mess with it's magazine.