Dixie Chicks, Steve Jobs, the Demise of DRM & Music Label Taunting at the Grammy Awards

With the Grammy awards last night bouncing back in the ratings (though I still didn't watch it, they at least had the sense not to go up against American Idol like last year), the RIAA was in full effect and showing their rebel streak by blue-stating the Dixie Chicks with honors they'd never see at the Country Music Awards.

For the first time since Eric Clapton in 1993 bestowing upon the DCs FIVE awards, including album of the year, record of the year and song of the year. WHEW!

Even as mainstream pop waxed, rap records were waning as hip-hop got no love from the Recording Academy with zero nominations outside the rap category for the first time in years. Perhaps there is still hope for America's youth.

Why do I think the Dixie Chicks won for "Not Ready to Make Nice"?

Their co-author of course: Dan Wilson, Minneapolitan songwriter from Semisonic and Trip Shakespeare shared the honors.

What's interesting in all this music industry PR wasn't the reunion of The Police (though cool), but that it came even as Apple's extraordinary sense of timing has just finished forcing media companies of every ilk to bow before the iPod monopoly of consumers similarly locked into the iTunes digital distribution channel.

Then a week ago we saw Steve Jobs make a public commitment to free market economics by calling for the end of digital rights management (DRM), though not strictly for altruistic reasons. Not only, he argues, does DRM fail to stop pirates, it limits consumer rights and wastes money and energy forcing Apple to license music from the four big labels burdened by DRM technology.

Note this all came the same week Apple patented a new DRM technology, and told iPod users to steer clear of the new Microsoft Windows Vista operating system, so the Recording Industry Association of America shot back that Apple should instead license its FairPlay copy-protection schema to competitors.

While this might simply be Steve Jobs trying to deflect criticism on new scapegoats from European regulators opening the iPod/iTunes tying arrangement to interoperability, EMI seems to be the only one of the big four open to the idea, but not out of any sense of generosity:

Major label EMI - home of Coldplay and Norah Jones - is in discussions with online music stores about selling its music without copy protection, or digital rights management (DRM), according to two sources with direct knowledge of the talks who would not speak for attribution because discussions are ongoing.

Last week, Apple CEO Steve Jobs created a huge stir when he called on the music industry to dump DRM, saying it hinders sales. Yahoo Music general manager Dave Goldberg predicts that by Christmas, most of Yahoo's catalog will be DRM-free.

"The labels understand that DRM has to go," he says. "It's nothing but a tax on digital consumers. There's good momentum behind DRM going away."

He says sales would increase by 15% to 20% without DRM. Consumers have bitterly complained about DRM, which puts rules on how a song can be used. For instance, songs bought at Apple's iTunes Store can be easily played only on an iPod, and not on digital devices from Microsoft and SanDisk.

EMI spokesman Adam Grossberg wouldn't comment on the DRM-free proposal.

Big four music labels EMI, Warner, Sony BMG and Universal long have said they must have their work protected against piracy. Last week Warner reiterated its support for DRM.

Meanwhile, online piracy has continued to grow. Some 15 billion songs were downloaded for free via unauthorized file-sharing services in 2006, says measurement firm BigChampagne. Album sales continue to tumble - down 15% so far in 2007 according to Nielsen SoundScan - and labels are exploring options.

EMI, in fact, offered a non-copy-protected song from Jones on Yahoo Music and eMusic in late 2006.

Without restrictions on entire catalogs, "Sales would explode," says David Pakman, CEO of eMusic, the No. 2 online music retailer behind Apple's iTunes. "DRM has been holding the market back." His company is the only legitimate digital music service selling unrestricted songs, in the MP3 format. Its songs work with any music player, including the iPod.

By taking the DRM-free plunge, EMI "would slow the loss of its sales, and get a lot of attention for its artists," says James McQuivey, an analyst at Forrester Research. "EMI wouldn't have to worry about pirates, because anyone who wants to pirate music is already doing it. The paying customer is a different breed."

Russ Crupnick, an analyst with researcher NPD Group, says ending DRM would put all the music services on an equal footing. "If I'm a label, I'm thinking this is a good thing. I don't want Apple to totally control the market," he says.

Here's an excerpt of an article with some further analysis of the Jobs announcement:

Apple has been under pressure in Europe to make iTunes music compatible with players other than the iPod. On Jan. 25 Norway's consumer ombudsman said Apple must open access to iTunes by October 1 or face legal action.

"Perhaps those unhappy with the current situation should redirect their energies toward persuading the music companies to sell their music DRM-free," said Jobs about the European action.

Apple's iTunes Music Store is currently the world's largest digital music outlet, having sold around 2 billion songs since its launch in 2003. It has more than 70 percent market share of all digital music sales in the United States.

The songs sold on the service are protected by Apple's proprietary FairPlay software, which prevents users from making multiple copies for distribution. The software only works with Apple's iTunes software and iPod digital media players.

Jobs said Apple had concluded that if it licenses FairPlay to other companies it could no longer guarantee to protect the music it licenses from the major record companies.

Apple is due to reopen talks with the four majors in early March to discuss terms of their relationships with the iTunes Music Store, according to a source familiar with the discussions.

The four majorsVivendi's Universal Music Group; Sony BMG Music Entertainment, which is owned by Sony and Bertelsmann; EMI Group; and Warner Music Groupall negotiated one-year extensions with Apple last year, according to the source.

Music industry watchers, particularly at independent music companies, have intensified calls in recent months for the majors to sell their music without copy protection.

"Apple's alternative is the only way we're going to get complete interoperability," said Tim Bajarin, president of Creative Technologies, a Silicon Valley consulting firm.

Plus more on the Chicks and... well, the other people who won last night:

The Dixie Chicks are Nashville refugees for reasons of politics and personality after stinging comments about President Bush, country radio banned them and country fans shunned them but on Sunday the trio found blue-state redemption at the 49th annual Grammy Awards with five awards, including song, record and album of the year.

Intense R&B singer Mary J. Blige and the rock veterans of the Red Hot Chili Peppers were among the other notable winners, but by the end, the show belonged to the Chicks, who became the first act in 13 years to sweep all three prestigious categories.

The avalanche of honors at Staples Center in Los Angeles came just three months after the Chicks and their defiant album "Taking the Long Way" were snubbed at the Country Music Assn. Awards, creating a divide that turned into something resembling a pop-culture election.

"I think people are using their freedom of speech tonight with all these awards," said Natalie Maines, the lead singer of the Texas-bred band and a firebrand figure for much of America.

It was Maines who in 2003, on the eve of the invasion of Iraq, told a London concert crowd: "Just so you know, we're ashamed the president of the United States is from Texas." That led to radio bans, CD burnings, death threats and the Nashville career collapse for a group that had been among country music's most bankable acts.

Maines, a lifelong Texan, moved to an L.A. beach house and her music partners, sisters Emily Robison and Martie Maguire, joined her in California to record "Taking the Long Way" with rock producer Rick Rubin and rock session musicians.

There was also "Shut Up and Sing," a documentary film that gave the back-stage story of the public furor, enraging critics even more. The group, which began as a bluegrass outfit, had surrendered much of its musical identity, but songs such as "Lubbock or Leave It" signaled that the musicians were not in ideological retreat.

Maines joked Sunday night that Middle America might not be happy with the Chicks' romp, which came from the votes of the Recording Academy, which is centered in the industry hubs of Los Angeles and New York.

"A lot of people just turned their TVs off right now," the newly dark-haired Maines said with a laugh. "I'm very sorry about that."

The first single from their album, "Not Ready to Make Nice," won record of the year, which honors the best overall recording, and song of the year, a songwriter's award, which they shared with their collaborator Dan Wilson, formerly of the band Semisonic. The Chicks ran the table Sunday they won all five categories in which they were nominated.

Folk singer Joan Baez introduced them as "three brave women" and also asked the audience to "please listen closely" to their performance of "Not Ready to Make Nice," which the trio performed on a small pedestal stage at the center of the venue.

Norah Jones, in 2003, was the last act to win three of the four marquee awards. This year, the only top award the Chicks did not take home was the one they were not eligible for best new artist, which went to Carrie Underwood, the country singer whose career was minted by "American Idol," Fox's popular talent show.

"I love country music first of all," said the 23-year-old native of Muskogee, Okla. "There are so many people to thank. I'm going to start at the top: Thank you God, thank you Mom and Dad, thank you Simon Fuller, who created the show 'American Idol' that got me here. I owe everything to Simon Fuller'."

Last year, "American Idol" was head-to-head with the Grammys and thumped the awards show in ratings.

This year, acknowledging the new physics of musical stardom, the Grammys added a talent-show component to its broadcast.

A 19-year-old Texas unknown named Robyn Troup sang a duet with Justin Timberlake and got an ovation just as loud as the singers who went home to mansions.

Rick Rubin was named producer of the year (non-classical) for his work during the eligibility period with the Peppers, Dixie Chicks, Johnny Cash and Neil Diamond. He also contributed a song to the Timberlake album, giving him a credit on three CDs in the best album category.

The 43-year-old, who was a co-founder of the rap-pioneering Def Jam Records, came into the evening with five previous nominations in the prestigious category but had never taken a trophy home.

The show's gramophone trophies celebrated music that was released between October 2005 and the end of last September, but some of the most memorable moments of the gala honored music of the past.

The broadcast on CBS opened with the reunited Police performing their first hit, the torchy tango "Roxanne" (the band, which broke up in the mid-1980s, will announce a major tour today with a club performance and news conference in West Hollywood), and there was also a tribute to the late James Brown that included Christina Aguilera performing a forlorn version of "It's a Man's Man's Man's World," the 1966 song Brown wrote with Betty Newsome.

If the Chicks were celebrated for overcoming public travails, Blige and the Peppers took home awards that were especially poignant given the struggles in their personal lives.

Blige, whose performances are often riveting and wrenching, was choking back tears as she spoke on stage "There was a time in my life I couldn't love myself enough to love anyone else," she said.

Her three awards in R&B categories add to the success of her album "Breakthrough," the most uplifting music for an artist who has weathered drug abuse, physical abuse and despair.

The Peppers picked up four Grammys and had the final performance, a magical hometown moment for a longtime Los Angeles band that has dealt in the past with overdoses, defections and critical apathy. They scored the first No. 1 album of their career and some of their best reviews ever last year with "Stadium Arcadium."

For the music industry elite who gathered for "the biggest night in music," the gala was just as much about escapism as it was exultation.

The recent headlines have been disconcerting even in an industry growing accustomed to bad news: Tower Records shuttered its stores, layoffs are underway at Virgin and Capitol Records and, most distressing of all, last month the best-selling album in the country managed only to sell an anemic 60,000 copies during a week in stores.

Finally, here's the full text of Steve Jobs anti-DRM epistle:

Thoughts on Music

Steve Jobs
February 6, 2007

With the stunning global success of Apple's iPod music player and iTunes online music store, some have called for Apple to open the digital rights management (DRM) system that Apple uses to protect its music against theft, so that music purchased from iTunes can be played on digital devices purchased from other companies, and protected music purchased from other online music stores can play on iPods. Let's examine the current situation and how we got here, then look at three possible alternatives for the future.

To begin, it is useful to remember that all iPods play music that is free of any DRM and encoded in open licensable formats such as MP3 and AAC. iPod users can and do acquire their music from many sources, including CDs they own. Music on CDs can be easily imported into the freely-downloadable iTunes jukebox software which runs on both Macs and Windows PCs, and is automatically encoded into the open AAC or MP3 formats without any DRM. This music can be played on iPods or any other music players that play these open formats.

The rub comes from the music Apple sells on its online iTunes Store. Since Apple does not own or control any music itself, it must license the rights to distribute music from others, primarily the big four music companies: Universal, Sony BMG, Warner and EMI. These four companies control the distribution of over 70% of the world's music. When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.

Apple was able to negotiate landmark usage rights at the time, which include allowing users to play their DRM protected music on up to 5 computers and on an unlimited number of iPods. Obtaining such rights from the music companies was unprecedented at the time, and even today is unmatched by most other digital music services. However, a key provision of our agreements with the music companies is that if our DRM system is compromised and their music becomes playable on unauthorized devices, we have only a small number of weeks to fix the problem or they can withdraw their entire music catalog from our iTunes store.

To prevent illegal copies, DRM systems must allow only authorized devices to play the protected music. If a copy of a DRM protected song is posted on the Internet, it should not be able to play on a downloader's computer or portable music device. To achieve this, a DRM system employs secrets. There is no theory of protecting content other than keeping secrets. In other words, even if one uses the most sophisticated cryptographic locks to protect the actual music, one must still hide the keys which unlock the music on the user's computer or portable music player. No one has ever implemented a DRM system that does not depend on such secrets for its operation.

The problem, of course, is that there are many smart people in the world, some with a lot of time on their hands, who love to discover such secrets and publish a way for everyone to get free (and stolen) music. They are often successful in doing just that, so any company trying to protect content using a DRM must frequently update it with new and harder to discover secrets. It is a cat-and-mouse game. Apple's DRM system is called FairPlay. While we have had a few breaches in FairPlay, we have been able to successfully repair them through updating the iTunes store software, the iTunes jukebox software and software in the iPods themselves. So far we have met our commitments to the music companies to protect their music, and we have given users the most liberal usage rights available in the industry for legally downloaded music.

With this background, let's now explore three different alternatives for the future.

The first alternative is to continue on the current course, with each manufacturer competing freely with their own top to bottom proprietary systems for selling, playing and protecting music. It is a very competitive market, with major global companies making large investments to develop new music players and online music stores. Apple, Microsoft and Sony all compete with proprietary systems. Music purchased from Microsoft's Zune store will only play on Zune players; music purchased from Sony's Connect store will only play on Sony's players; and music purchased from Apple's iTunes store will only play on iPods. This is the current state of affairs in the industry, and customers are being well served with a continuing stream of innovative products and a wide variety of choices.

Some have argued that once a consumer purchases a body of music from one of the proprietary music stores, they are forever locked into only using music players from that one company. Or, if they buy a specific player, they are locked into buying music only from that company's music store. Is this true? Let's look at the data for iPods and the iTunes store - they are the industry's most popular products and we have accurate data for them. Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that's 22 songs purchased from the iTunes store for each iPod ever sold.

Today's most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats. It's hard to believe that just 3% of the music on the average iPod is enough to lock users into buying only iPods in the future. And since 97% of the music on the average iPod was not purchased from the iTunes store, iPod users are clearly not locked into the iTunes store to acquire their music.

The second alternative is for Apple to license its FairPlay DRM technology to current and future competitors with the goal of achieving interoperability between different company's players and music stores. On the surface, this seems like a good idea since it might offer customers increased choice now and in the future. And Apple might benefit by charging a small licensing fee for its FairPlay DRM. However, when we look a bit deeper, problems begin to emerge. The most serious problem is that licensing a DRM involves disclosing some of its secrets to many people in many companies, and history tells us that inevitably these secrets will leak. The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute. Such leaks can rapidly result in software programs available as free downloads on the Internet which will disable the DRM protection so that formerly protected songs can be played on unauthorized players.

An equally serious problem is how to quickly repair the damage caused by such a leak. A successful repair will likely involve enhancing the music store software, the music jukebox software, and the software in the players with new secrets, then transferring this updated software into the tens (or hundreds) of millions of Macs, Windows PCs and players already in use. This must all be done quickly and in a very coordinated way. Such an undertaking is very difficult when just one company controls all of the pieces. It is near impossible if multiple companies control separate pieces of the puzzle, and all of them must quickly act in concert to repair the damage from a leak.

Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies. Perhaps this same conclusion contributed to Microsoft's recent decision to switch their emphasis from an open model of licensing their DRM to others to a closed model of offering a proprietary music store, proprietary jukebox software and proprietary players.

The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.

Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven't worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That's right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.

In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves. The music companies sell the vast majority of their music DRM-free, and show no signs of changing this behavior, since the overwhelming majority of their revenues depend on selling CDs which must play in CD players that support no DRM system.

So if the music companies are selling over 90 percent of their music DRM-free, what benefits do they get from selling the remaining small percentage of their music encumbered with a DRM system? There appear to be none. If anything, the technical expertise and overhead required to create, operate and update a DRM system has limited the number of participants selling DRM protected music. If such requirements were removed, the music industry might experience an influx of new companies willing to invest in innovative new stores and players. This can only be seen as a positive by the music companies.

Much of the concern over DRM systems has arisen in European countries. Perhaps those unhappy with the current situation should redirect their energies towards persuading the music companies to sell their music DRM-free. For Europeans, two and a half of the big four music companies are located right in their backyard. The largest, Universal, is 100% owned by Vivendi, a French company. EMI is a British company, and Sony BMG is 50% owned by Bertelsmann, a German company. Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.