Apple's Jobs calls on music industry to drop DRM

By Yinka Adegoke and Duncan Martell

NEW YORK/SAN FRANCISCO (Reuters) - Apple Inc. Chief Executive Steve Jobs on Tuesday called on the four major record companies to start selling songs online without copy protection software to thwart piracy known as digital rights management (DRM).

Jobs said there appeared to be no benefit for the record companies in continuing to sell more than 90 percent of their music without DRM on compact discs, while selling the remaining small percentage of their music encumbered with a DRM system.

"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," he said in a statement posted to his company's Web site.

Apple has been under pressure in Europe to make iTunes music compatible with players other than the iPod. On January 25 Norway's consumer ombudsman said Apple must open access to iTunes by October 1 or face legal action. The company has also faced some criticism because songs bought on the iTunes music store play on the iPod and not other digital music players.

"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 also 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 majors -- Vivendi's Universal Music Group; Sony BMG Music Entertainment, which is owned by Sony Corp. and Bertelsmann (BERT.UL); EMI Group; and Warner Music Group -- all negotiated one-year extensions with Apple last year, according to the source.

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.

"This is interesting because the greatest beneficiary of DRM-enabled systems is telling an industry you've got to get off this stuff," said Gartner analyst Mike McGuire of DRM.

Analysts also suggested that Jobs might be trying to deflect pressure from the European Union regarding the interoperability question to the record labels.

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.

"Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it?" Jobs wrote on the Apple Web site (www.apple.com/hotnews/thoughtsonmusic/). "The simplest answer is because DRMs haven't worked, and may never work, to halt music piracy."

But senior record company executives disagreed with Jobs' assertions, saying they doubted they would start selling music without protection any time soon.

"How can you be in the digital business of content and say you're not going to protect it?" said one executive who spoke to Reuters on condition of anonymity. "So is the film and TV industry looking at doing this? I can guarantee you they're not."