Thursday, March 25, 2004

The future of Apple's Music

Following news coverage of Real Networks CEO Rob Glaswer telling Apple that it should make its iPod compatible with other audio standards, there have been tons of articles on the subject. One particularly good commentary on the issue can be found at BusinessWeek Online. As an avid iPod user, I feel that I need to weigh in as well.

Regarding the opening of standards on the iPod: Sure, it's a good idea. The iTunes Music Store (iTMS) is probably the best interface for a music store and the best shopping experience. However, iTMS does not have every song, and most of the iTMS competitors serve up their music using the Windows Media Player (WMP) standard, meaning that I can't download from the competing sites unless I am willing to go through a fairly complicated procedure to turn the music from WMA into Advanced Audio Coding (AAC) (or MP3) format so that I can load it on my iPod. It is suspected that an opening of the hardware to other formats may be forthcoming because of the Apple deal with Hewlett Packard (HP) in which HP will sell HP-branded iPods to its customers.

Regarding the AAC standard: AAC is a Dolby compression scheme that is supposed to provide higher quality audio than the MP3 format. Apple combines support for MP3 and AAC tracks in its software and iPod devices, although the preferred format is AAC (all sings on iTMS are in AAC format). In conjunction with the AAC format, Apple uses a Digital Rights Management (DRM) tool called FairPlay. One of the reasons that WMP is so prolific is that Microsoft licenses their DRM schemes very openly, while Apple is yet to license the FairPlay technology. When I look at AAC and see the Dolby name attached to it, my first thought is the little Dolby symbols that you see on almost every audio device sold. If AAC and FairPlay were integrated into the Dolby chipsets that were installed in all audio components, it is quite possible that Apple would be able to blow the WMP standard out of the water. As it is, Microsoft is spending lots of time and money trying to get the WMP standard adopted by electronics manufacturers.

Regarding Apple's strategy: Right now Apple is at the top of the digital music world; they produce the best device and have the best software. However, this advantages is not sustainable in the long term unless Apple is willing to change its focus. Anyone else feel the deja vu here? Think back to 1984 when Apple was producing the best, most user-friendly hardware and software and suddenly just got take over by Microsoft Windows, which copied much of the same functionality that Apple was known for. Microsoft has indeed already announced its plans to open its own music store, and I have heard that it will go live in August or September of 2004. Unless Apple is willing to give away the FairPlay standard (they have the ability right now to really push FairPlay as the de facto standard), open up their devices to accept other formats (Steve Jobs has even admitted that iTMS is a loss-leader designed to sell more iPods) or at least provide codecs that allow other formats to seamlessly be converted on-the-fly into AAC, Apple may really take a beating within the next year. Unfortunately, Apple cannot base its technology on restrictive and proprietary standards, even if they are producing the coolest technology (thankfully, we have seen a shift towards less proprietary standards in the production of iTMS for Windows and in the new Macintosh OS that is based on Unix).

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