Lies, DRMed Lies and Steve Jobs: Interview with Nettwerk Music Group

February 6th, 2006 -- Steve Jobs posted his Thoughts on Music as an open letter on the apple.com "hot news" website. As has been noted elsewhere, the piece would have been more appropriately titled "Thoughts on DRM" as Jobs ultimately posted just shy of 2000 words on the subject of Digital Rights Management as it applies to the iTunes Store.

On the very same day, Jon Lech Johansen (aka DVD-Jon) published a response on his personal blog in which he called Steve Jobs to task:

Steve claims Apple wants to sell DRM-free music but the labels won't let them. This of course flies in the face of reality. Source.

Johansen's frustrations are rooted in an article published on The New York Times a month prior to Jobs' missive against DRM. The portion cited by Johansen involved a quote from the CEO of Nettwerk Music Group:

Among the artists who can be found at eMusic are Barenaked Ladies, Sarah McLachlan and Avril Lavigne, who are represented by Nettwerk Music Group, based in Vancouver, British Columbia. All Nettwerk releases are available at eMusic without copy protection.

But when the same tracks are sold by the iTunes Music Store, Apple insists on attaching FairPlay copy protection that limits their use to only one portable player, the iPod. Terry McBride, Nettwerk's chief executive, said that the artists initially required Apple to use copy protection, but that this was no longer the case. At this point, he said, copy protection serves only Apple's interests. Source.

Terry McBride appears to assert that Nettwerk Music Group wouldn't require DRM if Apple would agree to offer music unencumbered by Fairplay protections. At no point does McBride claim that he (or anyone else) requested the removal of DRM or that Steve Jobs refused such a request.

Johansen ends his short post with the following challenge to Steve Jobs:

It should not take Apple's iTunes team more than 2-3 days to implement a solution for not wrapping content with FairPlay when the content owner does not mandate DRM.

Seemingly sensible, and possibly true. Still, Johansen seems to be jumping to the conclusion that NMG (or any other content owner) has ever officially requested the removal of DRM from the digital files they sell through the iTunes Store.

Here on Newsvine, this leap of logic has been co-opted and pole-vaulted into an article entitled Jobs Caught Lying About DRM. Paul William Tenny goes beyond subtle implication and states outright that Jobs is playing fast and loose in the wording of his open letter:

I didn't have the interest in digging it up to refute the absolutely ridiculous words coming out of Steve Jobs mouth recently about freeing music from DRM, but a special person who has a history in the DRM game did the job for me.

Jon Lech Johansen dug up this snippet from a New York Times article that ran not even one full month ago that proves conclusively that given the opportunity, Apple has refused to abandon DRM. Source.

Of course, all of this is based upon a single paragraph of Jobs' open letter (approximately 106 words out of nearly 2000) in which he lays down the gauntlet concerning Apple's stance on DRM:

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. Source.

So, the question remains: Has Steve Jobs refused to lift Fairplay protections when given the chance? Did Jobs refuse McBride's official request? Was there an official request?

As it turns out, that information was fairly easy to obtain: Carter Marshall is the Director of Digital Sales and Marketing at Nettwerk Music Group and after an email or two and a phone call, he provided the answers to several of these questions.

A little background, from the Nettwerk Music Group website:

Nettwerk Music Group is Canada's leading privately owned record label and artist management company. Nettwerk is responsible for managing some of Canada's biggest artists like Sarah McLachlan, Avril Lavigne, Barenaked Ladies and many others. Nettwerk has several offices located around the world including offices in New York, Los Angeles and London; with our main office right next to Granville Island in Vancouver, B.C.
Litigation is destructive, it must stop .... as per Nettwerk copyrights, we have never sued anybody and all our music is open source to encourage fans to share it with others and help us promote our Artists. As per those Artists we manage on other labels (Majors), we take issue with those labels claiming that litigating our fans is in our interest, as it clearly is not.

Marshall was undeniably passionate about the idea of providing unrestricted digital formats to music fans. He was optimistic about several distribution possibilities and referred to the iTunes pricing scheme ($.99 singles and $9.99 albums) as being at the "top end of the range." He also mentioned that the Bare Naked Ladies provided music in DRM-free MP3 (compressed) and FLAC (lossless) formats on the band's personal website. (All of NMG's artists offer unrestricted music through the eMusic service.)

Marshall also made a point to note that Nettwerk Music Group is an "Apple operation" (meaning that they utilize Apple hardware and software) and that they are "fans of Apple's solutions for consumers." Notably, he also mentioned that he took Jobs' comments regarding DRM "at face value."

When asked about a request to remove Fairplay from NMG's music -- Marshall responded that there had never been a "formal" discussion. While he wasn't familiar with the details of the contract between Apple and NMG, Marshall mentioned that "most of the contracts that come across our table are pretty heavily tied to DRM."

If this holds true in the case of an iTunes contract, it would likely mean that Nettwerk Music Group initially signed a contract with Apple which stipulated the use of Fairplay DRM. It's probably safe to assume that "DVD-Jon" Johansen isn't privy to the details of the contract, if NMG's own Director of Digital Sales isn't.

With that said, when the signing of the Independent labels was first announced, it was widely publicized that all Independent Labels were offered agreements identical to those signed by the Major Labels:

Apple emphasized that indie labels are getting the same "A" deal that they offered the major labels. But in return for this they said they were not willing to negotiate on the rates or the contract. They said they don't have the time or the interest in talking to 200 lawyers on this stuff -- it's a "take it or leave it" offer. Source.

Unless Jobs (or one of the labels) provides more information, no one can know with any certainty what those identical contracts have to say about the use of DRM or the consequences of Apple lifting DRM from some labels while leaving it intact for others. (This could possibly provide legal cause for the majors to pull out -- and this may explain why much of Jobs' letter is directed squarely at the "Big 4" labels.)

If at first you don't succeed: Try, try again.

Operating under the assumption that NMG had made some sort of formal request to Apple, and that this request was made prior to the posting of Jobs' open letter, one would think that Marshall (or someone else at NMG) would be making a second stab at the request.

When asked whether this was the case, Marshall responded that there were "no current plans" to ask Apple to strip DRM from NMG's catalogue. This seemed a bit odd, considering the passion with which Marshall discussed unrestricted music.

As a result, the following question was posed in a followup email:

You also indicated that there were no current plans to approach Apple again about removing DRM -- Do you not see Jobs' recently letter as an invitation to reopen the discussion -- and perhaps for some of the smaller (or Indie) labels to lead the way?

Marshall's response:

Jobs is aware that the Indies are doing well on the #2 digital retailer in America, eMusic, which is DRM free. I don't think he needs us to ask him to know our preference. Our CEO, Terry McBride, has been banging the MP3-drum in the media for years. Nettwerk believes that our position has been clearly expressed.

When asked (in the same email) whether the initial request occurred before or after the contracts were signed, Marshall replied:

Informal conversations have taken place, ie; we have expressed our interest in losing DRM from all stores in the Media and at trade conventions. We have not discussed a change in the iTunes business model directly with Steve Jobs.

Marshall had previously indicated that the issue of DRM was one that "needs to happen between Apple and the Big 4."

Following up on that thought:

You mentioned that the issue of removing DRM is a discussion that needs to happen between Apple and the Big 4 -- could you elaborate on this a bit? Specifically -- is this not an area that some of the smaller labels have the ability to impact?

His response:

iTunes is the market leader, and is performing fine under the current situation though they have indicated they are willing to change. I don't think there is any market advantage for them to switch at the moment, though they might do so should other services start to do so. Another consideration might be that iTunes has a contractual commitment to the Majors where they would not offer two-levels of DRM on their store, but that's speculation. I know a few digital retailers that are planning on offering DRM and open-source side-by-side imminently. Perhaps once a few of these services change, and there is wider pressure from the indie labels, iTunes will change.

Marshall's speculation seems to mirror the proposed idea that Apple may be contractually bound to offer Fairplay protections on all music sold through the iTunes Store -- and this again sheds light on the narrow focus of Jobs' open letter.

So, is Steve Jobs a liar?

In the end, it would appear as though Steve Jobs' alleged hypocrisy is nothing more than a false alarm, raised with little evidence to support the claim. Carter Marshall of Nettwerk Music Group seems unequivocal in his statements that there has never been a formal "no" to a formal request for unrestricted music. (Indeed, a formal request was never made for Steve Jobs to say "no" to.)

Even Johansen's suggestion about removing DRM has to be called into question: This just isn't an assertion that can be made without knowing the details of the identical contract that all of the labels who sell music through the iTunes Store have signed.

If a DRM stipulation exists -- Steve Jobs may be stuck bargaining with the Big 4, and that may be the only bargaining chip they have left in this game.

If such a stipulation does not exist -- Jobs ought to pick up a bargaining chip or two by making a phone call to Nettwerk Music Group: Despite an odd lack of proactive effort to bring about change, they seem ready to discuss a workable future for digital music.

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