Apple and DRM

Digital Rights Management or DRM is technology that allows a digital media provider or platform to "lock-down" it's products so that only the purchaser of a particular song, book, or video can play the media - and only on the platform's utilizing the same DRM technology used to protect the media.

This technology is somewhat limiting to consumers who may wish to play media on multiple devices in multiple locations - at home or at work, say - and many feel treads upon fair usage rights of consumers. I'd imagine that many people would find it unreasonable to purchased a CD only to find it only worked on their home CD player (but only the downstairs one, not the upstairs), and they couldn’t listen to it in their car.


Apple uses a DRM technology called FairPlay in all DRM protected media sold through it's iTunes store. In recent years, Apple has come under increasing pressure to sell DRM-free music . Apple responded that they would do so when "all of the record companies" agreed to go DRM free. In other words, "it's not us - talk to the record companies". Viewed from a game theorists perspective, this was an extremely clever move on Apple's part.


The record companies are trapped in a type prisoner's dilemma - they would all benefit if they cooperated and each one refused to allow its content to be sold on iTunes with DRM. However, each record company would have a strong incentive to defect, due to the popularity of the iPod and the massive size of the iTunes market. Therefore, the safest strategy was for each record company to "defect" and not coordinate. Apple, realizing this, can look like the good guy by putting the blame on the record companies, knowing full well how unsustainable cooperation would be.


The record companies may have found a way around this problem with the recent success of the Amazon music store. All of it's music is sold DRM-free - and as it's market share rises, it provides a context by which the aforementioned incentive to defect back to iTunes is not as great as it might have been, and gives the record companies some "breathing room" to allow the cooperation to happen . So the result is that today we have Apple starting to relent and begin to sell DRM-free music through its online store. I have no doubt this would not have been the case without other marketplaces emerging, such as Amazon, which helped change the strategic landscape.