The iTunes DRM Model

What's so revolutionary about iTunes store?

• MPEG-4 AAC. The AAC ( Advanced Audio Coding ) file format, aka MP4, combines built-in DRM and better audio compression. AAC audio compression at 96 kbps generally exceeds the quality of MP3 audio compression at 128 kbps according to Dolby Labs, a co-developer of the MP4 standard.

• Copy protection. Songs sold by the iTunes Music Store cannot be copied onto more than two Macs or shared through a network. The music may be ripped to an unlimited number of CDs, however.

• Royalties. Artists receive the same royalty per download as they would receive if the same song were sold on a CD.

The runaway success and dramatic popularity of Apple's iTunes Music Store is poised to change everything. In its first month of operation, Apple sold about three million songs at 99 cents each. According to Robin Bloor of Bloor Research,

The success of iTunes Music Store is even more remarkable if you consider the fact that the service is currently confined to Mac users who make up less than 1 percent of home PC users in the US, and that it does not currently include all music labels. Naturally, Apple is thinking of porting the software to Windows. If you do the math, this could expand the market by a factor of 100, and Apple could be staring a $3 billion a year market in the face. And that's just for the music itself, never mind the iMacs, iPods, and software it could sell!

When rock 'n' roll moved from radio to video, MTV became the hottest force in music. With the iTunes Music Store, Apple may become the next MTV! Thirty days after the launch of the iTunes Music Store, Apple's stock had already risen 25 percent in value. The hackers weren't far behind! Apple's Rendezvous, part of OS X, enables Apple peripherals to share data over a network. Two Mac users with iTunes can share each other's music over a network without actually copying the music files, for example. When one user logs off, the playlist is no longer available to the other. It was only a matter of weeks before hackers tweaked Rendezvous so the software's file-sharing capabilities expanded to the Internet. Although no file copying took place because of the built-in DRM in the AAC file format, thousands of strangers thousands of miles apart could listen to each other's iTunes playlists over the Web. Apple got wind of the hack and released iTunes 4.0.1 within a month. It disabled Rendezvous' capability to share playlists over anything more than a local area network. Apple officially expressed disappointment about how the feature was used, but that's naive. Where there's a will there's a way, and where there's a way there's a hacker. Unfortunately, piracy is here to stay!

Figure 9.5: The Apple iPod