Apple Same Old Problems

Same old problems

And that could mean the record labels will face the same problem all over again. Just as they remove DRM from their products, Apple would re-impose it. Apple customers with a subscription would probably never buy from third-party services, even while the likes of Amazon could undercut iTunes and be iPod-compatible.

Mark Mulligan, digital music analyst at Jupiter Research, also expects Apple to change its approach. "It's highly likely Apple will get into the next-generation service game. That could be Apple selling iPods preinstalled with unlimited access to music, or with a bundle to a subscription offering," he says. Mulligan sees the market evolving into multiple tiers. At the top end, a minority will be willing to pay a premium for the best quality, DRM-free downloads. The middle tier will be "subsidised offerings like Nokia's Comes With Music, where you buy a device and the cost of the music is included subsidised"; while at the bottom will be advertising-supported services such as Qtrax, SpiralFrog and We7, where free music is paid for by embedded advertising.

That would leave Apple with the top-end iTunes downloads and a subscription business. But would Jobs back it? In January 2007, Reuters asked him if Apple would do so. "Never say never, but customers don't seem to be interested in it," Jobs said. "The subscription model has failed so far." Which hardly rules it out forever. DRM might not stop pirates, but it does rivals. And in business, the latter can be a greater threat than the former.