Comments on DRM/interoperability by John Kennedy, Chairman & CEO of IFPI

February 7, 2007

We have been talking about the desirability of interoperability for some time. However, we have always respected Apple’s own commercial modus operandi.

We are pleased that Steve Jobs now wants to address interoperability, but he appears to be saying that interoperability has draconian side effects. We don't believe that that need be the case.

After such a long period without interoperability, it seems to me that the right thing to do would be for Steve Jobs to sit down with the industry and say "I believe these are the consequences if I allow interoperability" and for the industry to explain how we believe that some of the side effects that he believes are inevitable are not inevitable.

There would be a sensible discussion of the pros and cons, a risk/reward assessment and a discussion to make sure we are not throwing out the baby with the bathwater, and, most importantly, to preserve the right of all rightsholders, big and small, to decide whether they want to implement DRM on their intellectual property.

Some further thoughts:

• I am told that in spite of what Steve Jobs says it should be neither impossible nor unreasonably burdensome to implement interoperability whilst maintaining the security of DRM

• DRM makes the following possible:

• Subscription services
• New business models
• Variable pricing for variable uses
• Options for different types of music consumption

• DRM and content protection are not unique to the music industry:

• ATM Machines
• Online Banking
• They have been applied by TV film and software industries for more than a decade

• They provide security to content owners and enable flexible choices of different service options

• It is incorrect to give the impression that you cannot have interoperability and DRM

• Is Steve Jobs now advocating Apple's own software should be open source and that Disney and Pixar sell movies without DRM protection?

• The fact that CDs are an unprotected format is no reason to make the same mistake for the future, i.e. remove options for protection

• Banks have interoperable ATM systems and mobile phones have interoperable voice and billing services without compromising the integrity and security of the service

• Evidence that the burden is manageable comes from Microsoft who continue to run Plays For Sure across hundreds of music stores and devices

Until now Steve Jobs has not advocated interoperability; perhaps now the door is open to find a combination of interoperability and DRM to have a win/win scenario for Apple, the music industry and the consumer.