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July 26, 2004

Is RealNetworks Playing Fair?

The Web is atwitter today with the news that RealNetworks has reverse-engineered Apple's FairPlay digital rights management scheme, and plans to use its implementation in its music store.

In English, this means that songs purchased from online stores operated by RealNetworks (or from companies to whom Real has licensed its technology) will now be playable on iPods.

Why is this a big deal?

Well, first let's clear up some confusion. iPods play MP3 files just fine, whatever their origin. If you have an MP3, then you can park that puppy in any iPod, no sweat, and play it to your hearts' content.

The problem, of course, is that MP3 is an unencrypted file format. Once a song is in MP3, you can copy it, give it to friends, swap it on the Internet, you name it. I'm speaking from a technical standpoint, here, not a legal one (don't steal music). The recording industry HATES this, which is why digital rights management, or DRM, comes in to play. DRM is designed to take the music file and "seal" it in a digital envelope so it can only be played by the person who actually buys it. There's a billion and one different DRM schemes out there, but Apple has chosen a technology called FairPlay for the iTunes Music Store.

If you want to play music on the iPod that's got DRM, the only DRM you can use is FairPlay. Real bas basically cloned FairPlay, and is now selling its clone technology to others.

This raises several interesting questions.

First, is this good or bad for consumers? Well, my first inclination is to say that Choice Is Good; that is, the more outlets you can get selling music, the better it is for online music as a whole and individual choice in particular. However, I am troubled by the fact that Real has chosen to reverse-engineer the technology (rather than licensing from Apple ... and yes, I know Apple has refused to license), because it means that the quality of the experience for Real's consumers is not guaranteed. Should Apple decide to make small changes in FairPlay (and this is something tech companies do all the time), then it's very possible that Real's technology will break, and anyone who is buying music based on that technology will be basically screwed. So while I applaud Real for their Engineering Kung Fu, you wouldn't catch me building my business on their stuff.

Second, I'm not sure that what Real is doing is even legal.

The Digital Millenium Copyright Act (DMCA) is a law passed to protect the rights of copyright holders. It basically says that reverse-engineering is, while not outright against the law, now a very murky area.

This law is playing out in interesting, and unexpected ways. In the brutal inkjet-pritner business, for instance, manufacturers like Lexmark give away their printers at cost to make money on the ink cartridges. Lexmark, like a lot of companies, now embeds chips in Lexmark-branded ink cartridges so they work with Lexmark printers. No special chip in your ink cartridge? Won't work in your Lexmark printer. Or it'll work poorly.

Lexmark actually sued a small company, called Static Control Components, who reverse-engineered their chip technology. Static Control was selling this reverse-engineered implementation to other ink cartridge manufacturers, who in turn could now undercut Lexmark on price in the ink cartridge market. Static Control has ceased making their chips.

So it seems that something similar is about to happen in music. Pardon the pun, but stay tuned. This could get ugly.

Posted by Gavin Shearer at July 26, 2004 8:36 AM. Posted to Apple.

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