The second alternative is for Apple to license its FairPlay DRM technology to current and future competitors with the goal of achieving interoperability between different company’s players and music stores.

The most serious problem is that licensing a DRM involves disclosing some of its secrets to many people in many companies, and history tells us that inevitably these secrets will leak. The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute.

Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies.

Decius's comments are right on:

Steve Jobs speaks openly about DRM here, which is interesting, but he is obviously negotiating with European anti-trust entities in this essay. He presents a proposition that the two major European music companies license their music to him without a DRM requirement. Thats a bit "let them eat cake" I think. I'm sure he thinks the pressure that Europeans might put on those major music companies as a result of this essay will release some of the pressure on him, allowing him to find a better negotiating position.

Unfortunately, with regard to the passage I'm quoting, he's wrong. In order to have a DRM system you have to put the enforcement technology in the hands of all of your users. Those people can reverse engineer that technology, and spread their results via the Internet. DRM encoding systems can be just as blackbox as DRM enforcement systems, and you aren't handing them to as many people, so the idea that you can't tolerate the risk of those encoders being reverse engineered doesn't make any sense. You're already taking the greater risk that the decoders will be reverse engineered, and thats the fundamental crux of DRM. Furthermore, there is no reason why Apple couldn't support another companies DRM technology that already has shared encoders.

I am of the opinion, and have been for some time now, that the record companies are going to start abandoning DRM technology. I am also of the opinion that we need, and will get, a means of attaining blanket licenses to cover music downloads, as well as a reasonably elegant system for paying royalties.

I would be shocked if Apple is not expecting things to go this way as well. The line they are taking here actually puts more pressure on the powers that be to take moves to open licensing, then if Apple opened their technology. The big win for everyone is if it became possible to sell non-DRM'd tracks. Unless that happens, it is not to Apple's advantage to open their DRM technology.

Screw opening the DRM, open the licensing regime. Like Steve said:

Convincing them to license their music to Apple and others DRM-free will create a truly interoperable music marketplace. Apple will embrace this wholeheartedly.

Steve Jobs on the future of DRM...

The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.

Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.

The second alternative is for Apple to license its FairPlay DRM technology to current and future competitors with the goal of achieving interoperability between different company’s players and music stores.

The most serious problem is that licensing a DRM involves disclosing some of its secrets to many people in many companies, and history tells us that inevitably these secrets will leak. The Internet has made such leaks far more damaging, since a single leak can be spread worldwide in less than a minute.

Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies.

Steve Jobs speaks openly about DRM here, which is interesting, but he is obviously negotiating with European anti-trust entities in this essay. He presents a proposition that the two major European music companies license their music to him without a DRM requirement. Thats a bit "let them eat cake" I think. I'm sure he thinks the pressure that Europeans might put on those major music companies as a result of this essay will release some of the pressure on him, allowing him to find a better negotiating position.

Unfortunately, with regard to the passage I'm quoting, he's wrong. In order to have a DRM system you have to put the enforcement technology in the hands of all of your users. Those people can reverse engineer that technology, and spread their results via the Internet. DRM encoding systems can be just as blackbox as DRM enforcement systems, and you aren't handing them to as many people, so the idea that you can't tolerate the risk of those encoders being reverse engineered doesn't make any sense. You're already taking the greater risk that the decoders will be reverse engineered, and thats the fundamental crux of DRM. Furthermore, there is no reason why Apple couldn't support another companies DRM technology that already has shared encoders.

Let’s examine the current situation and how we got here, then look at three possible alternatives for the future.

The first alternative is to continue on the current course ...

The second alternative is for Apple to license its FairPlay DRM technology ...

The third alternative is to abolish DRMs entirely.

The problem with this pitch is that he frames the debate in a way that excludes certain business models from the discussion. In particular, he ignores the music-as-service model as implemented by his rival, Real, with Rhapsody (and Rhapsody To Go).

A DRM-free music rental service would be a hard sell to the big four.