Picker: iTunes Again

So a number of posts and comments need responses; I think that I will do that in sort of briefish chunks so that people can read what they want to read.

Let me start with the continuing dispute Tim and I are having about iTunes—I feel as if we are back in our joint Spring innovation seminar where the disagreements were frequent and lively (how nice!)—and that will get us to some useful issues about business and product definition.

So Tim suggests that iTunes might “be accused of facilitating illegal sharing as between its customers.” I have to know more about the product (I listen to music the new old-fashioned way: I buy CDs at Amazon and rip them to my laptop with Windows Media player).

So Apple describes sharing on iTunes as about sharing your iMix. As I understand the iIdea, this is straightforward: I put up a list of songs that I like, I let you know, and you can click and buy. This is exactly the viral marketing approach that we should expect, but doesn’t copy anything, and therefore shouldn’t raise copyright issues.

This is not sharing or copying of music. I gather that Apple had enabled broader sharing of actual music, but backed away from that.

And I think wisely, even had they known about the new Grokster ruling. So Tim is right to say—and Ed Felten also has a post on this—that Grokster is about business models. The Supreme Court goes to B-School. (And Brand X looks a bit that way with its discussion of the choices made in how broadband is sold to the public.)

The core idea of iTunes is straightforward: sell music to the public. Businesses have been doing that since wax cylinders, and that business-model has been media-neutral, all the way from LPs to 8-tracks and cassettes to CDs and now online.

Tim, is the facilitation here that the music comes in digital form and that that is easy to email to someone else? Again, presumably Apple’s contracts with the copyright holders address the legitimacy of iTunes. Apple isn’t distributing content without consent, so I am not understanding who would bring this pre-new Grokster suit against Apple.

Now to business model and product definition. Put to one side the consent issue just discussed: suppose iTunes is selling music, but that Apple allowed customers to “share” music with friends (again the copyright holders could consent to that, but ignore that possibility).

That version of iTunes would bundle together a fully-legit business model—sales of songs—with a feature that facilitated infringement. Is this inducement under Grokster?

One reading of Grokster is that the business model test is a necessity test: if the facilitation of the infringement is necessary to make the business model work, you will probably be found to be an inducer. Tim, do I read you as saying that (“it says you cannot run a business whose revenue model is premised on encouraging illegal acts”)? (I like your unfair competition characterization.)

I agree in that I think Grokster goes at least that far, but I think my revised—originally actual/now actual?—version of iTunes is a more interesting case. The sharing feature in the revised iTunes probably isn’t necessary to run the business—offline music has done fine without it—but it could easily add incremental revenue.

If the Grokster business model test is about necessity, the revised iTunes would be fine.

But that doesn’t make sense. The example makes clear that there is frequently a fundamental arbitrariness about product and business definition. In the revised version, Apple would have chosen to add the sharing feature—and independent of what the internal emails at Apple would say post-Grokster—it would be hard to understand the sharing feature as being about anything other than helping the business through copyright infringement.

That feature wouldn’t get pass Grokster on a standalone basis—that is Grokster after all—and shouldn’t do better merely because it is bundled with a legitimate business model of selling music online.

Comments

[Roger Ford]

iTunes is several things. First, iTunes is an application that lets you play MP3s and rip CDs to mp3 (or AAC or WAV) so you can play them on your computer without the CD. This is much like Windows Media Player and WinAmp and any of a number of other programs.

Second, iTunes lets you stream music that is on one computer to play it on another computer. A copy is not made; the two have to be on the same local network at the same time. (There are workarounds that let you write the music to disk. Apple keeps defeating them and they keep coming back.) This is much like Internet radio, except it's local and it's a "pull" technology, meaning I have to decide what songs I want rather than listening to what the radio station sends me. This is limited to two computers on the same subnet (typically, same building). This was briefly not true, but Apple closed the loophole.

Third, there's the iTunes Music Store (iTMS), which is Apple's paid service. Here you pay a buck, you get a song. The song is not sharable except to the extent you burn it to CD (which is allowed) or defeat Apple's DRM scheme (which can be done, but is of course illegal). There's no other sharing aspect. You can create what's called an iMix in the iTMS, which shows songs you recommend that fit a category or whatever, but the only way to access those songs is to purchase them from Apple.

In short, while iTunes is a competitor to file sharing systems in that it's another way to download music on the Internet, it's not by the remotest stretch of the imagination any sort of file-sharing system. There might be a claim under Grokster against Apple for selling the iPod, or for distributing iTunes for the simple fact that it plays MP3 files, but otherwise it's architectually like selling CDs, not Kazaa or Grokster.