Resnikoff’s Parting Shot: Interoperability Lost

Interoperability has been a fleeting mirage for the digital music market, and now the situation is getting worse.

The music industry – and in particular major labels – have long painted a vision of seamless interoperability, one that would allow flexibility and hassle-free portability. During a recent CTIA roundtable in Los Angeles, executives from Sony BMG, Warner Music, and Universal Music argued that DRM itself isn’t the problem – it’s the lack of communication between the competing systems themselves. After all, a well-oiled DRM infrastructure goes unnoticed – unless, of course, the user is attempting to steal.


But with the latest news from RealNetworks, and Microsoft before it, that vision is starting to look like a pipe dream. The reason is that each digital music retailer – whether it be Apple, Microsoft, or RealNetworks – has narrow business interests that run contrary to consumer needs. And as the battle for market share gets more intense, so do the usability restrictions related to each service. Now, each company wants to command a tight relationship with the consumer by building an insular, walled garden. And fueling the fire is iPod+iTunes, which is actually winning the game based on a closed, proprietary system! Sure, consumers are mostly stuffing their players with ripped CDs and P2P-downloaded MP3s – which repeated studies have shown – but when they do purchase, they stay within the walls of the iTunes Music Store. Meanwhile, almost every other digital music store is suffering as a result.


Wait…every digital music store is suffering as a result…including iTunes. Why? Because consumers are digitally savvy, and they get smarter and smarter every day. Think it’s just teenagers? Try engaging a relatively non-technical 40+ something buyer, and you will probably get a glimpse of the rising knowledge bar. “I heard that the new Microsoft player won’t work with Apple,” would be a common statement. Sure, the details are often hazy, but that works against the paid download market, and in favor of the iPod. Certainly, other factors like price and selection are also critical parts of the equation, though few would argue that low levels of interoperability are actually helping this market.


And the weeds are now getting positively scary. In a recent interview, a Microsoft executive revealed to Digital Music News that the Microsoft Zune player and store has a unique DRM architecture, one that makes it unfriendly to outside PlaysForSure players and stores. Some things will be compatible, other things won’t, and that’s only on paper! That is bad news for stores like Urge and Napster, as well as player manufacturers like Samsung, Creative, and Rio. Meanwhile, the SanDisk and RealNetworks solution represents yet another incompatibility circle, and a new source of apprehension for buyers.


The increased Balkanization is playing right into the hands of upstarts like eMusic, an all-MP3 digital download service. eMusic has done the legwork to convince independent labels and artists to offer their music in the open format, but it still lacks a blockbuster major label catalog. For that, users have less legal pastures to graze. The increased interoperability mess will continue to fuel an already-strong illegal file-sharing community, one that is becoming increasingly decentralized and underground. Sure, applications like eDonkey 2000 will exit the stage, but the appetite for no-strings-attached MP3s will continue to grow. And remember – the underlying file-sharing networks themselves will remain intact – decentralized, lawless, and without an owner to litigate against.


So, if markets aren’t serving consumers, what about government intervention? France has already tested the waters, though it is doubtful that a magically interconnected web of digital music stores and players will result. If PlaysForSure has problems within its own system, it will probably experience greater glitches when talking to competing systems – and that is assuming that Apple even plays ball. Perhaps entertainment technology is moving too fast for governments to keep a handle on – and so are consumers. And that begs the question – does anyone really need government protection in this realm? Certainly a download-crazy seventeen year-old is okay without it – simply because he or she is the most comfortable animal in this digital jungle. But older consumers are also getting the memo, and learning more and more every day. In the end, their digital intelligence is telling them which systems to sidestep, and which to embrace. And with an increasingly complicated protection landscape comes more red flags, and less incentive to participate in the paid digital music market.