In videotaped deposition, Steve Jobs talks DRM and dealing with record labels
Six months before he passed away, Steve Jobs sat down for a videotaped deposition to answer questions connected to Apple's ongoing iPod antitrust class action lawsuit. The lawsuit alleges that Apple improperly enacted measures to render songs downloaded from competing music services unplayable on the iPod. In doing so, the plaintiffs allege that Apple was able to keep iPod pricing higher than it would have ordinarily been otherwise.
This past Friday, video footage from Jobs' deposition was played before the court and CNET was there to recap some of the more interesting exchanges.
Jobs' take on the matter aligns with what Eddy Cue articulated on the stand earlier last week, namely that the fear of piracy amongst record labels resulted in fairly strict contracts that required DRM to be an integral part of the iTunes/iPod ecosystem.
According to Jobs, Apple's contracts with record labels were "black and white." Jobs explained that the contracts, in addition to stipulating that songs needed to be laden with DRM, specified that if Apple's DRM (called FairPlay) was broken or hacked, the record labels could immediately remove their music from iTunes. No questions asked.
So when RealNetworks came around in 2004 and reverse engineered FairPlay, thereby enabling music purchased on the RealPlayer Music Store to work on the iPod, Apple took immediate notice and subsequent action.
Jobs was also asked about the efforts of competing digital music stores like RealNetworks, a company that developed software called Harmony that would reverse engineer Apple's FairPlay to let iPod owners put RealNetworks' music on their devices. Through iTunes updates, Apple continuously broke Harmony, an action plaintiffs say was anticompetitive because it degraded the consumer experience and was an example of Apple wielding a monopolistic position in the market. Jobs response? Harmony was undermining Apple's end-to-end product ecosystem.
"We were very concerned with somebody like Real [Networks] promising customers that they would have compatibility, when in the future they might not," he said. "That's not something we could guarantee. So we could get sued by all these people."
Jobs' testimony paints a picture of stringent contracts with record labels that Apple was extremely vigilant about upholding, lest the crown jewel that was the iTunes Music Store suffer an immediate blow to its song library.
"There are lots of hackers trying to hack into these things so that they can do things that would put us in noncompliance with the contracts we have with the music companies," Jobs explained. "We were very scared of that."
The resulting impact on competing music services is something Jobs alluded to as "collateral damage."
All told, the plaintiffs at large are seeking US$350 million in damages. Whether or not the trial will reach a conclusion, though, hangs in the balance. This past Friday Apple filed a motion to dismiss the case altogether after discovering that the two named plaintiffs did not purchase iPods during the relevant time period of the case.
A ruling on that motion is likely to be handed down soon.
