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Steve Jobs doesn’t care if you have DRM-Free music.

Since I have been able to do nothing in the last few weeks without running into something about DRM, I’ve decided to do a How To Guide to Why Steve Jobs Doesn’t Give a Flip about you and your music. I’m still working on the title.

An iPod a Day…

Apple Computers is a company in the business of increasing stockholder value. In order to do that they must generate as much revenue as possible. How does a company like Apple generate revenue? It sells large amounts of a product with a relatively high margin. Now, for the next part of this discussion I present you with a graph.

Lets look at 2006 for an instance. As you can see, iTunes generated about 100 Million downloads, this does not include those that were downloaded through promotions or other freebies. In that same year, about 40 Million iPods were sold. For ease of calculation lets say Apple makes 50 cents off of each of the songs sold (which is downright impossible with the music labels breathing down their necks) and lets assume for a moment that they make about $10 on each iPod sold (it is probably substantially more than that). In this world, iPods are responsible for $400 M worth of revenue whereas music has only generated $50 M.

Do you see the problem here?

Apple and Mr. Jobs are trying to maximize revenue, the best way to do that is to sell as many iPods as possible. The iTunes music store is very little more than “value added” in the scheme of things. Apple is in the business of pushing iPods. Thus, other than ideology (which is completely irrelevant in this situation) there is absolutely no reason for Steve to think twice about what his music store is shilling this week. It’s a blip on the rader at best, an annoying distraction at worse.

What is Music Then?

Music is a grand PR stunt. Take a look at some recent headlines about Mr. Jobs courtesy of Google:

• Steve Jobs Asks Record Labels To Abolish Music DRM
• Will Steve Jobs drop iTunes DRM in a heartbeat?
• Steve Jobs versus the Big 4

Needless to say, it goes on like this for quite some time. Steve has found a way to position Apple as an underdog fighting against the big, bad RIAA. By opening up a challenge to the labels, he has placed his company squarely on the side of the demographic that typically bashes iTunes for supporting DRM. By easing some of the bruised egos and hurt feelings of his target demographic, I bet he managed to sell a few more iPods.

Why None of This Matters

Take a look at the news recently, if you don’t want to let me summarize it quickly:

EMI is planning on releasing DRM Free music.
Amazon music store, 12,000 labels strong, is planning on releasing its music DRM Free.
We7 has been launched, offering DRM free tracks with advertising stuck onto the front end.

The pattern is clear and if nothing else we must say that Steve Jobs ability to analyze a market has not failed him. It is very difficult for me to believe that someone as savvy as Mr. Jobs failed to see that the industry, at least the portions of the industry that really mattered to him, were trending towards the removal of DRM. With the RIAA’s stormtroopers busy suing children and dead people, it is becoming difficult to stand out against DRM and not look a bit silly. It has never been about whose side you are on, it has always about whose on your side, and in this case Steve has been hanging out with the biggest playground bully of the bunch.

Thus, more than a heartfelt polemic against the obvious inequity of limiting a customers ability to use the products that they have rightfully purchased, it is much more likely that this sudden change of heart was little more than public relations.

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For every person who owns an iPod, about 20 songs are purchased from iTunes music store. This means that for $300 worth of hardware, people are on average buying $10 worth of software. Even if the growth of music sales were to increase ten fold, these numbers just don’t equate.

Now don’t get me wrong, trying to maximize shareholder value is the nature of business. Just because someone has successfully done this, does not mean that we should get up in arms about the idea. However, when a PR tactic is drawing as much praise as this one has, it’s worthy of deeper analysis.Thus, before you go out and praise Steve Jobs for standing up for the little guy, take a second to change the track on your iPod and think more about why he would do it.