Vertigo over iTunes

• Article
• Comments ()
• Click-2-Listen

By

The French government's actions this week could end up causing technology giant Apple to pull its popular iPod from French shelves. By a 296-193 vote, French lawmakers moved Tuesday to require Apple and other digital-entertainment companies to make downloadable music files playable on all portable music systems, including those made by Apple's competitors. Currently, users must have an iPod to listen to the files, called iTunes, which feature copy-protection technology exclusive to Apple. The global digital-music business tripled in sales last year to $1.1 billion; "iTunes" sales, which are rocketing in both Europe and the United States, are said to comprise about three-quarters of that total.

The French critics claim that current arrangements give Apple a monopolistic advantage over rivals like Sony and Microsoft. Their law would essentially force Apple to choose between altering its iPod business radically or pulling out of the French market.

Apple fired back Wednesday, saying the law would "result in state-sponsored piracy" because non-iTunes files cannot be protected as verifably as iTunes files, at least in Apple's own judgment. The French interoperability law, they predicted, would create a "culture of piracy" favored by government: "If this happens, legal music sales will plummet just when legitimate alternatives to piracy are winning over customers." No similar challenges have been made elsewhere, so a successful one here would break significantly from past experience.

From a free-market standpoint, the French move looks immediately suspect, but it also points to a problem Apple will need to grapple with down the road: The shift of most media and cultural products in time to digital formats. In the long run, movies, TV shows and a host of other items consumers want will be readily available -- perhaps predominantly so -- via digital downloads. Digital media will eventually compete seriously with cable TV and other industries for the attention of most audiences. It goes without saying that the more competition exists in this market, the more options consumers will have, and the better the outcome will be for all consumers.

What France is doing sends a chilling signal to all innovators with interests in the European market. Battles like these are likely to increase in frequency as more entertainment products are sold on digital platforms. Apple, as much as it is justified in protecting its market share, will need to address them sooner or later.