In a trial about whether Apple's iTunes was the lynchpin in shutting out competitors and making it harder for consumers to take their music elsewhere, today was Apple's chance to explain what it was doing with its software nearly a decade ago. To do that, Apple's iTunes chief Eddy Cue today spent several hours testifying in an Oakland, California courtroom, mainly trying to explain why the company not only created its own digital rights management (DRM) software, but also why it didn't share it widely with others.
At odds in the case is whether Apple's Fairplay DRM encryption made it harder for consumers to use music software and services other than iTunes. The plaintiffs in the class action suit complain that Apple made its software worse for consumers when it tried to lock out would-be competitors, while Apple says it was necessary to secure digital music files in order to license music from the major record companies, and that any changes were made to improve security of that system.
"We thought about licensing the DRM from beginning."
In testimony today, Cue argued that Apple abhorred DRM, but had to implement it in order to broker deals with record lables that collectively controlled 80 percent of the music market. After investigating existing solutions, Cue says Apple decided to make its own called Fairplay, which it contemplated licensing to other companies. But today Cue said that there were technical issues keeping that from ever happening. "We thought about licensing the DRM from beginning, it was one of the things we thought was the right move that because we can expand the market and grow faster," Cue said. "But we couldn't find a way to do that and have it work reliably."
As issue, Cue said, were things like interoperability with the growing multitude of MP3 players. New devices from other companies would come out, and might not work with that system. "Others tried to do this, and it failed miserably," Cue said. "One of those was Microsoft." Cue also noted that when Apple first floated the idea of the iTunes Store to record labels, that they rebuked the idea because they had their own stores with DRM systems that could be different from song to song, and from device to device.
Fairplay DRM still exists for music
Apple still uses Fairplay, including for music — though not in a way that customers see when downloading something from its store. As Cue explained, the company uses it to secure encrypted music files on its servers, but that it's removed when someone buys a song. It also continues to use Fairplay on apps and ebooks.
Cue's been with Apple since 1989, and is currently in charge of the company's media business, including iTunes and the App Store. That group pulled in $18.06 billion in revenue for Apple during its latest fiscal year, or about 10 percent of the company's total sales. Cue also oversees Apple's advertising and cloud services businesses, Siri, Apple Maps, and more recently its payments platform Apple Pay.
The DRM issue comes into play with the plaintiffs in the case claiming the system locked them in, and actively kept third parties from attempting to open it up. Companies like RealNetworks, makers of the RealPlayer software, and a startup called Navio Systems were designing ways for people to use iPods without iTunes, as well as DRM-protected music from the iTunes Store with other MP3 players. Apple responded by locking down its software to shut those companies out. The plaintiffs say that by doing that, Apple was acting to secure a monopoly by limiting consumer choice.
"We had a time to fix the problem, or they could take all their music off the store."
Apple's own defense of the claims is a bit more complicated. Much of the case hinges on whether updates made to iTunes added new features and improved the software, versus simply attempting to shut out efforts to sync up music to iPods with something else by adjusting its DRM and supporting software. Apple's argument is that it was reacting to efforts to circumvent its security and keep buggy software from interfering with iPods and iTunes versus trying to squash competitors. There were onerous security contracts with the record labels too, Cue said. "If a hack happened, we had to remedy the hack within a certain time period," Cue explained. "We had a time to fix the problem, or they could take all their music off the store ... we’d have to drop whatever we were doing and go work on those [hacks]."
Testimony earlier in the week focused on the inner workings of iTunes, and how the software was designed to keep third-party software from making changes — something Apple views as it simply fixing a vulnerability in its own security system. "I discovered that the system was not very good," said Augustin Farrugia, a senior director of internet security and DRM at Apple, referring to iTunes security, which he was in charge of evaluating after joining the company in early 2005. "I discovered that the system had flaws everywhere ... it was easy to steal content from the iTunes Store."
"It was easy to steal content from the iTunes Store."
Farrugia went into deeper detail during his testimony on Wednesday, saying that the company viewed anyone trying to inject code as an attacker, whether they were a malicious hacker or another company. That prompted probing questions from the plaintiffs' attorney Patrick Coughlin about whether Apple's solution, which involved wiping all the songs from a user's iPod if it detected unauthorized music with DRM then prompting them to resync, could have been implemented better.
Cue indirectly responded to that today, saying that letting other stores and devices into that system would have broken things, and caused headaches for both Apple and consumers. "It wouldn’t work," Cue said. "That integration we created between the three products would start failing, and start having issues ... there’s no way for us to have done that and had the success we had."
The trial is slated to run another six days. The plaintiffs in the case asking for $350 million in damages, something that will ultimately be decided by a jury.