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Steve Jobs' 2011 testimony in Apple DRM lawsuit points finger at music labels

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Apple's late CEO says rival companies were 'collateral damage'

Whether Apple's security measures for iTunes and iPods were designed to actively shut out competitors, or simply keep record labels happy, is one of the key questions in a trial that could have Apple on the hook for $350 million. Today, Apple continued to make the case that it was fulfilling agreements it made with record labels to patch security holes, versus trying to squash competitors that wanted to create music stores of their own. That was aided by testimony from Apple's head of iTunes software, and incidentally by segments of a deposition of late Apple CEO Steve Jobs filmed months before his death in 2011.

"We had pretty much black and white contracts with the labels."

The plaintiffs in the case brought out the never-before-seen video deposition of Jobs to help paint Apple as a giant. That plays to the complaint that Apple was using its dominance in the MP3 player and music markets in the mid-2000s to squash competitors including RealNetworks and Navio Systems, which at the time were working on ways to get around Apple's digital rights management software. One segment that was shown has Jobs noting that Apple had the "deepest pockets," of any company, and was the biggest of any involved in the space.

But the video clips also included Jobs explaining that Apple was required to implement its Fairplay DRM software in iTunes and on iPods primarily because of its deals with record companies, something that's become the company's defensive narrative. Jobs says that any changes Apple made were because of "black and white" deals it had with the labels. In particular, Jobs says the company "went to great pains" to make sure people couldn't hack its system:

I think as best as I can recall, my point of view — and Apple's point of view — we were the only big company involved in this stuff at this time, the one with the deepest pockets. And we had pretty much black and white contracts with the labels that people violated the digital rights management system, on iTunes or on the iPod, and they allowed music to be taken off the iPod as an example and put on somebody else's computer. That would be in clear violation of the licenses they'd have in the labels, and they could cease giving us music at any time. I remember we were very concerned about that. And we went to great pains to make sure that people couldn't hack into our digital rights management system because if they could, we would get nasty emails from the labels threatening us that they were going to yank the license.

A little later in the interview, Jobs noted that "lots of hackers" were trying to break through Apple's security, making security a "moving target."

There are lots of hackers trying to hack into these things, so they can do things that would put us in non-compliance with the contracts we have with the music companies, and we were very scared of that. So we would constantly be revving the iTunes and iPod software, closing any holes that might be in it, or any problems it might have. And so this was a moving target. And anybody trying to keep up with that moving target would probably have a hard time doing it, and so we were very concerned with you know, somebody like real promising they would have compatibility when in the future they might not, and that’s not something we could guaranteed, we could get sued by all these people.

Jobs then says that any competitors that got locked out by changes in security were "collateral damage," adding that Apple did not want the onus of trying to work with third-party companies in order to get their systems to work with the closed security they'd come up with.

"They're trying to hijack the iPod."

But the plaintiffs argue that Apple's updates to iTunes were not beneficial to users and somehow illegitimate. Instead of adding new features, they say, it was simply shutting others out. Jeff Robbin, Apple's current vice president of iTunes engineering, argued just the reverse while on the stand earlier today, saying companies like RealNetworks were aggressively trying to change how its software and devices worked with their solutions, something that would ultimately end up being worse for consumers.

"We had hack after hack after hack," Robbin said. He referred to what RealNetworks did with its Harmony software as one such effort. It allowed users to sync and play songs they've purchased from RealNetworks on an iPod made by Apple. "They're trying to hijack the iPod," Robbin said, pointing to a behavior where RealPlayer's software prompted users to select an option that would automatically launch its jukebox software instead of Apple's when people plugged their iPod into their computer. "It means that the iPod is stuck in time," Robbins said. "It's no longer going to be updated."

"It means that the iPod is stuck in time."

Apple's Eddy Cue, who heads the iTunes and cloud services groups, and marketing chief Phil Schiller made similar statements yesterday, saying that the changes the company made to lock out third-parties from its software were intended to keep hackers at bay. That wasn't just for competitors, Cue said, but to keep record labels from pulling out of the entire enterprise. He described a veritable countdown timer that would begin between when a hack was discovered and when the company was required to fix it. If it didn't do it in time, Cue said, the record labels could yank their songs from the iTunes Store and kill off the business. In his testimony, Schiller compared trying to add other DRM schemes to iPods as adding a second steering wheel to a car. "You can’t have two people driving it, because it will crash up," he said.

Critics, including the plaintiffs in the case, view Apple's changes as monopolistic, saying that it made these changes to maintain its dominance in both the MP3 player and online music space. The complaint argues that these changes to the DRM specifically targeted people who might want to take their music libraries elsewhere, or use a non-Apple device with iTunes, and that it was able to sell at higher prices because of this. Apple's counterargument has been that other large companies like Microsoft tried to create a DRM standard that worked with third-party devices and failed, ultimately adopting a similarly closed system with the Zune.

The trial continues into next week, though Apple filed a motion earlier today to get the entire case thrown out on claims that the one remaining plaintiff representing the class of roughly 8 million customers did not actually purchase an affected iPod. The plaintiffs have since responded by filing to add a new person to represent those customers, something that's expected to be sorted out next week.