In this article, we will take a look at the background leading into the legal, technical, and social issues that has resulted in this French decision.

In the last couple of years, Apple and others have begun making CMF available on the Internet for about a dollar each. Now that the compressed online music business has heated up, let’s take a closer look at compressed music and what it has to offer the average consumer. Apple has made CMF into a legitimate businessUntil now, the compressed music business has been limited to techno-dweeb teenagers and music pirates.

Of interest to us is the fact that while there is more than one format for compressed music, the MP3 format is the most commonly used and is the format that Apple chose to provide to their customers. The MP3 format has been around for several years, and since then, about a half dozen or so alternate formats have emerged. Most notably, Microsoft has offered the WMA format which has perceptibly better sound quality when compressed to even smaller files when compared to MP3. Of course, compressed music can never sound as good as the original uncompressed music audio CDs.

Looking back at the history of recorded music, perhaps a few of us remember the early days of LP records. Back then, there were no computers, no Internet, and of course no audio CDs. You bought what the recording studios offered, or you enjoyed the silence. One important point to note is that back in the days of 33RPM/LP records, you could also buy smaller 45s with one or two hits for a much lower price. That practice effectively protected consumers from having to buy entire LPs full of songs when you really only wanted one or two. How many times have you purchased a music CD and were disappointed to find that you only liked to listen to one or two songs on the CD?

Without getting into too much detail, it is important to note that according to the music industry, the vast majority of the purchase price of your music goes to the music industry, the store where you bought it, and the manufacturing of the disk and packaging, not to the musicians.

Enter the modern digital age, complete with computers, the Internet, and CD burning disk drives. Now, music consumers with some tech savy are able to transfer the uncompressed audio files on their commercially produced audio CDs to the storage device on their personal computer. The original CD and packaging become unimportant at this point.

The digital music files can be played on the computer, written on an inexpensive blank CD to be played on any DVD or CD player, or compressed to an alternate format to be played on portable music players (PMP) or DVD players.

When compressing the digital music files, the size of the file is significantly reduced, so that about 10 times the amount of music will fit in the space of what uncompressed digital audio files would take. As an example, the typical audio CD of 700MB holds about 70 minutes of music, which is why only one album will fit on one CD. In contrast, about ten different albums of CMF will fit on the same size CD.

PMPs need to use CMFs to play music. In the current marketplace, it turns out the the Apple IPod accounts for the majority of PMP sales primarily because Apple was the first company to bring a good product to market. The iPod is small, well-built, and amazingly easy to use. Apple’s Internet website makes it easy for consumers to purchase individual songs for about $1 each, that are easily loaded into the owners’ IPod. Nice job Apple!

However, PMPs are at an early stage of their market development and there are other players for less money that are rapidly eroding Apple’s market share. Until recently, the songs that Apple makes available on their website would play on virtually any player on the market. So Apple has decided to shoot themselves in the foot. Apple recently announced that the files they sell on their Internet site will only play on their IPod product. To make matters worse, each file will only play on the first IPod it is loaded into, and won’t play on any others after that.

It is clear to those with a rearview mirror that Apple never learned from the mistake they made back when they released their revolutionary Macintosh. Up until that time, Apple’s fantastically successful Apple II was the leader and quite a profit maker for the young company. The Apple II was what we in the computer business call “open” architecture, which means that the computer would accept modifications from third parties such as high-end video, enhanced sound systems, and third party software. In 1981, the IBM PC was introduced, and similarly used an open architecture. The IBM-PC was initially slow to gain traction in the emerging personal computer market.

Then, in 1984, Apple introduced the revolutionary closed architecture MacIntosh. Consequently, this strategy relied on Apple to develop features and products to enhance the computer. As a consequence, the cost of the software and hardware was significantly higher than open architecture competitors such as the IBM product. Despite the fact that the MacIntosh was easier to use and offered superior graphics, it failed to keep pace with the soaring success of the IBM product. Apple did not reverse their mistake and is now left with the insignificant market share of about 5% of personal computers sold.

Apple is now making the same mistake that caused their computer business to fail back in the 1980s. They are taking a successful music marketing business and making it a “closed” system. Indeed, Apple is trying the same strategy of failure that they used with the McIntosh. Apple can look forward to a steadily declining market share, and eventually they will be forced to drop the online MP3 enterprise when it proves to be unprofitable. The French ruling, while I disagree with the essence, does deal an initial financial blow to Apple, that could be described as the first nail in the ITunes coffin. My personal feeling is that if Apple wants to shoot itself in the foot, why should any government try to prevent this?

While the music industry views compressed music as a threat to their business, I view compressed music as a consumer response to many years of heavy-handed music industry profit-driven business practices. For years, music consumers have been forced to buy over-priced CDs, typically with half the available space unused, and often with one or two songs of interest. You might also think of it as the consumer has outsourced the record labels!

The positive view is that the iTunes website offers individual songs which allows consumers to cherry pick the songs they like, enabling consumers to buy only those songs they want to hear. One downside to the iTunes website is that the song content is sold at about the same price that consumers used to pay without the content, packaging, and artwork they previously paid for a music CD. The music companies can just pocket the difference. And don't forget the CMF from Apple only plays on an iPod. After more time passes, the price for the Internet obtained music will go way down, eventually to about a dime a song. This will make it easier for lesser-known artists to offer their work without the obsolete overhead and control by the recording industry middlemen.
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