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France debates challenge to iPod's strategy

"My gut feeling is that Apple will simply pull out of France if these amendments get through."

Jonathan Arber, a research analyst in London at the technology consultancy Ovum

In the digital music market, France is singing a different tune.

A bill under debate in the French Parliament may require iPods to be able to play music purchased from competing Internet services, not just Apple Computer's own iTunes Music Store, forcing changes in the business model that gave rise to the revolution in legal digital music downloads.

The outcome of the debate, which began as an update to French copyright law, is far from clear. But taken to one logical conclusion, the legislation could lead Apple, the market leader, to leave the French music business, said Jonathan Arber, a research analyst in London at the technology consultancy Ovum.

"My gut feeling is that Apple will simply pull out of France if these amendments get through," Arber said. "Weighed against breaking their business model for all markets, it doesn't make sense for Apple to continue operating with the iPod and iTunes in France."

Debate lasted late into Thursday night; a vote in the National Assembly is set for next week. The bill, which also proposes to turn individual digital piracy into a violation no more serious than a parking ticket, would go next to the Senate, where it is unlikely to be altered significantly, political analysts say.

Some critics say the plan is technically unworkable, unfairly undermines Apple and opens the door to more piracy by crippling technology that protects copyrights. Supporters see France setting a long-overdue legal precedent that opens Apple's closed iPod-iTunes digital music system to competition.

Apple would not comment on the legislation. Led by chief executive Steve Jobs, Apple persuaded the world's major record labels in 2003 to sell songs over the Internet at US$0.99 each through the iTunes Music Store.

But the price of making it inexpensive, easy and attractive for consumers to buy online -- rather than sharing songs on the Internet without compensating record companies or musicians -- was the use of Apple's proprietary formats, making song buyers beholden to Apple and its players, which account for more than 70 percent of all devices sold.

The broad backing of Apple by music industry executives has turned into public and private griping over the company's control over the price of iTunes downloads and the domination of the highly profitable iPod, at what they see as the industry's expense.

The amendments proposed by the government, tacked onto what is being called the author's rights law, originate in part from a European view of the economy that makes it more acceptable there than in the US for governments to order competition in the marketplace for the benefit of consumers.

Renaud Donnedieu de Vabres, the minister of culture, told the Paris newspaper Liberation, "I want to give the Internet world and the cultural industries a secure legal structure to permit a real development -- or even explosion -- of online cultural offerings."

He added, "Everyone will be able to choose."

France is the third-largest digital music market in Europe, after the UK and Germany, according to GfK, a market research company based in Nuremberg, Germany. Downloads in France last year totaled 20 million songs worth US$23.3 million, while 4.7 million digital music players were sold, the company said.

As of Thursday, the copyright bill still had more than 400 amendments, many of them having to do with how devices interoperate. The most prominently affected device would be the iPod, but Sony's Walkman digital music players operate on a similar principle. In both cases, purchased online music can be transferred to the hardware only from a site owned by the same company -- the iTunes Music Store for iPods and Sony Connect for the Walkman. Sony declined to comment.

The development is especially rich in irony for Microsoft, a target of European antitrust action, which licenses its digital music format, called WMA, to any company willing to pay for it. Most non-Apple digital music players, like those produced by Samsung, Creative and Archos, allow WMA songs, while most online music merchants, like Rhapsody from RealNetworks, Music Now from America Online and Napster, sell songs in that format.
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