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Friday, June 30, 2006
France to Vote Watered Down iTunes Law

France's parliament is to vote Friday on a draft law which, if passed, could force Apple to make songs on its hugely popular iTunes Music Store compatible with players other than iPods.

But -- after months of pressure from the US technology company -- the law is also expected to include an amendment that might let Apple sidestep the measure and maintain the status quo.

Much rides on the outcome of the French bill's passage.

Other European countries -- Norway, Sweden and Denmark, and possibly soon Finland -- are all considering similar legislation, and there are signs the battle to break Apple's dominant position in the digital music marketplace could spread even further.

Britain's music recording industry is also looking closely at iTunes and thinking about a similar approach to that being taken in France.

The main argument employed is that Apple's use of proprietary encoding that prevents iTunes music being played on any players other than its own wildly successful iPods is anti-consumer and anti-competitive.

Apple eschews the MP3 format widely used for digitising and compressing music on its iTunes Music Store. Instead it opts for another format called AAC (for Advanced Audio Coding) which can be "protected" from piracy -- and which is not licensed to other music player manufacturers.

Allow customers to download iTunes tunes to whatever player they want, the French lawmakers and their supporters say, and legal downloading will increase while the scourge of music piracy shrinks.

To do so, the Dadvsi law, as it is known, would require companies such as Apple to ensure "interoperability", opening their digital rights management technology (the equivalent of software copyright "locks") to competitors.

But Apple has blasted the bill, calling it "state-sponsored piracy" and claiming its pioneering efforts to promote legal downloads through its Music Store will be torpedoed.

There have also been reports that the US company is considering pulling out of France.

In the inevitable debate thrown up on the Internet, many Americans have accused France of simply being jealous that Apple is not French, and taken the view that an innovative company deserves all the profits from a successful product.

A factor complicating that perspective, however, is that Apple essentially operates iTunes as a minimally profitable unit, selling tracks or albums for just a little more than the cost of buying the rights, thus undercutting other online music retailers.

Where Apple makes its money is from iPod sales -- some 40 million are expected to be sold this year, nearly as many as the 50 million that have been sold since the devices were introduced in 2001.

Big recording companies have long been skirmishing with Apple, trying to reverse their weaker negotiating position with a company that has been able to dictate online music pricing because of its dominant market position.

The British technology commentary website The Register said that, if the French law passed, it could "shift the balance of power" in the sector, effectively putting Apple on a back foot. One result then could be higher prices for tracks, as the music companies want.

With the debate now thrown wide open by the French moves, Apple has to contend with a problem that is only likely to grow.

Even if it gains a victory in France, through a modified law allowing "business as usual", its comfortable business model has been set up for a range of direct challenges in the future.

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