The Register’s Andrew Orlowski reports here that iTunes “has experienced a collapse in sales revenues this year.” Forrester Research’s analysis of credit card transactions shows that since January 2006 iTunes’ average transaction size and monthly revenue have declined respectively by 17% and 65%. Orlowski also reports that revenue is flat across the entire digital download sector. Orlowski attributes much of the blame to low consumer interest in music encrypted with digital rights management when pirated music is freely available. As an alternative to DRM music he points to discussions in the UK about blanket licenses under which consumers might pay a flat fee, perhaps as part of a broadband subscription service. Under such a scheme consumers would obtain the right to download and share music free of restrictive digital rights management and copyright infringement liability, and the collected fees would be allocated among artists and the recording industry.
The issues raised go beyond iTunes’ fate. If the iTunes business model does not work then the recording, television, and motion picture industries must adopt another. I cannot imagine these industries embracing a model in the U.S. that does not include digital rights management as a security blanket. Fighting piracy by allowing users to download and share freely, even after paying to do so, would require a seismic transformation in industry attitudes. It would be similar to the transformation required to fight the drug trade by legalizing drugs and selling them through state-regulated-and-taxed channels. The question is, how badly broken must the business models become for these industries to make the U-turn from “sharing copyrighted material equals theft” to “pay the man and share as much as you like!”?