More to EMI-Apple Pact for Unprotected Music

EMI has finally agreed to let Apple distribute unprotected digital music. Apple's CEO Steve Jobs has been publicly vocal about the need for the music labels to pull their heads out of whatever beach sand they inhabit and face reality. But there is at least a second force at work: patent licensing of audio compression.

All digital sound that you'll find on the Internet is compressed, so the files take up less space and transmit faster. The major format had been MP3, whch is actually a spin-off from a type of video compression. However, Apple for various reasons (including an easier time protecting content from users who might choose to swap files) decided on chose to use ACC.

There is a significant difference between the two formats in their licensing terms. Companies distributing audio in MP3 format must pay royalties. That isn't true for ACC. And devices that play the files must pay royalties for either MP3 or ACC.

Apple and EMI (and, presumably, other labels going forward) have just demonstrated a brilliant competitive use of intellectual property. By making ACC more attractive, the labels help move the market to a format that will reduce their costs and, obviously, increase their profits. As the labels move, virtually all the other player manufacturers will have to support ACC, which ensures that they are paying the same number of royalties as Apple, leveling the playing field in manufacturing costs. Yes, a number of manufacturers already have added ACC support, but this would become the nail in the coffin. And the relationships help cement Apple's position at the forefront of mobile music. What really brings a smile to my lips is the thought that they managed all this through smart use of IP that neither Apple nor the labels owns. Instead of Other People's Money, or OPM, maybe we should talk about OPT - Other People's Technology.