1) Continue the status quo, with competing schemes from Apple, Microsoft and Sony.
2) License FairPlay (the Apple DRM scheme) and cede control over that proprietary encryption scheme.
3) Abolish DRM entirely. In such a world, "any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat."
What's the best direction? It's hard to see the major multinationals releasing their content in the way Steve describes in his utopian vision, though I cautiously agree that open formats would be in the best interests of both artists and consumers alike.
I thought the following facts were, if true, somewhat staggering, though of course he had asserted as much beofre in the keynote when he announced the iPhone. What follows the iPod sales numbers and purchases, however, is a much more interesting revelation:
Through the end of 2006, customers purchased a total of 90 million iPods and 2 billion songs from the iTunes store. On average, that’s 22 songs purchased from the iTunes store for each iPod ever sold.
Today’s most popular iPod holds 1000 songs, and research tells us that the average iPod is nearly full. This means that only 22 out of 1000 songs, or under 3% of the music on the average iPod, is purchased from the iTunes store and protected with a DRM. The remaining 97% of the music is unprotected and playable on any player that can play the open formats.
I can say that's anecdotally true. The vast majority of music in my collection is from the CDs, tapes, mixes, burned CD-Rs and LPs that previously constituted (and still do, to be fair) the bulk of my music collection before the iTunes store ever entered the picture. These days, on the Nano at least, most of the space is full of podcasts.