Apple's Eddy Cue says early success of iPod, iTunes hinged on DRM

Testifying in an antitrust lawsuit on Thursday, Apple SVP of Internet Software and Services Eddy Cue said the initial success of iPod and iTunes was reliant on digital rights management due to an onslaught of attempts from hackers to crack the ecosystem.

During his hours-long testimony, Cue made constant use of the terms "hack" and "hacker" to drive home the notion that DRM was a necessary tool in keeping music labels on board with iTunes.

"All these other guys that tried the approach of trying to be open failed because it broke," Cue said, according to in-court reports from CNET. "There's no way for us to have done that and have the success that we had."

Cue offered new insight on Apple's deals with record labels, saying, "If a hack happened, we had to remedy that hack within a certain time period or they [the labels] would remove all their music from the store."

Apple is accused of inventing a monopoly between 2006 and 2009 with its closed iPod-iTunes ecosystem protected by FairPlay DRM, which in turn allowed the company to sell iPods at inflated prices, harming consumers. In court yesterday, attorneys for the plaintiffs claimed Apple intentionally deleted music from users' iPods if the content was purchased through competing digital stores.

Apple has taken the stance that DRM was the only way to keep iTunes protected from hackers, characterizing it as a necessary evil.

"Steve was mighty upset with me and the team whenever we got hacked," Cue said, referring to late Apple cofounder Steve Jobs.

On Tuesday, emails and a videotaped testimony from Jobs revealed Apple was "very scared" of running afoul of its precarious music label contract terms. Jobs touched upon a lynchpin issue during his deposition, saying frequent iTunes updates were rolled out as "hackers" found new workarounds.

A main contention in the case is that Apple updated its iTunes software to stop users from playing back songs from competing music stores, specifically RealNetworks' RealPlayer storefront. RealNetworks rolled out Harmony, which effectively bypassed FairPlay, but the technology was subsequently broken with the iTunes 7.0 update. Apple maintains its software upgrades were of real value to customers.

According to a separate report from The Verge, Cue said Apple was opposed to a DRM lockout, but had to implement it to appease large music labels, themselves afraid of losing money on pirated, illegally distributed content.

"We thought about licensing the DRM from beginning [...] but we couldn't find a way to do that and have it work reliably." - Apple SVP of Internet Software and Services Eddy Cue

"We thought about licensing the DRM from beginning, it was one of the things we thought was the right move that because we can expand the market and grow faster," Cue said. "But we couldn't find a way to do that and have it work reliably."

When asked if there was any way for iPod owners to get non-iTunes music on their devices, Cue mentioned a tried-and-true method most iTunes users in 2004 likely have employed, or at least known was an option.

"You could take the songs you bought in another store and burn them onto a CD and then rip them back into any device or music player you wanted," Cue said.

The class includes individuals and businesses who bought iPod classic, iPod shuffle, iPod touch or iPod nano models between Sept. 12, 2006 and March 31, 2009, and plaintiffs are seeking $350 million in damages, an amount that could be tripled to over $1 billion under U.S. antitrust laws. Trial proceedings are scheduled to continue into next week, with upcoming testimony expected from Apple marketing chief Phil Schiller.