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Apple's iPod Faces Battles In Europe

Apple's iPod and iTunes may be selling well in Europe, but that's not stopping the governments of the EU from attacking the company over the lock between iTunes and the iPod.

The Cupertino, CA computer company announced just this week that it has sold more than 200 million songs through its European iTunes Music Stores in just over two years. The iTunes music catalog now includes more than three million songs and represents 17 European countries.

Obviously many Europeans love their iPod, it's certain members of the French, Norwegian, Swedish and Danish governments that don't. France was considering what became known as "The iPod law," which would have forced Apple to license its FairPlay DRM for competing devices and services so as to break the lock between iTunes and iPod.

Eventually, the "DRM neutrality" provision was watered down significantly, so a company cannot be forced to license their DRM without compensation. The law was passed and signed this week.

The Scandinavian countries have been much more militant than the French, going so far as to suggest they would ban the iPod from their countries. Apple  has been in negotiations to keep the vikings at bay, although it's keeping its arguments under wraps. Apple didn't respond to repeated requests by internetnews.com for comment. The company sent in a 50-page response to the three Nordic nations earlier this week, but requested the contents not be made public.

For now Apple, presumably, is being diplomatic and trying to work things out. But CEO Steve Jobs doesn't take kindly to being told what to do. So, will this force Apple's hand and make it end its lock between the iPod and iTunes, or is this the end of the iPod in Europe? No way on the former, but opinion is split on the latter.

"iTunes has never been about Apple selling media. iTunes has always been about helping Apple sell more hardware. It's never been about razors and blades, it's always been about selling more iPod devices," said Susan Kevorkian, program manager for audio consumer markets at IDC.

She doesn't believe Apple would break the connection between iTunes and the iPod, and that leaving Europe is highly unlikely.

"For Apple, pulling out of a country would be a last resort, particularly the EU, because those countries are paying close attention to what's happening. They would have to be careful how to respond to one country because there could be a domino effect with the other countries," she said.

However, Roger Kay, president of Endpoint Technologies, who follows the handheld device market, thinks withdrawing from those markets would be preferable for Apple. "They don't gain anything opening up the format. It's a hardware business, and if they can't promote the sale of hardware through the [iTunes] business, well, why bother?"

Apple can argue that iTunes is not a truly closed system, that it is possible to convert the downloaded music files to a generic MP3 format and use them elsewhere, said Kevorkian. Conversely, the iPod can play any MP3 file, not just music from iTunes.

The Scandinavian countries seem to be holding a lot faster than France did, and Kay noticed parallels between this and Microsoft's ongoing EU legal battles.

"The objection appears to be if a single firm controls what they view as a public good, then they don't take kindly to it. That's where their view of ownership differs from the United States.

"I think they're going to play chicken," Kay continued. "It will be between the company and legislatures and some of them are ideologically committed. If you assume everyone's going to play hardball, that's probably where it'll end," he said.

The question then becomes would there be consumer anger at their elected officials for driving the iPod out of their country, he added.



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