Apple's Copy Protection Isn't the Problem

Apple's DRM has benefited the public and the music industry. It was Apple's technology platform that convinced the music industry to sell music and videos online. The iPod and its FairPlay DRM created a legal digital music market where none had existed before. While the iPod eco-system isn't without its problems, it's clear that Apple and its DRM have done some good.

Doctorow seems unwilling to concede that point in noting that FairPlay was hailed as "balanced." His use of quotation marks is consistent with his apparent position that no DRM is good. Still, he differentiates FairPlay from more restrictive systems backed by Sony, Toshiba, and Microsoft and grudgingly gives iTunes credit for winning over consumers. He even acknowledges that FairPlay can be circumvented:

Removing iTunes's DRM is pretty straightforward. It's time-consuming, but it's not too difficult.

How bad can Apple's DRM really be if it can be removed with relative ease? The answer is not very.

Like Doctorow, I dislike DRM. In fact, I own an iPod and all but two of the files on it are DRM-free MP3 files that I loaded from my collection of CDs. I've never purchased a song from the iTunes Music Store and I don't plan to.

I don't like DRM but I can tolerate it as long as it's optional. Really, a better term for Apple's FairPlay would be DCD -- digital copy deterrence -- but the world hardly needs another acronym.

A bigger bite of Apple

Apple's fiscal year ends in September, so our analysis will be for a six-year growth rate from that starting point. Our capital-asset-pricing model's inputs are beta, a measure of expected volatility in a moving market; a price-to-earnings (P/E) ratio of some flavor, and the most recent estimate projection. Since beta should be unaffected by an earnings announcement, we'll use the historical beta of 1.58.

Reuters Estimates says that 16 of the 23 analysts who cover the computer company updated or reiterated their per-share earnings estimates on Thursday. Taking a simple average of only the 16 post-announcement estimates, the unofficial consensus 2006 earnings estimate is $2.15 a share, with the highest projection for $2.26 and the lowest for $2.11; our analysis, then, will use $2.15 a share as our baseline.

School's Out for Apple

The company has ceased selling the $900 version of its iMac computer to individual customers just one week after announcing the new system.

Apple spokeswoman Teresa Weaver declined to explain why the company decided to stop selling the cut-rate computer to individual students and teachers -- and declined even to acknowledge that the company had changed its policy. However, Apple clearly advertised the $900 iMac in its store for individual education customers last week when it announced the new machine.