I fail to see how DRM-interoperability solves the major labels’ problems.

So, open up the DRM and you can listen to tracks purchased at the iTunes Music Store on competitive hand-helds.  This could erode iPod dominance.  Then again, maybe not.  Is that really what’s selling the iPod, iTMS compatibility?  Sure, it might make someone think twice about buying a Creative or SanDisk product, but you’re STILL confronted with a design-challenged item, which doesn’t work with iTunes.  Meaning transferring tracks is no longer seamless, no matter where you buy them.  Sure, Fairplay incentivizes one to buy an iPod, but the main reason people buy iPods is they’re the BEST.  The best designed, the easiest to use, the most problem free (in terms of transferability and usability, not LONGEVITY!)  Most people fill their iPods and Samsungs and Sonys with product stolen or ripped from CD, the fact that iTunes-purchased tracks aren’t compatible with non-Apple products is barely relevant.

But let’s say the playing field is leveled.  That Apple is forced to open up Fairplay (assuming they don’t pull out of France).  You don’t have a label field day, nothing close, because of wholesale PRICE!

The labels are pissed that they can’t raise the price at the iTMS.  Thinking that Apple is being hard-headed, and if they could just charge as much for a track as Verizon charges for a ringtone, they’d be in economic heaven.  Only one thing, full tracks are to ringtones as apples are to oranges.  Music is something YOU listen to.  Ringtones are something OTHER PEOPLE LISTEN TO!  They’re badges of identity.  You only buy a couple.  To show others where you’re at.  Whereas a music library should be composed of MANY tracks.  THOUSANDS if the price was cheap enough.  And, actually, it already is.  Music is free.  So, to increase revenue, one must LOWER the price, getting closer to FREE, not RAISE IT!

Then there’s the feeling that Apple needs competition.

If Napster is changing its strategy, depending on advertising, if no one can compete with the Cupertino behemoth, is it REALLY about DRM?

But even if it is, is the pot going to increase?  Or is the wealth just going to be spread amongst many companies, instead of just Apple?  Hurting Apple a tiny bit.  Since really, the money is in iPods.  And so far, none of its competitors sell hardware (except for Sony, whose Connect and players are a TOTAL joke).  To stay in business, you need to MAKE money.  How in the hell are Apple’s competitors gonna make money at close to seventy cents wholesale?  Oh, if they RAISE the price (assuming the labels don’t raise THEIRS concomitantly) they end up with a larger margin.  But Apple doesn’t have to do this, making money off of iPods, and devastates them.

Usually competition drives down prices.  But with wholesale close to seventy cents and retail ninety nine cents, and infrastructure costs in between, there’s no room to lower the price and still make money.  So, maybe music ends up a loss leader, for big sites like Yahoo and Google, just like it is in the physical world with Best Buy and Circuit City.  I ask you, how well has this worked out for the labels?  A product the retailer doesn’t respect, that he GIVES away.  Doing so much volume that HE dictates the wholesale price.  God, makes Apple look GOOD!  Like the labels’ best friend.

The labels’ problem will only be solved when prices go down and DRM evaporates.  When free isn’t worth it.  Or when free is monetized, a la licensed P2P.  The labels want to keep throttling their business, squeezing their partners and raising the price on fewer and fewer sold tracks.  It’s INSANE business policy.