French Lawmakers Soften ITunes Proposal

The Associated Press
Thursday, June 22, 2006; 7:35 PM

PARIS -- Leading French lawmakers voted Thursday to water down a draft copyright law that could force Apple Computer Inc. to make its iPod music player and iTunes online store compatible with rivals' offerings.

Currently, music bought on Apple iTunes can be played only on iPods, and an iPod can't play songs purchased from rival stores, such as Sony Corp.'s Connect. Critics have called the restrictions anti-competitive and anti-consumer, but the lock-in is a key part of the companies' business models.

The National Assembly, France's lower house, voted in March to force companies like Apple and Sony to abandon their closed approaches and hand over exclusive copy-protection technologies to any rival that wants to offer compatible music players and online stores.

While the compromise adopted Thursday still asserts that companies should share the technical data essential to such "interoperability," it tones down many of the tougher measures backed by the lower house.

It also maintains a loophole introduced last month by senators, which could allow Apple and others to dodge data-sharing demands by striking new deals with record labels and artists.

But the changes may not go far enough to satisfy Apple. A statement issued by the company appeared to suggest that the legislation could ultimately affect its presence on the French market, some observers said.

"We are awaiting the final result of France's legislative process, and hope they let the extremely competitive marketplace driven by customer choice decide which music players and online music stores are offered to consumers," Apple's statement said.

Spokeswoman Natalie Kerris said Apple had "nothing further to add," when asked if the company was considering pulling out of the music download business in France _ a move that could leave hundreds of thousands of French iPod users unable to purchase new music from iTunes.

"I think it's a hint," said Phil Leigh, an analyst with U.S. market research firm Inside Digital Media.

"I think what they're saying is, 'We think France is a capitalistic market and the market's telling us we have the best product as it is right now. But if you interfere with the principle of market selection, we would have to give long and serious consideration as to whether or not we would want to participate in the market'," Leigh said.

IDC analyst Sue Kevorkian said Apple executives appeared to be "keeping their options open pending more information" and the law's final implementation.

"Withdrawal from the French market is one of several choices Apple could make, but in our view it would likely be a shortsighted one," she added, citing moves under way in several other European states to force Apple to open iTunes to rivals' players.

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