Aussie Law Might Bar Putting Music on iPod

Copying music from a CD onto Apple's (Nasdaq: AAPL) iPod or a computer hard drive in Australia is effectively breaking the country's copyright laws, which do not have the "fair use" clauses as in the United States and Europe, according to numerous media reports.

This would include the transfer of legally purchased music onto the iPod, which has about 100,000 users in Australia.

Still, even with so many Australian iPod users, aussies cannot purchase music from the iTunes Music Store in the United States due to requirements that the credit card used for purchasing be billed to a U.S. address. That credit card requirement bars them from the only source of music that can be put directly onto an iPod.

Music purchased from Australian online music sites, such as Telestra, which supports Windows Media Player 9 digital rights management, meet the Australian legal standard because it is being sold under the authority of the copyright holder. However, the .wma format used for that music would have to be downloaded to a computer first and then changed to an iPod-usable format, and only then could it be transferred to the iPod -- a transfer that is illegal under aussie law.

MP3 Standard

One of the benefits of owning an iPod in a region without access to online music purchases is its support for the MP3 standard. That allows music buyers to rip legally purchased CDs onto a PC or Macintosh and transfer to the mobile player for digital listening.

Apple has not said whether it is pursuing the opening of an Australian iTunes Music Store, which would make music legally available for the iPod.

Apparently, the only legal use for the iPod would be the transfer of originally authored music not under any copyright protection. Law enforcement officials in the country have publicly stated they are not currently enforcing the law regarding transfers of music from CDs.

Two Mountains to Climb

Apple now faces two challenges in its bid to maintain leadership in digital music, and they both point back to interoperability and licensing. To date, Apple has not allowed other stores access to its digital rights management (DRM) technology, FairPlay, nor have they elected to support other DRM standards on the iPod.

In a much publicized move last week, RealNetworks (Nasdaq: RNWK) released Harmony Technology, which provides a gateway to playing music purchased from non-Apple online music stores on the iPod.

Apple countered with a veiled threat of legal action under the Digital Millennium Copyright Act (DMCA) and the possibility of a software update to disable Harmony Technology from working on its iPods.

Independent Compatibility Development

RealNetworks has taken the stance that it has not violated the DMCA and issued a statement last Thursday promoting its cause.

"In fact, the DMCA is not designed to prevent the creation of new methods of locking content and explicitly allows the creation of interoperable software," the company said.

It added: "Harmony follows in a well-established tradition of fully legal, independently developed paths to achieve compatibility. There is ample and clear precedent for this activity, for instance, the first IBM (NYSE: IBM) compatible PCs from Compaq."

Consumers Demanding Options

Recent Gartner (NYSE: IT) research shows that regardless of the outcome of corporate battles over proprietary standards, consumers want options.

In the report, Global Music Services Face Local Laws and Expectations, G2 senior analyst and report author Michael McGuire wrote, "If a significant number of consumers expect that digital content purchased over the Internet can be shared among family members and friends without infringing copyright laws and contractual agreements, this might directly affect the success of the online business model."

McGuire also points out in the report that while a First Sale Doctrine does exist in the United States, one does not exist for digital media. The First Sale Doctrine addresses such uses as when consumers grow tired of music and sell it to used-record stores, or public libraries allowing the public to borrow copyrighted works.

Inside Digital Media analyst Phil Leigh has appraised the worldwide market for recorded music in the neighborhood of $35 billion. Leigh said this is too big a market to ignore, as a portion of it transitions to the digital realm.