On second thought, Why Apple won’t sue Universal

The other day, I speculated-out-loud that Apple may have grounds to sue Universal for factors related to “restraint of trade” in not allowing DRM-free music to be sold via the iTunes store while opening up such an option to nearly all other online retailers of any heft. (I admitted — and still do — I have absolutely no knowledge of the law surrounding such an issue, but I do recall “restraint-of-trade” being a central-focus of legal and regulatory battles in the book-retailing industry whenever one channel of distribution appears to gain preferential treatment from publishers or wholesalers.)

However, after thinking about it some more and reading articles like this one in the LA Times that re-hash the conventional wisdom that Universal is using this as some type of warning-shot against Apple, I have thought about it some more and come to this conclusion: Why should Apple give a rip about how people purchase DRM-free music? They should be encouraging Universal to do this and hoping that Walmart, Best Buy and anyone else who can sell DRM-free music will be as successful as possible.

Why?

In reality, Apple doesn’t make that much money from selling music. I once wrote about 10,000 words pointing out how Apple’s podcasting strategy, in which they support the RSS-distributed delivery of what is, for the most part, free music and programming, is a winner for them because, duh, Apple is in the business of selling hardware that organizes and plays music — the “content” part of iTunes is not their business. I won’t repeat the economics of this, as I’ve covered it before, but believe me, the margin Apple earns on selling music is a microscopic fraction of the margin they earn on selling an iPod or iPhone.

In reality, Apple wants you to purchase DRM-free music any way you can. They are begging Universal to the throw them into the briar patch if they doth protest too much (to mix literary metaphors) Universal’s selling of DRM-free music through every other channel possible. Steve Jobs & Co. know that on iTunes, there is this little menu item called “Consolidate Your Library” that will automagically suck into iTunes all of that DRM-free music you purchase via other sources.

Steve Jobs & Co. know that in a few months, Universal will let them sell DRM-free music. Even I, who am observing this from so far away I have to squint, can see it is inevitable that Universal will cave-in on this after all of their “testing” is done.