'Stunned' Apple rails against Real's iPod move

By Matt Hines
Posted on ZDNet News: Jul 29, 2004 7:05:00 PM

Apple Computer on Thursday issued a scathing response to RealNetworks' move to unlock Apple's proprietary technology and make it possible for people to listen to music in RealNetworks' digital file format on iPod devices.

In a terse statement, a "stunned" Apple accused RealNetworks of adopting the "tactics and ethics of a hacker" with the release of its Harmony software. Harmony allows songs sold via RealNetworks' online store to be played on a variety of portable devices, including Apple's iPod and Microsoft-compatible rivals.

Apple threatened to block access to the iPod using Harmony the next time it updates the software used to run the device. The company last week unveiled the fourth generation of the trend-setting music player.

"It is highly likely that Real's Harmony technology will cease to work with current and future iPods," the company said in its statement.

In addition, Apple said it is investigating the implications of Real's software strategy under the Digital Millennium Copyright Act (DMCA) and other laws. The DMCA broadly restricts the bypassing of copy-protection technologies used in DVDs and in some music CDs and software programs.

RealNetworks has been selling songs from its digital song store since January, but the files previously could be played only on a few portable devices. Apple has refused to provide licenses to companies seeking iPod compatibility, and RealNetworks did not seek permission before releasing the software.

Later on Thursday, RealNetworks issued its own statement in response to Apple's accusations. The company contends that consumers, not Apple, should be the ones controlling which music files can be played on their iPods. And the DMCA is not applicable to Harmony, RealNetworks said, because the antipiracy legislation "explicitly allows the creation of interoperable software."

RealNetworks said that it has no plans to change the application and that Harmony was created "in a well-established tradition of fully legal, independently developed paths to achieve compatibility."

Harmony automatically changes songs created in other formats into files that will play on an iPod. Since Apple refused to license its FairPlay copy-protection software to RealNetworks, the company had its engineers create their own version of the application in order to make the device play them back. Although the company said this action wasn't technically "reverse engineering," legal experts have observed that Apple may have some recourse if it decides to pursue the matter aggressively.

But one industry watcher was uncertain how strong a case Apple might have under DMCA, even though the company has had success defending its trademarks, as in 2000 when it reached settlements with several hardware makers accused of selling knockoffs of its iMac computers.

Regardless of whether Apple goes to court, it's likely that the company has little to worry about from the RealNetworks technology, said Tim Deal, an analyst with Technology Business Research in Hampton, N.H.

"I think the public will see this as sour grapes, since Real couldn't reach a deal with Apple," he said. "I'm not sure there are that many people out there who really want to work with multiple music platforms."

Apple does need to defend its proprietary iPod technology, Deal said, since the device's top selling point has been the integrated package of the music player and music files sold over the company's iTunes digital music service. But since Apple counts on iTunes primarily as a driver of iPod sales, Deal predicted that the company's profits won't suffer because of Harmony.

"Real is looking for music store revenue, whereas Apple really uses iTunes just to sell more iPods," he said. "As long as people are still buying iPods, the immediate threat posed by (Harmony) would not seem all that significant."

CNET News.com's John Borland contributed to this report.