Mike: I did misread that line of yours, and I apologize. As you point out, your post is very much in keeping with my thoughts here, and I commend it to everyone.

Bruce: Excellent comment. I agree that the lack of interoperability has a cost, but it is not clear to me that the cost is too high. There is surely a trade-off between, among other things, the effectiveness of DRM and the degree of interoperability. Standards-based interoperability is not costless, nor is it, contra Frank Pasquale, a birth right, and I would imagine that more interoperability would lead to more DRM cracking (at the least, it would make cracking the DRM more attractive, even if it didn’t make it easier).

Regardless, I am confident that consumers are able to price non-interoperability and to act accordingly (remember Jobs’ point that only 3% of music on iPods is Fair Play encoded). I am also confident that Apple is able to calculate the pricing consequences and the revenue effect (whether positive or negative) and act accordingly, as well. To the extent that consumers want standards-based interoperability, they can and do buy other mp3 players. To the extent that they want iPods, they can and do discount their value for the lack of interoperability.

To play devil’s advocate here for a second, while this may be true of the individual DRM offerings, it’s not necessarily true that the end result is better for consumers. Competition between DRM providers may lead to incompatibility problems between devices that use different methods. That’s why there’s no competition in the market for the DRM used to protect standard pre-recorded DVDs — and also why your DVD collection will play on any DVD drive or player.

Perhaps the difference between the way consumers use movies and music — or physical media and downloads — explains the different approach. (There’s the rental market for DVDs, for example; watching a DVD is much more likely to be a one-time experience, creating demand for lower-cost, shorter-term access.) But perhaps there has simply been a collective action problem in agreeing to a single protection format. Or perhaps there is a problem when one company is both the exclusive DRM provider and the exclusive maker of the relevant playback machines. For a number of reasons, consumers may not be putting enough pressure on such unitary providers; for example, they may be counting on circumventing the DRM or using illegal downloads to recreate their collections if they ever want to switch, neither of which we want to encourage. If either of the last two is true, then pressuring DRM providers to license their technology more widely may help address those issues.