A rough history of the iTunes store and DRM goes about like this:
- Apple starts working on the store; asks big Record labels to participate DRM free. Labels say "hell no!"
- Tense negotiations with big record labels lead to a deal allowing 1 year of iTunes music store (ITMS, hereafter) on Mac only -- no PC support. DRM required, with bit-rates restricted to 128kbps. Apple twisted their arms into allowing use on up to 5 Macs and unlimited number of iPods. Note that the labels get roughly 70% of the money from each sale.
- ITMS goes live, does well. Steve Jobs invites independents and small labels to participate. No negotiation, one standard deal -- take it or leave it. The only option offered is... exactly the same terms as the big labels. This is an unbelievably good deal for the minors, btw.
- When that year was up, and sales were pretty good, Apple and big labels negotiate extending the deal to PCs as well. Sales grow a lot.
- (fast forward a few years) One major label goes DRM-free at ITMS, with 2x bit-rate for higher fidelity. Their sales increase much faster than the other three majors.
- Most observers in the open source software world (wrongly!) attribute DRM at ITMS to Apple, rather than to the labels.
- (Fast forward a few more years) Sales at ITMS going through the roof, while CD sales continue to drop. Labels get nervous about ITMS dominance of the market. They decide to compete by licensing other stores (like Amazon) DRM-free, while continuing to require DRM at ITMS.
- Amazon and other DRM-free music stores fail to gain much ground on ITMS. Apple keeps asking for DRM-free music; majors continue to say "hell no!"
- Apple finally negotiates DRM-free license for all tunes, in exchange for allowing labels to price a limited percentage of their tracks at $1.29 instead of $0.99 (and also pricing back-list at $0.69). Labels still get 70% of the revenue from each sale; how much goes to the artist is determined by contracts between artists and labels (Apple has no say in that part!).
- ITMS becomes largest music seller in US market, by quite a bit. This includes both ITMS sales and CD sales in all venues.
It is important to note that Apple's been clear from the start that they view DRM as an annoyance that gets in the customer's way, rather than as protection against "piracy." But they had to support it to get the major labels on board. Also, if you go read press accounts at the launch of the ITMS, you'll see that all pundits were astonished that the usage terms enforced by the DRM were as open as they were (5 machines plus as many iPods as you like was
far more than anyone expected).
This history, for some reason that I don't understand, appears to be unknown to lots of folks out on the internet. The common assumption is that "competition from Amazon and other DRM-free stores forced Apple to dump their DRM." -- a view which runs counter to plenty of publicly available news accounts and interviews with Apple and record label execs. Go figure.
Xenophon