I've been trying to follow the Grokster commentary, though I'm sure I've missed a lot. I was moved to respond by Tim Wu's confidence that iTunes would have nothing to worry about if it came out with "Rip. Mix. Burn." today. As I understand it, he sees iTunes as safe-harbored by Grokster because it uses encryption to avoid infinite filesharing and has a deal with the music industry, which presumably shows good faith as well as making a lawsuit unlikely in the first instance.
Basically, though Tim's analysis, as always, makes interesting reading, I think he's conflating iTunes with the iTunes store. As others have pointed out, one fills one's iPod mostly with music that isn't purchased from the iTunes store -- I am a heavy iTunes store user, I suspect, and I have slightly under 300 songs in my "Purchased Music" sublibrary, out of a total collection of over 6700 songs.
"Rip, Mix, Burn" promoted iTunes, not the iTunes store. "Rip" only matters if you have CDs, since purchased iTunes files come preformatted for iTunes. Purchased, DRM-protected music can't be shared without either circumvention or quality-diminishing re-encoding, but iTunes does nothing to limit massive distribution of all those mp3s it encourages you to rip from your own collection (or download from others' to fill that nice big iPod). There is no encryption on ripped files, no deal with the record industry on ripping, and I just don't see which "safe harbor" helps immunize "Rip, Mix, Burn" in particular. This is not important for iTunes, since as a business matter Apple is unlikely to get sued. It's important for the next music player startup that doesn't happen to have music deals in place already, that maybe wants to make money just through the player without having an associated music store.
This really matters, though, for the next industry; we know a lot more about what the digital music industry will look like in the future than we do about digital video.
Of course if anticircumvention technologies are deployed successfully, it might not matter much at all, since they provide an easy workaround for all this kerfuffle about contributory infringement.
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