San Disk's Statement on DRM (annotated)

An Open Letter from Eli Harari, Founder, Chairman and Chief Executive Officer of SanDisk Corporation with annotations to help understand what he is really saying....

As a loud debate continues over how digital music is sold and used by consumers, SanDisk believes there is another way to address this issue—an approach less confrontational than that voiced by others in the industry. I guess the attacks by the RIAA on the rights of end users are not considered confrontational?

The answer is to protect the interests of everyone involved, not to chastise rights holders for trying to safeguard the entertainment they create and support. Musicians create music - the record companies do not. Yet, their insisitence on the current uses of DRM inhibit the growth of electronic forms of music.

As a leader in the digital music industry, SanDisk has always supported freedom of choice for consumers. At the same time, we believe that entertainment companies and artists must be compensated. But should the existing system of compensation the producers more than they are worth be continued - should there be a rebalancing toward entertainers?

Consumers deserve fair use of the digital entertainment they purchase, with the freedom to enjoy content on any device they own. SanDisk’s approach is to let consumers decide how and where they acquire and play back their music.

Proprietary systems, in short, aren’t acceptable to consumers. In recent months, there has been a rising chorus of complaints in Europe about the anti-competitive nature of closed formats that tie music purchased from one company to that company’s devices, and tie that company’s devices to its music service. With several of the major licensing companies in Europe is this about consumer rights or producers?

SanDisk is already offering an alternative with its Sansa line of MP3 players, which connect to many major online music stores, including Rhapsody, Napster, URGE, Yahoo! Music, emusic and Best Buy Digital Music Store. Users purchasing songs from those services can also play them on many non-SanDisk devices. SanDisk and our partners have full support from the four major music companies, and we believe our offering is no less secure than closed systems.

What’s more, the decision on using digital rights management (DRM) should rest with the music industry, not with device makers. Tell that to Sony and the Beta format - this is ultimately about the consumer not either the device maker nor the producer. A better market would allow the consumers and the artists to connect more directly.

Time and again, we have seen that open choice prevails. The “walled garden” approach may offer a smoother user experience in the short run, but ultimately restricts user choice. Protecting music doesn’t require confining consumers to a single company’s service or devices. It’s time to tear down the walls. Hmmm, seems like I have heard that earlier in the week - perhaps from Steve Jobs.

SanDisk is looking at the big picture, by creating solutions rather than conflict. Why this concentration on conflict? Isn't that the point? Sometimes conflict is essential for advancement. Building an infrastructure to give consumers fair access to digital content while protecting content creators is vital for the long-term health of the music industry, as well as to our business and to our competitors. SanDisk stands committed to making this happen.

Market Share by maker - Apple 82.7%, SanDisk 18.4% at December, 2006