by: SA Editors posted on: March 21, 2006 | about stocks: AAPL / SNE    

AP reports from Paris:

French lawmakers approved an online copyright bill Tuesday that would require Apple to break open the exclusive format behind its market-leading iTunes music store and iPod players. The draft law.. would force Apple Computer Inc., Sony Corp. and others to share proprietary copy-protection technologies so that rivals can offer compatible services and players.

Under the bill, companies would be required to reveal the secrets of hitherto-exclusive copy-protection technologies such as Apple's FairPlay format and the ATRAC3 code used by Sony's Connect store and Walkman players. That could permit consumers for the first time to download music directly to their iPods from stores other than iTunes, or to rival music players from iTunes France.

Sounds bad for Apple, both in that market and as an international precedent, but Bear Stearns analysts Andrew J. Neff, Bill Hand and Ted Chung managed to find the silver lining -- excerpted from a note sent to clients:

While this decision could be perceived as a negative for AAPL (i.e., enabling users to play songs purchase on iTunes stores on other MP3 players), we see this as mixed – or arguably positive – development for AAPL. On the negative side, the legislation lowers the barriers to switching to different devices and could potentially increase device competition. On the positive side, AAPL continues to lead in terms design and ease of use with a broad line of products at different price points, which will continue to be the primary factor for purchasing MP3 players.

In fact, we believe that interoperable DRM could increase the appeal of iPod to wider consumer base by providing them with different options for online music purchase.... Europe represented 22% of AAPL’s total sales in FY05, but its iPod-related business in France would be a very small portion of this figure. Stock impact: mixed for AAPL (could be perceived as a negative, but in our view AAPL could actually gain share given its lead in features, design and price).

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By SA Editors