Some Facts About AAC

Tuesday, 10 April 2007

I’ve noticed a slight uptick in misinformation about the AAC audio format. It could be coincidence, but I suspect it’s a result of Apple’s recent push toward selling DRM-free music on the iTunes Store. There are some people who have long insisted that Apple’s grand scheme for the iPod and iTunes hinges on proprietary file format lock-in, and I think what they’re doing now is grasping for some way to continue making this argument.

After Steve Jobs’s “Thoughts on Music”, these “it’s all about the lock-in” types argued that Jobs didn’t mean what he wrote, that Apple renounced DRM solely for PR value, knowing that record companies would never go along — or that Apple would later reveal some sort of fine-print restriction on their offer to sell DRM-free music (like, say, requiring all four major record labels to agree to do it).

Last week’s announcement with EMI put those arguments to rest.

But why did these lock-in arguments gain so much traction in the first place? One thing is that this — where by “this” I mean using proprietary file-format lock-in advantages as a competitive weapon to bludgeon competitors and maintain a market advantage — is what Microsoft has done for decades. Hello, Microsoft Office Open XML.

Let’s imagine for one paragraph that Microsoft’s and Apple’s digital music positions were flipped: that it was Microsoft that shipped the world-changing Zune in 2001, that they had sold 100 million Zunes to date, and that Microsoft’s online music store had 85 percent market share for legal downloads — all of them protected by Microsoft’s proprietary DRM. Can you imagine, in this scenario, Steve Ballmer or Bill Gates publishing an open letter like Jobs’s “Thoughts on Music”? Can you imagine Microsoft volunteering to switch from DRM-protected songs to an unprotected industry standard file format?

Me neither.

Microsoft would have told EMI to stick their DRM-free tracks up their ass. And the classic Microsoft, the Microsoft with a set of balls, would have told EMI that if they wanted to sell DRM-free tracks elsewhere, at other stores, that they’d suddenly find the terms changed for their songs at the market-dominating Microsoft store.

Apple is not the “Microsoft of digital music”, and everyone ought to stop trying to view their actions as though they were. Alas, that’s too much to hope for, and so in the meantime, now that Apple has proven its commitment to DRM-free music downloads, keep your eye out for anti-AAC propaganda from those pushing an anti-iTunes or anti-Apple agenda.

E.g., this bizarre piece by Giles Slade in the current issue of Mother Jones, “iWaste”:¹

These days, the champion of audio obsolescence is Apple, which successfully combined its iPod with a unique digital format (AAC). By embracing a non-MP3 format, Apple locked you into its world. Now, when your iPod breaks, you have a library of music that you can’t use on other players. You have to buy another iPod.

MP3 is ubiquitous, yes, but it is not a free standard. The rights to MP3 in most countries, including the U.S., are held by Thomson Consumer Electronics, and companies must pay them licensing fees for any hardware or software product that plays or encodes MP3 audio. Audio playback in hardware costs $0.75 per unit, for example; encoding costs $1.25 per unit.

AAC is not “unique” to Apple. It’s not even controlled or invented by Apple, or any other single company. It is an ISO standard that was invented by engineers at Dolby, working with companies like Fraunhofer, Sony, AT&T, and Nokia. Licensing is controlled by Via. For up to 400,000 units per year, AAC playback costs $1.00 per unit; for more than 400,000 units per year, the price drops to $0.74 per unit.

In terms of licensing costs, patents, and openness, AAC is very much comparable to MP3. MP3 does have the advantage of near-ubiquitous support in consumer electronics and software; AAC has the advantage of slightly better audio quality at the same encoding bitrate. Additionally, MP3 requires a royalty fee of 2 percent for “electronic music distribution”, AAC requires no royalty fee for distribution.

Is there an argument to be made for MP3 — that MP3 would be a better choice for DRM-free songs from the iTunes Store and as the default encoding choice for iTunes when ripping music from CDs?² Sure. But there’s also a strong case to be made for AAC: better quality and no royalty fees for distribution.

The ideal scenario would be for a genuinely open and free file format such as Ogg Vorbis to supplant MP3 as the de facto world standard. No patents, no licensing fees, a documented file format, open source libraries for encoding and decoding. That doesn’t seem to be in the cards, however. In the real world, major corporations only seem comfortable with multimedia formats backed by other large corporations.

In his misinformed “More Than You Ever Wanted to Know About Audio Formats” comparison last week on his Zunester weblog, Dave Caulton — who, it’s worth pointing out, works for Microsoft doing competitive analysis for the Zune team — described the licensing situation for WMA as “Freely licensable for a low fee” (where by “freely” he apparently means “freely” in some sense other than “without cost” or “without restriction”). Caulton described AAC licensing as “relatively pricey” and MP3 licensing as “a low fee”. As mentioned above, AAC licensing is not significantly more expensive than MP3 (and for more than 400,000 devices a year, it’s actually one penny cheaper per unit).

But it is true that WMA licensing is significantly cheaper: $0.10 per unit for playback of two or fewer channels of audio, $0.20 per unit for encoding. But WMA is not an industry standard. Unlike AAC, it is controlled by a single company: Microsoft. And in for a penny, in for a pound: once you license WMA audio, you’re also on the hook to Microsoft for licensing fees for Windows Media DRM (if you need support for DRM) and Windows Media Video.

Another thought experiment: Let’s say Apple had chosen to make WMA the primary format for the iPod in 2001. Do you think it’s possible that Microsoft might have decided to change the licensing terms at some point after the iPod became a phenomenon? Or, perhaps better put: Do you think it’s possible they wouldn’t have?

The implication in pieces like Giles Slade’s in Mother Jones is that AAC is somehow an “Apple format”, and that by selling DRM-free tracks from iTunes as AAC files, they’re still pushing a file lock-in strategy with songs that only play on iPods. FairPlay DRM is an Apple format; regular AAC is not. Here’s a selection of the devices listed by Wikipedia as supporting AAC:

• Microsoft Zune
• Sandisk Sansa e200R
• Sony PlayStation Portable
• Sony Walkman S-Series players
• Sony Ericsson phones
• Nokia phones
• Palm OS PDAs
• Microsoft Xbox 360
• Sony PlayStation 3

That list includes nearly every serious competitor to the iPod and iPhone, and the Xbox and PlayStation are at least oblique competitors to the Apple TV.

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Apple’s use of AAC in lieu of MP3 is analogous to the Mac’s switch to USB in 1998. USB was an industry standard that wasn’t taking off because PCs didn’t ship with built-in USB ports, which PC makers didn’t include because there weren’t many USB peripherals on the market, which peripheral makers didn’t want to build because there weren’t enough PCs shipping with USB ports.

Then came the iMac, whose only peripheral port was USB. (It didn’t even have FireWire.) All of a sudden peripheral makers had a reason to make USB gadgetry, and after that, PC makers had a reason to include USB ports on new PCs.

Apple’s use of AAC as the default encoding for iTunes has given other companies a reason to adopt it, too. Because of iTunes, there are billions of AAC-encoded audio files ripped from CDs that would otherwise be encoded as MP3.

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Update: A brief follow-up article based on feedback from readers: “A Wee Bit More on AAC, Ogg, and MP3”.