Unlocking the iPod
If you want to buy content for Apple's iPod, you have to go through iTunes. Navio Systems is hoping to change that.
By Michael V. Copeland, Business 2.0 Magazine senior writer

In an ideal digital world, we'd be able to buy copyrighted music and videos wherever we wanted, not just on a designated store. But that's been the fate of iPod users, who can only buy content off of Apple's iTunes Music Store.

Even iTunes competitors, like Napster and Microsoft's (Research) MSN Music, have a limited set of devices that play the content they sell. And eMusic, which sells unprotected MP3 files, has a limited selection. (Sure, sure, you can buy physical CDs and rip the songs off them to any MP3 player, but that hardly seems like a digital-age solution to the problem.)

Navio plans to offer software that lets its customers offer copy-protected videos that will play on iPods
Navio plans to offer software that lets its customers offer copy-protected videos that will play on iPods

But Navio Systems, a startup based in Apple's hometown of Cupertino, Calif., is hoping to change that situation - and let anyone sell music, videos, games, and other content that stays protected wherever it goes.

Hollywood, which has seen Apple (Research) rapidly seize control of the paid music-download business, is especially eager for an alternative to iTunes. In fact, they'd like to run their own stores. And that's what Navio's software lets them do.

Navio has built a system that stores the rights associated with a piece of music, a game or a movie in the file itself. When you buy a song or video from a Navio-powered website, information about your purchase is stored in a "digital locker" that tracks your rights. The key difference from iTunes: Navio doesn't care where you get the content. And that opens up any number of websites to the possibility of selling digital content.

Already, early Navio customers like Fox (Research), Sony (Research) BMG Music Entertainment, Walt Disney Internet, Cingular and Verizon Wireless have been experimenting with Navio's software to sell digital content. Disney (Research), for example, will be using Navio to power content sales on its website promoting the Pixar/Disney animated blockbuster Cars.

By the end of June, Navio plans to include software that lets its customers offer copy-protected videos that will play on iPods. (Apple, which has not widely licensed its own copy-protection system, wouldn't comment on Navio's move, but we would love to be in a board meeting where former Pixar CEO and current Disney board member Steve Jobs discussed the decision to go with Navio.)

For music labels and movie studios, Navio provides an opportunity to reach consumers through a huge number of outlets, and experiment with selling and bundling content in a way that isn't restricted by the rules of a particular service or online store. (Music labels, for example, have chafed at Apple's insistence that music tracks sell for 99 cents on iTunes.)

For consumers, it gets them closer to a world where they can play digital music and movies how and where they want.

"Navio is an important alternative to the systems that are out there now," says Mike McGuire, a vice president for research at Gartner. "The key for its success is to develop the technology and experience so that it is as good or better than what is out there right now. If not, it's back to the services that already exist."

And aside from the challenges of reverse-engineering the iPod's copy-protection system, technology is not the limiting factor preventing Navio, or any other company, from creating a seamless content experience where users can buy content anywhere on the Web.

"A lot of it is already technically possible," McGuire says. "The limitations are almost all related to mundane issues like licensing and rights agreements."

That's what makes Navio's approach so smart. Hollywood studios and record labels already have the rights to their libraries of movies and songs. Rather than haggle with them over rights, why not just let them sell their libraries themselves?

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Apple seen developing iPod phone. Read more.

Sony dances to Apple's tune. Click hereTop of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.