“You’ve got the record industry bitching about how file sharing — and now CD burning — is destroying their industry, therefore they need stronger DRM. As is par for the course, they’ve got it backwards: what’s going to destroy their businesses is DRM.”

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It’s another interesting development that furthers the belief that Microsoft may end up dominating the portable and mobile music market, thanks to its willingness to license its technology, even to the likes of rival mobile OS developer Nokia. This stands in stark contrast to Apple’s strict control of the FairPlay DRM it uses, and so far sharing the technology only with Motorola. Microsoft’s main role is as a technology provider, where as Apple wants to both supply the technology and be the sole content provider — a relationship that will be hard to successfully maintain in the mobile world.

It’s hard to see this deal really driving much traffic to O2. How will they market it? “Like Groove Armada? We’ve got half of them!” While its unsurprising to see exclusive deals pop up in the mobile world, it seems that O2′s got the formula reversed. This type of mobile-only content will only drive sales in large numbers if it’s extremely compelling — which this doesn’t really seem to be. It’s hard to see somebody deciding to switch to O2 because they really like some song. If O2 had scored exclusive download rights to current hits, it might be a different story.

Cato’s argument doesn’t really seem to wash, either. According to the paper, “Cato said the deal with O2 was a way for him to stay on top of the boom in digital music distribution. ‘Piracy is rampant and the digital systems are slightly out of control,’ he said. ‘Maybe this is one way of stabilising the situation.’”

So he’ll circumvent piracy by supplying his songs only to a single, relatively unpopular download service? That would seem to be a good way to _encourage_ piracy — after all, he’s keeping tight reins on distribution (assuming, of course, that anybody wants the songs to begin with). It seems more likely that O2′s 50 pence per download is probably a much bigger revenue share than that offered by other, more popular download services — although Bleep.com, which sells plenty of DRM-free music from a wide range of labels, says artists receive half the 99 pence it charges for single downloads. Interesting.

UPDATE: But wait — the BBC reports that Cato’s tracks for O2 won’t have any DRM, and that he describes “himself as a Luddite, he said he had not heard of DRM until he was flown into London from Ibiza to promote the O2 service. But he added that trying to stop illegal copying of tracks with technology or lawsuits was ‘like trying to hold back the tide’.”

While it’s great that he’s selling DRM-free music, it’s hard to see how putting unprotected tracks on a small, mobile-only download service will stop the “rampant” piracy he objects to. Why not make the songs available on the Web as well? After all, the real point of mobile music isn’t necessarily mobile-specific services, but rather making the platform irrelevant.

In any case, such taxes could severly stunt the growth of the mobile music industry. Witness the backlash against the licensing cost of OMA DRM, which is just 65 cents per handset, and compare that to the tens or even hundreds of dollars that such an “iPod tax” could add to the cost of a device, and vendors will likely decide it’s in their interest to forgo music capabilities or large amounts of storage.

A Canadian judge tossed out a similar plan there earlier this year, but record labels around the world could see this type of tax as the best way for them to legitimize — er, rather, profit from — P2P traffic, as opposed to actually doing anything themselves.

The GSMA press release is an interesting bit of posturing — it says it’s received 14 proposals for alternate DRM solutions, and it also says the group’s board is “frustrated by the lack of transparency surrounding the details and structure of IPR that MPEG LA considers ‘essential’,” leading members to question the patents’ validity.

The Open Mobile Alliance, of course, has distanced itself from MPEG LA, and while it’s true that OMA has no control over the patents themselves or the terms under which they’re licensed, it needs to accept some responsibility for trying to standardize on a DRM technology that’s proving such a mess to license. The point of OMA was to develop open standards so that the industry didn’t fragment on each and every service and feature, and OMA members are required to give non-exclusive licenses for their relevant intellectual property “on fair, reasonable and non-discriminatory terms and conditions” — the problem being two of the five companies holding relevant patents aren’t OMA members. OMA’s membership roster is a veritable who’s-who of the tech world, so it’s hard to believe the group couldn’t find a suitable technology from within the organization.

The likely outcome of all of this is that the mobile music market will mimic the fragmentation of the wired digital music market, at least in the short term. But it also leaves an opening for another DRM vendor — perhaps OMA member Microsoft? — to step in, likely circumventing OMA through the GSM Association. Consumers don’t particularly like any DRM, so it’s not so important whose flavor is chosen, just that the issue is settled soon so the market can move forward.

- US mobile content rating system in the works: The trade group of US mobile operators wants to define a standardized content rating and filtering system, not only to make it that much more difficult for kids to see porn, but to also pave the way for them to sell ringtunes with explicit lyrics intact, a move supported by record labels.

- Dutch group proposes surcharge on MP3 players (thanks, DMEurope): A Dutch group that already collects a surcharge on the sales on blank CDs and DVDs to compensate copyright holders for “lost” revenue — since, after all, the only thing anybody ever does with blank media is share music and movies — wants to being collecting a similar fee on MP3 players to the tune of 3.28 euros per GB, a move that could not only hurt the country’s electronics companies, but forestall the sales of digital music players — including mobile phones.

- OMA distances itself from DRM licensing mess: The Open Mobile Alliance issued a statement reiterating it’s got nothing to do with MPEG LA or the controversial terms at which that company is licensing the OMA DRM standard. It’s a strange announcement, with OMA highlighting the need for mobile services based on open standards — which begs the question of why it adopted a DRM standard requiring users to license so many patents.

- DRM frustrates digital music buyers: A UK magazine says people are growing increasingly dissatisfied with the restrictions on music they buy from download services, such as the inability to play songs on multiple devices, and pricing levels.

- Xingtone to let artists sell ringtones directly to consumers: While Xingtone’s consumer software lets users make ringtones out of music they already own, the company is happy to play the other side, too, letting artists set up online stores to sell their own tones.

The cuts represent some savings, but the change on transaction fees may still worry operators, and could not bring a unified mobile DRM standard any closer. The per-subscriber charge may be too much to stomach for carriers, and leaves open the possibility that someone could come in and offer DRM technology royalty-free to make money back somewhere else, such as through their own download shop.

Om Malik is right when he says this could squash the mobile music business — it’s clear that incompatible DRM has held back the wired download market, and with the penchant for overpricing mobile content, nobody’s going to pay through the nose for a song on their phone that uses some DRM standard incompatible with their PC or MP3 player.