What's this mean for Sony BMG? It means that all the major labels have now faced the fact, which Radiohead articulated with last year's free release of its album In Rainbow, that file-sharing piracy is inevitable, and possibly even exacerbated by DRM protections. Legal downloads of Sony BMG artists like Britney Spears, David Bowie and Bruce Springsteen will be more attractive once they can be played on various MP3 portables and applications, shared with friends and burned to CD.

A bigger question to me is what will this mean for Apple. A long-time complaint about Apple's iTunes Store has centered on restrictions on its tracks that limit their use to Apple products. Apple has been recently offering unrestricted tracks for a 30-cent premium over typical downloads; a DRM-free catalog would likely boost iTunes sales, drawing users of rival music players like Microsoft (NASDAQ: MSFT)'s Zune.

The downside of doffing digital rights protections would be the end to iTunes' hefty influence on what MP3 players people use. iTunes is by far the leading merchant of music downloads, and for years has been able to steer users to its iPod. According to Apple's most recent 10-K, iPod and iPhone sales account for three to four times as much revenue as iTunes sales. With the iPod and iPhone, Apple has been able to set its own price and profit margin, whereas it has had a number of public scuffles with the major labels concerning the pricing and revenue share of its iTunes sales.

Then again, the 10-K figures show iTunes sales steadily increasing year over year, while the increase in iPod sales is slowing. The market is more or less saturated; for a few years, users of the early hard drive iPods had to replace them with later, more durable flash-memory models. By now, so many music fans already own dependable MP3 players that Apple has to hope that iPod users accidentally drop their current models in the bathtub, unless the notion of a touch screen is really as alluring as Apple believes. Either way, as the iPod faces increasing competition and market saturation, maybe losing the restrictions on iTunes couldn't come at a better time for Apple.