France has passed a law that requires suppliers of content (most notably Apple's iTunes Music Store) to provide information that is essential for 'interoperability.' Currently, purchases from Apple will only play on iPods, PCs and, of course, Macs, but not on other MP3 players and systems. The intent of the law is to require Apple to provide a means of making their downloads playable on alternative systems.
I have noted before that, in an ideal world, this might not be a bad thing for Apple. It will only encourage more sales from its store and may not make such a difference for iPod sales (after all, most music on iPods does not come from Apple, it is from peoples' own music collections).
Of course, the world is not ideal. It seems reasonable to suppose that Apple's agreement with music publishers is contingent upon downloads being in their DRM format. Moreover, it is also likely that Apple would be contractually prevented from providing 'work arounds' as the French law would require. So what will happen?
There are several possibilities:
1. Apple exits France.
Notice that this won't happen immediately. Someone has to make a claim against Apple. They have to then demonstrate the 'interoperability' is possible but it is unclear whether this can be modified for piracy concerns.
Moreover, even if that is done, Apple could argue that its downloads are already interoperable. Why? You can burn a CD from iTunes in the original CD format. Then you can load it back to the computer in MP3 format; something playable on most systems.
2. Apple partially exits France
Apple could modify its iTunes Music Store in France to supply content that does not require DRM (e.g., podcasts and independent music publishing). This would leave it with a presence as well as sending on on-going message that French customers are being disadvantaged by the French government.
This is not usually Apple's style but then again, they did launch the Australian iTunes Store without Sony initially. Australians knew where the blame lay there.
3. Apple finds a way to provide interoperability.
If it is potentially in Apple's interest to open up the system, it could provide interoperability. Imagine what would happen if it found a way to do this that was proprietary. Then its music store would have a considerable advantage over others and it would retain its dominance there. Thus, there are big incentives to innovate on that dimensions.
So, in summary, given this, the immediate exit notion seems very unlikely to me. It also seems that this will not have long-lasting effects on innovation. It just sends a signal to the music industry: worry about DRM but also worry about providing competition. We want to find out if we can have our brioche and eat it too.