A Working Economy Without DRM?

Tilted Equilibrium asks: "In a few weeks, our school will be hosting a panel on DRM with several respected individuals. In advance of the panel, I have been doing some research on the topic and thinking about it in my free time. In economics, we learn that the price of a product is determined essentially by supply and demand. Without a DRM in place, we are capable of making as many copies of a piece of content as we want and seeding it onto the net. How do you create a market for a product, and make money of a product that has a huge initial creative investment, but then no manufacturing cost, and is in infinite supply?"

Comments

Biased question

[swillden]

How do you create a market for a product, and make money of a product that has a huge initial creative investment, but then no manufacturing cost, and is in infinite supply?

Most likely, you don't. But in large part you're creating a strawman, by specifying exactly the situation in which it is most difficult to make a profit.

It's entirely possible that the Internet will mean the end of $200M productions, because unless you can get your money back in the theater (I'm focusing on movies because they're the only things that fit your specifications), you can't make it back.

Maybe. I'm not absolutely convinced of that. I think DVD releases with lots of extras, including some that aren't digital, are a good model. Obviously, movie theaters have a workable model. There may be other approaches that can work. Any approach that offers the consumer real value for their money will work. People *want* to spend money on entertainment.

And, honestly, outside of movies, what other media meets your requirements? Not music. Music is cheap to make. Sure, it's likely that in a fully DRM-free Internet age that musicians won't be mega-millionaires, but I consider that a good thing. I think it would be great if we could support more musicians with decent incomes, instead of the smaller number with insane incomes. Heck, even if there aren't more of them, maybe they'll live longer and make more great music if we don't give them heroin and Ferraris.

I agree with Eric Flint's essay, found in the Free Library on baen.com: Until there's some way to make music/movies/books that doesn't require musicians/actors/directors/authors, and until people stop wanting those materials, there *will* be ways to make money off of them. It's just a matter of finding them. And, perhaps, accepting that people don't really need millions for doing what they love.

Re:Biased question

[BadAnalogyGuy]

I disagree with the whole idea that it's unnecessary to protect the works of content creators. DRM is a necessary evil and assuming a world without it is simply pissing in the wind. What we need to work towards is a DRM model that preserves as much of our rights as possible while still effectively preventing the widespread copying of content.

DRM is a reality and to deny this is to be simply ignorant of current trends in media playback software/hardware stacks. All new hardware from major manufacturers will support DRM standards. If the data stream is protected, the media appliance will acknowledge and honor the DRM lock and you will be unable to do more with the content than is allowed by the DRM lock. This is reality and it is already here. What we want to do is make sure that things like machine-local data can be transmitted from one machine to another (deleting the original data as it moves to the next device) are preserved while things like forward-lock (which prevents copying at all) are eliminated. Working against the system when you are completely outside the system is futile.

Re:Biased question

[westlake]

Music is cheap to make.

Talk to a classical musician: ask her the price of a fine solo instrument, a piano, a violin. The basic tools of her profession.

Re:Biased question

[intrico]

"I think it would be great if we could support more musicians with decent incomes, instead of the smaller number with insane incomes. Heck, even if there aren't more of them, maybe they'll live longer and make more great music if we don't give them heroin and Ferraris."

This is an excellent point about the music industry. The traditional business model is very inequitable to the average artist. The major record labels say that people are "hurting" these artists by downloading their music. But one can make a very strong, valid argument that by forcefully marketing a select few musicians to the massess, and creating huge barriers to entry to these marketing channels for thousands of other artists who may can be just as good or better, that they have have caused the general population to miss out on all of these other artists out there. This hurts all of these other artists by effectively denying them mindshare.
 
Getting marketed by a major record label is simple a matter of being in the right place at the right time, and really is not correlated at all to the quality of the artist's work. The same of course, goes for the movie industry where quality does not necessarily equal production costs and or marketing clout. And again, the traditional setup of the movie industry ends up denying access to marketing channels for many smaller independent film producers, making it harder to get the word about their works out to the masses. In short, the RIAA-associated and MPAA-associated marketing powerhouses have fostered an anti-competitive environment at the artist level. DRM-Free media will not ruin the "working economy", but it will create a level playing field for the actual artists who produce content.

Re:Biased question

[BadAnalogyGuy]

Your last sentence is a complete non-sequitor.

DRM-free media and the playing field for music artists are wholly unrelated. Artists that are not picked up by record companies (whether large or small) are not in any way prevented from producing their own music and publishing/selling it in a non-DRM format. There are no players that refuse to play non-DRM content. Non-DRM content is simply read as unprotected content and the full functionality of the device copying mechanism is available for that data.

In fact, you could argue that DRM-encumbered media is less attractive than DRM-unencumbered media because the former restricts user actions while the latter does not. However the real problem for the artists is getting discovered, and that has nothing at all to do with whether the record labels apply DRM to label-produced content.

Re:Biased question

[aussie_a]

You assume DRM is necessary, but in actuality, it isn't. These people somehow make a profit without DRM (otherwise they wouldn't bother releasing the e-books). As does these people as well as these people.

Perhaps multi-million dollar movies aren't capable without DRM or Britney Spears being profitable without DRM, but the truth is that the big media cartels aren't the only people in town no matter how much they want you to think they are. And DRM isn't necessary for artists to not only make a profit, but to make a living. Not all artists will be able to make a profit or a living, but then again not all artists deserve a profit or a living. DRM isn't a necessary evil, it's just an evil.

Re:Biased question

[the_womble]

It is still cheap to make compared with films.

That is partly because Holywood's business model has pushed up the cost of making films, but it is also because films are expensive to make.

What does make a lot of classical music quite instrinsically expensive to make (comapred to most other music) is the need for a full orchestra, so a lot of people's time is needed. The value of a good muscian's time is worth more than any insturment, even a Stradivarius (if you amortise the cost of the Stradivarius over all the performances it can be used for).

A more important point is that the cost is still low enough for business models other than pay per copy to work. I have some legit free downloads of classical music, and there is no reason there cannot be more., funded the same way.

With type of music that do not need large numbers of people alternative revenue models become even easier alternatives.

Re:Biased question

[BadAnalogyGuy]

We're not really talking about Trusted Computing here, though it may be interesting to see how TC impacts the availability of DRM-stripping software on mainstream operating systems.

Once the upcoming crop of DRM-enabled operating systems (Mac and Windows) only support media playback through OS API-level function calls, your "control of your computer" will have reached its conclusion. As system APIs become more plentiful, more useful, and easier to use, control is slowly creeping away from the now-productive developer and towards the central programming model/operating system.

You have every reason to be worried about losing control.

"I'll run Linux!"

With DRM implemented as an encrypted datastream and licensed to hardware/software makers, who is going to be able to bring DRM playback capabilities to Linux without also being tied to strict licensing restrictions that prohibit DRM-stripping as a feature or side-effect? These DRM systems are of course already running on Linux, just look at your favorite DVR which already implements such a system. Does this translate to your PC being able disable DRM content? Unfortunately, no. Not unless a DRM-licensee decides to break their license and provide the tools to do so. It's not out of the realm of possibility that a rogue employee may do such a thing, but the financial hardship he would face would typically be a sufficient deterrent.

Re:Biased question

[masklinn]

Uh, have you ever bought a record of classical music? As far as length/cost ratio goes, it's probably the best bang for your buck you can get unless you burn static noise on CDs and listen to that all day long.

Because most classical music performances are actually concerts, and I doubt classical music requires a lot of post-prod work (sound engineers and such, as well as their hardware), lowering the cost of records compared to highly edited/remixed "popular" music.

Re:Biased question

[vmcto]

There are no players that refuse to play non-DRM content.

Yes, but realistically how long will that last?

Do you think the big manufacturers are going to continue to produce devices that play non-DRM content? What's in it for them?

Re:Biased question

[gfxguy]

I tend to agree and more.

I honestly believe people should be more honest with themselves and their wallets. If something is worth buying, it's worth buying. If it's not worth buying, don't buy it. Just because you don't like the arbitrary amount someone has set for the product doesn't mean you should be able to just take it. I mean, come on! We're not exactly talking about stealing bread to feed starving children! We're talking about movies!

However, I don't agree with DRM at all, either, because if you do shell out the cash, you should be rewarded with a lot of freedoms with that content. You should be allowed to make backups, you should be allowed to listen/watch on different devices and so forth.

Now the reality - the more these idiots apply DRM, the more worthwhile it is to STEAL the content because the stolen content gives you the freedoms you should have had to begin with. I make the analogy with software copy protection, specificly from the 80s and early 90s. The copy protection became so bad, I'd buy a game and the first thing I'd do is look up on the internet (through ftp sites, at the time) how to break it. Damned code wheels and all that crap. Forget it! It's the guys that stole the game that didn't have to put up with that crap, and it's the people illegally copying the movies that can do whatever they want with it.

I'll make these analogies as well: when cassette tapes hit the markets as a cheap, convenient means to copy recordings, the RIAA complained it would put them out of business. Instead, sale of prerecorded cassettes opened up a whole new revenue stream for them. When consumer grade video recording hit the market, the MPAA cried it would put them out of business. Instead, the video sales and rental market opened up a whole new revenue stream for them; movies that wouldn't ever even have seen the light of day began returning at least some money, and movies that made hundreds of millions were making another hundred million in rentals when, if the MPAA had it's way, they'd be making nothing.

Then the RIAA complained about CDs. CDs sound so good, that cassette recordings made from them sound better than vinyl. Yeah. CD sales skyrocketed and the RIAA increased it's revenue again. Then there was DVDs and how people would record this high quality content on VHS, and they were wrong there, too - the sale of DVD quickly overtook VHS sales; the discs cost less to produce, but people payed more for them.

The bottom line is that if you give the people what they want, they will pay for it. I can download mp3s illegally, or I can pay for them. I choose to pay for them when I think it's worth it. Otherwise I simply don't download them at all.

I realize few people out there are as honest (my wife calls it brain dead honest) as I am; even people who are generally honest might not mind downloading a few things here and there. So yes, copyright violations will continue to happen, but there has to be an "acceptable" rate, which you would calculate by figuring out how much the cost of enforcement is versus how much is lost.

Frankly, the worst part about DRM is that we pay for it. We pay extra for licensing fees so that our DVD player will be crippled, and we pay extra for content itself so that it can be crippled. WE are the ones who pay for lost functionality and freedoms, and the more they squeeze us, the more ONLY HONEST consumers are hurt.

If that's not ass-backwards, I don't know what is.

So my question to these idiots is: honest consumers are paying extra for products with reduced functionality, while people with illegal copies of the content seem to have the most freedoms. How does that make any sense at all?

Re:Biased question

[SanityInAnarchy]

You are repeating the same misconceptions in the same ways. Look at your language:

I disagree with the whole idea that it's unnecessary to protect the works of content creators.

No one is arguing "that it's unnecessary to protect the works of content creators." We're arguing that DRM, specifically, in any form, is not worth the harm it causes, and that content creators can make a profit without it. After all, they did before DRM existed.

DRM is a reality and to deny this is to be simply ignorant of current trends in media playback software/hardware stacks. All new hardware from major manufacturers will support DRM standards. If the data stream is protected, the media appliance will acknowledge and honor the DRM lock and you will be unable to do more with the content than is allowed by the DRM lock. This is reality and it is already here.

If you are astroturf, you need to listen here: If that is really and truly the reality, I will wean myself off modern media. I simply refuse to spend any money on anything that has unreasonable "protection" on it. If there are enough of us, you will lose money on DRM.

That is why I refuse to buy anything Blu-Ray until I am convinced that it's permanently cracked.

If not, I simply don't care enough. There is enough entertainment in the world that comes without strings attached.

What we want to do is make sure that things like machine-local data can be transmitted from one machine to another (deleting the original data as it moves to the next device) are preserved while things like forward-lock (which prevents copying at all) are eliminated.

Current DRM models have two problems: In order to enforce any kind of protection, they require specific software/hardware stacks, which reduces user choice -- for instance, it becomes essentially impossible to have a proper open-source media center, or even to run a closed media center on an open OS.

The second problem is, much of it is online. For instance, the music subscription services -- pay $x/mo and get as much music as you can download, but if you stop paying, they stop playing. Another example is Steam: You only pay once, but it insists on connecting to the Internet periodically to get updates and to be able to shut you down if they find two copies from the same purchase online at once. The problem with this is, I'm essentially trusting the content provider not to unfairly revoke my right to use my content -- Valve could one day decide not to let me play at all, or their servers could go down, and I'd be stuck without a game.

This puts things entirely too much out of control of the consumer, who, in a very real sense, no longer owns their stuff. Think of it this way -- the rights to a book are owned by the author, and only licensed to a publisher for a finite amount of time. If you buy a book, you own that copy, and may do whatever you want with it, other than distribute copies of significant portions of the book. Yet I never hear authors screaming about how they're being completely ripped off by those damned libraries with their damned copy machines, not to mention kids with OCR who just throw the stuff up on the Internet.

Now, look at the Music industry. No real, provable signs that Internet piracy does a thing to their sales, yet publishers own artists' song rights forever, and now they want consumers to give up any concept of owning a song, the way we have for software. Oh no, now you own a license to play this song, which they can invalidate any damn time they please.

Working against the system when you are completely outside the system is futile.

Wrong. Almost all attempts at DRM are futile. No DRM will make it completely impossible to pirate something. If it does, it will be so oppressive that consumers won't take it anymore.

Here is the system that really works for everyone: For media, make it more con

Re:Biased question

[NeutronCowboy]

Not only are we paying in terms of money, we are paying in terms of culture that is being locked up and lost forever because there is no legal way of archiving it. That, in my opinion, is the biggest cost of all and the prime reason DRM is Evil.

Re:Biased question

[Flyboy Connor]

This will never happen on any sort of feasible scale. It isn't a matter of being "honest" (or as most people who take the same position you have, of being "moral") it is a simple matter of economics - rationale consumers will not pay for something they can get for free.

Weird. Computer games can be downloaded for free, or acquired for a very small fee from your neighbourhood copy-peddler. And still the game-development industry is steadily increasing its revenues. And music? People can download any song they want through eDonkey and such, and the music industry does not seem to suffer. Movies? The movie industry gets richer and richer by the day.

You might think it is rational what you say, but practice shows differently. It seems you are not taking everything into account. Probably, if you scan this thread a little more, you'll find out what that is.

Re:Biased question

[Logic and Reason]

It might not be very nice to listen to a street musician without giving him any money, but I certainly wouldn't call it dishonest. I don't think the musician has any right to demand that everyone who listens to him pay up, since he is performing in a public area and therefore does not have the right to decide who may stay and who must go.

Now suppose there were a law mandating that if you listen to a street musician for a certain length of time, you must pay him. Would that change the morality of the situation? Only if you believe that violating laws is in and of itself immoral. In your "brain-dead honesty" I see only a slavish devotion to nonsensical laws; you should decide for yourself what is right and wrong, not let the majority do it for you. I would be able to respect your opinion on "honesty" more (though I'd still disagree) if it didn't seem like you were using the law as part of the justification for your position-- believe me, I understand how seductive that thinking can be, but conflating legality with morality has led to much evil in our history.

Please don't accuse me of using convenient reasoning to justify my own actions, because I'm not. My own actions are irrelevant to this discussion, and my argument will stand or fall on its own regardless of how you perceive me.

Re:Biased question

[Alioth]

Also emusic http://www.emusic.com/ seem to make plenty of money, and are the no.2 online music store only after iTMS. They sell music in unencrypted MP3 files. They may not have Britney Spears, but they have a lot of labels and artists with chart music - people like the White Stripes, Paul Weller etc.

Re:Biased question

[Jah-Wren Ryel]

It seems you are not taking everything into account.

Actually, it's you who aren't taking everything into account. All of your examples involve additional cost factors - people who buy movies, music and games instead of downloading them are making a judgement that the cost of downloading is not only not free, but higher than the cost paying in the approved manner. That's in part because of the perception of the legal costs, in part because of the cost involved for getting plugged into the P2P networks (learning curve, perceived risk of virii, etc) and in part because of the cost of actually finding the desired product online.

None of these issues have a thing to do with honesty. Nada, zero, zip. It just basic economics.

If you would like to actually demonstrate a scalable example where a market works on "honesty" instead of basic economic principles, please be my guest.

Re:Biased question

[intrico]

You've read into that sentence too way deeply. I was referencing the question posed in the title of the original Slashdot posting, "A Working Economy Without DRM?". DRM was created by these major companies with the intent of controlling distribution of their media - part of an overall agenda to control distribution *as well as* the traditional marketing channels, two things which these very few huge media companies have obviously enjoyed a nice grip on for decades. Without these control-tactics exhibited by the media companies, "getting discovered" (e.g. scoring a contract - a lot like winning the lottery, not highly correlated to talent) would be irrelevant, as it should be, in turn creating a more level playing field for the artists.

Re:Biased question

[Schraegstrichpunkt]

No one is arguing "that [DRM is] unnecessary to protect the works of content creators."

I am. We still have copyright law, after all. Ultimately, that's why the content creators are still making money, even though every DRM system in widespread use has been broken (or fixed, depending on your point of view) to date.

I have yet to see an argument that DRM is necessary that is grounded firmly on evidence, rather than speculation. From what I've seen, the evidence suggests that DRM is unnecessary.

Re:Biased question

[PHPfanboy]

And on a slightly unrelated note...was it just me, or did Steal This Film fail to make any good justifications for piracy?

I'm with you on this one. I watched the whole lot and the quotes were all from people in the street who offered very shallow justifications, if any.

None of them backed themselves up with anything more than "copyright is against my morals" (WTF?) or "it's going to happen anyway" (yay for the moral collective consciousness of the internet!). Dan Glickman also didn't sound compelling. In short, it was an interesting movie about Pirate Bay, and how small countries can be pushed around by large ones (what's new?), but other than that, it was just a piece of propaganda/ advertising (which is why it is given away for free!)

Re:Biased question

[visualight]

DRM is a reality and to deny this is to be simply ignorant of current trends in media playback software/hardware stacks. All new hardware from major manufacturers will support DRM standards

Why do people keep saying that? Is that supposed to be some kind of self fulfulling prophecy? Like, if you say it enough it'll be true? The truth of your statement is entirely dependent on what people accept. I, and everyone I know, will never accept a computer or purchase media that is restricted/crippled/trusted. And, I think the percentage of the population that also believe that will continue to grow, not shrink. So,

DRM is a temporary social problem and to deny this is to be simply ignorant of current trends in society/politics. All new hardware will still allow people to defeat DRM standards.

Re:Biased question

[Znork]

"Just because it is easy to copy music it doesn't make it right to do so."

Just because it's easy to copy music it doesnt make it wrong to do so.

If I buy a chair and then make one just like it, it's in no way wrong. If I had a chair-copying machine, and started churning out copies, it still wouldnt be wrong. Yet you somehow appear to believe that ease of duplication should merit legal prevention of such duplication?

"but someone's lost something."

Yes, the economy as a whole constantly loses because of intellectual property. The money that brother isnt spending on buying protected material is spent on other things. If he would have had to buy the material he wouldnt have been able to spend money on those other things. This in turn would mean less wealth was created within the economy as a whole (the other stuff _or_ the ip, as opposed to the other stuff _and_ the ip), leading to an actual loss to the economy.

This problem is squarely tied to monopoly pricing. In a competetive market, the price falls towards cost of production, leading to a maximization of available wealth, and a fulfillment of as many consumers demand as possible while still being able to produce the product with a slight profit. With a monopoly right, pricing and revenue is maximized at a point where a whole lot of consumers cannot afford the product/will value it less than alternative products, even when it still could be produced with profit at a lower price, thus negating the whole point of a free market economy.

"but had your brother purchased said items the artist (and the rest of the chain from shop keepers to recording labels/studios/etc) would have got a share of the monies"

Then again, if we scrapped the monopoly copyright and instituted an IP sales tax on those actually profiting from the sales (say, 50%-75% of the price in stores or on the net) with the proceeds going directly to the artists and composers, then the artists and composers would have gotten a much bigger share of the monies, and the whole chain in between would remain competetive.

Re:Biased question

[Peter La Casse]

Ah. 'No one is arguing that protecting the works of content creators is unnecessary.' Never mind then. :)

Now that you mention it, why is it necessary to protect the works of content creators? It's not like content creators will all stop creating content if all content was public domain. Some industries would fail, but it's not our responsibility to prop them up with artificial business models. Some content, like $300 million movies, might not be created, but people would still make movies, and people would still pay to see movies in theaters. People would still watch TV and listen to the radio, because that's convenient, so those business models might not change much right away.

Follow-up: if it is necessary to protect the works of content creators, why is it necessary to protect them this much? Someone yesterday suggested changing copyright to 7 years. How is the current situation better than that? Or better than 15 years? Or 20 years?

Re:Biased question

[DevStar]

Weird. Computer games can be downloaded for free, or acquired for a very small fee from your neighbourhood copy-peddler. And still the game-development industry is steadily increasing its revenues.

There's a difference between something being free and your ability to steal it. If I could go to a legit website or to my local Best Buy and get all games for free or pay for them -- guess what? I'd take them for free.

Now I don't copy music, because it is illegal, and frankly I don't music so badly that I'd copy it. With games it's even trickier since if I'm not getting games from a trusted source, who knows what I just installed on my computer (see Rootkit).

Re:Biased question

[mencial]

Here in Spain, people do beautiful movies that get almost no money in movie theaters. How they do it? Government grants. They are shut off the theaters by the US majors. If there were no US big-budget, big-publicity-campaign movies, there would still be a ton of good movies to see.

All those Clint Eastwood spaguetti westerns were pretty cheap. And they are amazing.

Re:Biased question

[poot_rootbeer]

But in large part you're creating a strawman, by specifying exactly the situation in which it is most difficult to make a profit.

I disagree. The high creative capital + no manufacturing cost + no distibution cost scenario is a real-world one, facing every creative artist in the digital age.

People *want* to spend money on entertainment.

I disagree. People want entertainment, period. They are willing to spend money on it, but it is merely a means to an end. There's a reason why broadcast TV networks have viewerships many times the size of premium cable networks like HBO, and it's mostly because the former is free (as in beer).

Music is cheap to make.

I disagree. Recording costs for music may be down to the point where 72 minutes of audio can be preserved for $5,000, but there's no guarantee that the audio will be Music. Musicians invest a lot of time and often a lot of money developing their craft to the point where you would want to listen to what they create.

accepting that people don't really need millions for doing what they love.

I do not accept that. As a musician, I should have the opportunity to do what I love AND make millions. It is not and should not be a binary choice.

Re:Biased question

[Jah-Wren Ryel]

I can't give you an example where 'honesty' trumps economic principles, mainly because honesty IS an economic principle.

Only in niche markets where there is a direct cost associated with being 'dishonest.'

Your example from Freakonimcs is a case of the iterated prisoner's dilemma because each day is a new iteration and thus is only 'scalable' in that you have a group of niche markets (each office) that are effectively independent of each other.

That model may possibly scale to large numbers of individual offices, but Levitt's own reporting on Feldman's bagel business indicated that the larger the individual office, the less 'honest' people were.

Essentialy, you have just proved my point with your own example.

How? Ask Apple

[SuperKendall]

How do you create a market for a product, and make money of a product that has a huge initial creative investment, but then no manufacturing cost, and is in infinite supply?"

Ask Apple, they are doing so today. Sure they use DRM but the way they work sales would not really be hampered much by them not doing so - after all, I can download any song for free today but I choose to buy through ITMS.

you don't...

[twiggy]

You don't.. you sell something other than the tracks.

You create a completely different model now that people expect the tracks in digital form for free (or will risk an RIAA lawsuit to get them).

you make your money on tours, tshirts, or making amazingly badass CD packaging (see: Tool - 10,000 Days) that makes it worth picking up a hard copy.

Or, you make your money by giving people valuable merchandise or preferred seating at concerts for joining your fan club.

You can't create demand for something that can be infinitely and freely copied.

Re:you don't...

[QuantumG]

You can't create demand for something that can be infinitely and freely copied.

Wow. How can you say all that and still miss the point. There's no problem "creating demand", there's only the problem of "limiting supply" and you can actually do that, but to do so requires you to be so fuckin' evil that you're willing to get in everyone's face and prevent them from helping others.

Potentially no marketing cost......

[nbehary]

The thing is, if you market the shiny case, people will buy it. At least, the market thus far proves that to be true. Me, myself, I tend to be a huge "pirate", but I'll pay for something I think is worth it, even after getting it for free. That can't be said for most. But, irregardless, the masses will pay for it. At least so far. I guess my point is, make quality, make people think it's worth paying for, and I'd hope most would. Maybe I'm an idealist though......

Re:How? Ask Apple

[EnsilZah]

So basically what apple is selling is not the song itself, but rather the assurance that it would be of a certain quality, the time saved on searching for it, and also the assurance that RIAA commandos won't break into your house in the middle of the night and proceed to fuck you in the ass.

extra's

[bm_luethke]

To a large extent I think there is some truth to having an issue with making money by selling the virtual parts. It becomes even truer the more that is what you are selling.

However there is something to be said for convenience. I'm willing to pay some premium for always high quality recordings, no viruses, good selection, and other things that file swapping has a great deal of difficulty with. This depends on what you time is worth and how much is charged. Itunes has made pretty good with this even though many still do not use it (I don't - I don't like enough music to bother).

The other is many people (especially myself) like physical copies and the extra's that go with them. Nice jacket insets, quality backup (though this is much less the case now - most are skimping on quality control), hard copy manuals, all sorts of things. Just stuff I can not get by downloading.

And, lastly, support. For consumer items this may not be such a big deal - what support on downloaded MP3's? But for software with a business that can mean a whole lot. Really, what most businesses are paying Microsoft is thier support. This comes in several forms - large list of supported hardware, listening to important demands, and other types of things (little to none is getting phone support, you have your IT staff or another company to deal with that). For most businesses that switch to linux this also tends to be the case - Microsoft didn't listen to the demands, found some peice of hardware didn't really work well (for instance you need real time data encoding and you can not set the Kernel to the modes you need), or maybe need to dink with the code.

In short, there are lots of things to sell. In some markets it may not be that great, in others it may be where all the money is. It also depends on what you are viewing as your product - if it is only the string of bits being copied then you are screwed - DRM or not (it *will* be broken and once it is then back to unlimited supply, and probably broken quickly and much cheaper than the DRM that you produced). In the end, that is reality and you can not fight it succesfully. You can debate if it will end up good or not, but it will not stop it from occuring.

Public goods

[SiliconEntity]

Without DRM, information goods are what economists call "public goods". Public goods are non-excludable, which means that if you supply them to one person you are effectively supplying them to everyone. And they are non-rival, meaning that if you give them away, you still have them.

Public goods sound nice, but unfortunately they cause big economic problems. It is a classic theorem of economics that public goods are under-produced. There is no effective way to get paid for the investment needed to produce them because there is no way to charge for them. A canonical public good is clean air. Pretty hard to get people to pay money to clean the air, because clean air benefits everyone and cannot be limited to just certain people.

DRM turns information goods into private goods. Now they can be sold and owned. They become excludable. The investment needed to produce them can be recovered by charging for their sale.

Further, it is a theorem of economics that in the long run, competition will force prices to the level of manufacturing costs. As goods become popular, the investment needed to produce them will dwindle in proportion to the number of goods produced, and their prices will fall. In a DRM system, popular information goods will be inexpensive, and well supplied. There will be no shortages.

DRM is an optimal way to manage information goods.

Re:Public goods

[Jesrad]

Information is a public good, you say. I see nothing implying it shouldn't be a public good. You define under-production as a problem for information, are you so sure of that ? For one, information can be infinitely and freely reproduced, unlike the public goods studied by economics that suffer the "tragedy of the commons". Also, you're wrong in assuming there is no way to charge for it: material support for information is not a public good. I mean this in the very large sense. There always has to exist a physical support for information for it to reach one's mind, and that's how you charge for it, be it through concert tickets, a paper copy, a DVD, electrical signal down your phone line or whatever means currently exist for that.

There is demand for new information, so there is money to be made in the production of this new content. Once distribution of an "old" work is done, very little money can be made on its distribution, so production of new information is desireable by the distributors. That's where the concept of "first publication right" of the author becomes useful. This is a concept put forward by some members of both the french and german Pirate Parties. In practice, it goes like this:

Authors (whether promising new ones or established old ones, there's market for both) get hired for creating works by, for example, a private P2P network (where money is made through subscriptions, because people are paying for being the first to get their hands on some known artist's works, or because they value the selection that the network does), or a public ad-supported P2P network. Once the works are distributed, the network's users can record, copy, share for free or even distribute them for profit.

Think this model cannot work ? Think again, that's how television channels work, although I'm not allowed to sell DVDs of my recordings of series... yet.

Re:Public goods

[medarby]

...competition will force prices to the level of manufacturing costs.

IANAE(conomics)M(ajor)

Competition? What competition? Aren't we really facing multiple monopolies? It's not like Big Summer Movie #1 is offered by multiple companies. It's only offered by one. Competition is good if you consider the demand for ALL movies, but that's not really what happens. If I really want to see 3 movies this summer, I'll save my money and go to them, and not the 97 others that are released. Big Summer Movie #1 is not really competing with Big Summer Movie #2 or Crappy Art Movie #9864.

Each DRM product is a monopoly and not affected by other DRM products. The only thing to consider is the demand for an individual product and the fact the the supply for that product is monopolized.

stupid question

[RelliK]

How do you create a market for a product, and make money of a product that has a huge initial creative investment, but then no manufacturing cost, and is in infinite supply?

The same way it worked before DRM. You are making a ridiculous assumption that DRM is the only thing that prevents someone from distriduting copies of copyrighted works. That is utterly false. There is this thing called copyright law that works just fine without DRM. Photocopiers didn't kill the book publishers. Tape recorders didn't kill music industry. VCRs *multiplied* the profits of the movie industry, despite the fact that certain studios nearly had them outlawed.

For this reason your question is either biased or stupid or both. Turns out it is entirely possible to have a viable economy without infringing on the consumers' fair use rights or first sale doctrine. Who would have thunk!

Re:stupid question

[Dhalka226]

For this reason your question is either biased or stupid or both.

Well then let's be fair: I think your comparisons are biased or stupid or both.

Photocopiers didn't kill the book publishers.

Because there is a significant time investment in standing around and copying all of the pages of a book. Not to mention that when you're finished, you end up with a stack of papers, not a book.

Tape recorders didn't kill music industry.

No, they didn't. Then again, tape recorders--in terms of piracy (which is what we're really talking about when we talk DRM--require that I know you and live nearby you. They require that I be able to hand you the physical copy. This is still a problem with CDs.

VCRs *multiplied* the profits of the movie industry

Again, for me to pirate you a movie, I have to be able to give it to you. Sure, I could mail it or something, but that's more work and expense for me. That fact means it's largely limited to me pirating things for my close friends, family or neighbors.

The issue with digital piracy is that you can create as many exact copies as you want with no quality issues, and distribute them around the globe with essentially no effort. It also costs essentially the same to make and share one copy with one friend as it would to make 10,000 copies to share with 10,000 random people (ignoring data transfer costs--which most people, at least in the US, don't pay specifically for anyway; they pay for the speeds of their lines, not how much data they squeeze through those lines in a month).

I don't support DRM for many reasons, but to pretend that my ability to make exact digital duplicates of a CD (or DVD or what have you) and distribute those copies to anybody in the world with a 'net connection is somehow akin to what I could do similarly with VHS tapes or cassettes is naive at best and disingenuous at worst.

To avoid having to make a second post, I'm going to go ahead and give my answer to the submitter's questions:

I'm perfectly willing to pay for, for example, music downloads, assuming that the price is fair. Here is clue #1 for music companies: If it would cost me roughly the same amount of money to buy each track on a CD digitally as to go to the store and buy the actual CD, you're charging too much. I should not have to pay the same amount for lower-quality copies of songs with no case, no insert, no artwork and no CD-pressing manufacturing costs, that I would for higher-quality versions with all that. That is just plain silly.

Clue #2: I want to be able to choose the quality of the song I download. If I really love a song, I want to be able to get a high-quality rip. On the contrary, if I don't really love a song, or if I'm just downloading it again for some reason (for example I took my laptop to school and noticed a few songs I had forgotten to transfer over, I re-downloaded those), I'd like to be able to get a lower bitrate--and to pay a lower price accordingly. A bit rate range of 128 to 320 (for MP3) seems fair. If you want to offer lossless options, hey, more power--but I personally could not hear a difference between 320 and lossless, so it means very little to me.

Clue #3: Choosing formats is nice. It's not particularly important to me, but I know it can be to a lot of people--and really, when you get right down to it, if you're doing steps #1 and #2 already, then letting people chose their format in addition to their bitrate is simply not that much more work, neither to code for nor on the server doing the jobs.

Clue #4: Probably the most important one, and the one that most specifically addresses the question posed in the submission: Once I buy the song from you, IT IS MINE. Get the hell off my back about what I can do with it. I don't want DRM. I don't want you to tell me how many different CDs I can burn it to, or what devices I can play it back on. If you charge reasonable prices, permit me to choose my for

Folks still buy Hamlet

[Spazmania]

Why do folks still buy copies of Shakespeare's plays or Beethoven's symphonies? They aren't even protected by copyright let alone by DRM.

There is always a business to be made out of selling value, even if the content itself is free.

Besides, given a reasonable choice most people will be mostly honest most of the time. If they're able to buy music or a movie they want at a price they consider fair in the format they want most will choose to do so. Take the money where you can get it; don't worry about the rest. As for the rest of the folks, most of them wouldn't buy your music or movie if they couldn't copy it. Its not important to them; that's why they were willing to make do with a mere copy.

Re:Folks still buy Hamlet

[kfg]

Why do folks still buy copies of Shakespeare's plays or Beethoven's symphonies?

Because the printed editions of the works are covered by copyright.

If you wish to make your own transcription of Beethoven you can do that, because Beethoven's orginal content is in the public domain, but you cannot photocopy the sheet music you buy in the store because that is covered by copyright. Just try to enter a music competition with a photocopy of a score. Unless you have some form of proof that you didn't "steal" that score you'll get tossed on your ass for having a "stolen" copy of a public domain work.

Ain't modern copyright law grand? Publishers have found dodges to keep works that have been in the public domain for centuries effectively locked up.

This is why Project Gutenberg is now covering sheet music as well as literature. Unless people make transcriptions and donate them to the public domain, public domain musical works are not freely available to the public.

KFG

Re:Folks still buy Hamlet

[esme]

If they're able to buy music or a movie they want at a price they consider fair in the format they want most will choose to do so.

This is the point that I think most often gets lost in DRM discussions.

DRM allows media companies to set unreasonable limits on movies and music -- limits we'd never tolerate in a grocery store, clothing store, etc. Instead of relying on the basic goodness of the average user, the media companies are driving many people away from DRM'd content and into the P2P and other sources.

For example, I'd love to buy music from iTunes Music Store. The integration with iTunes and my iPod is wonderful. The selection is good, and the experience overall can't be beat. Except for the DRM. The first time my computer wouldn't let me play one of my songs, because it had gotten confused about how many computers were authorized, I realized the music wasn't really mine as long as it was DRM'd. Hymn/JHymn break the old iTunes DRM, but the new DRM is still uncracked (for now...).

So what do I do? I go to a lot more effort and inconvenience to get my music elsewhere, so I can do with it as I please. If I want MP3s so I can play them on my linux box, too, why does Apple have a problem with that. If I reinstall my OS and forget to deauthorize before, why do I need to convince Apple of this? It's this kind of crap that has convinced me that I'll never buy any content with (unbroken) DRM again.

-Esme

the carrot rather than the stick

[macadamia_harold]

How do you create a market for a product, and make money of a product that has a huge initial creative investment, but then no manufacturing cost, and is in infinite supply?

Simple: in addition to selling the music, you give people something else that requires no manufacturing cost, but is in finite supply, such as special "pre-sale" access to concert tickets. Fans are a lot more willing to give you their money when you offer a carrot, rather than threaten the stick.

Since when has DRM done anything

[CrazyJim1]

Only thing I saw DRM do is stop a Backstreet Boys CD from working on my exgf's portable CD/DVD player.

DRM doesn't stop online piracy anymore than a speedbump in your driveway slows interstate traffic.

But that's with ideal models.

[Anonymous Coward]

But those theories are all based around ideals of perfect or near-perfect competition. We are, obviously, nowhere near that in most markets. This is especially true of the entertainment field. The music industry is best described as an oligopoly, with there being a small number of major labels who hold a vast portion of the market. Sure, there are minor labels, but they push nowhere near the volume of the major labels.

It's questionable how well such elementary theories hold up when you consider the often convoluted legal and tax systems of many western nations. Those can have a significant impact on the ability of people to freely enter and leave markets, which in turn impacts directly on the validity of many of the Economics 101 theories.

Four ways to make money.

[thedletterman]

Given the presented variables, there are serveral ways to still make money.

1. Distribute the product yourself for free, request donations.
2. Merchandise goods that do not meet the same criteria.
3. Recreate the initial (creative creation) stage in live venues.
4. Control physical access to content.

Given the current "stage" with no shortage of supply of talented musicians, cheap manufacturing, and distribution mechanisms available, I'd personally like to see a revolution of internet radio where artists upload their tracks for free, stations stream their tracks to users, users rate their favorite tracks, and the station's advertising revenue distributes royalities to the artists and station manager. It creates like a democratic system of which artists get paid the most on which stations, and creates a very populist system for music completely destroying the 'mainstream' or even 'indy' model where station managers pick and choose their playlist and present that as the only options. As someone in the executive side of the music industry there's just way too much good talent and cheap processes for the ivory tower industries to remain standing. The business model is going to have to shift and adapt, or the people will throw everyone out of the ivory towers. No amount of intellectual property laws and drm is going to stop that.

The problme isn't what it appears...

[ThomasBHardy]

The core problem is the base assumption that record companies and via them, that music and movie stars deserve to make tens of million of dollars for doing what they do.

Sure you can talk about limited talent that drives up demand... and I can point you at any technical or challanging industries where that is true also but where the salaries for pop stars are not dished out to the coroprate IT guys.

Sure you can talk about how hard it is to train up for and performn in an action movie... and I can point you at any number of physically challanging and dangerous jobs. Just stop by the local fire station.

Somewhere in the past 60 years we developed the notion that stars deserve to be ridiculiously rich. Sure I wish them well, as much as any other person who does their jobs well. But they are not demigods. They are not superior human beings. They are just highly overpaid for their jobs.

The solution will be when a few things come together...

1) Digital distribution arrives fully, so that crowded theaters with annoying people and cell phones are a thing of the past unless you want to go to them, and can enjoy first run movies at home.

2) Prices of all media drop as the cost of perpetual CGI improvemnets removes the need for such extravagent movie costs

3) Stars of all types begin making more sane profits from their works than the current model.

Then we'll have the chance to listen to and watch what we want, in our own homes and it can be priced affordably enough that we won't mind paying for it versus downloading it illegally.

Like many, I do not mind paying for the content that I consume. But I do object to paying too much for it and for being forced to watch it in theaters (which I have come to detest) if I want to see it the same year it's released. And I am truly angered byu hamfisted DRM implementations that deny me the ability to enjoy what I paid for by telling me how I'm allowed to watch it.

The recording industries are sufering from clinging to the old model. They milked that model until it generated so much money that they are fat and deluded. They fight, and will continue to fight, the necessary revamping of the industry until their final breath. But in the end, progress happens, no matter how much you fight.

I've been thinking about this

[Aqws]

OK, just a heads up. I havn't fully thought this out, but here goes.

Data is not like apples and oranges, there is (almost) nothing lost when someone gives someone else data. All the cost is in the initial development. How about people pool their money together, as sort of a bounty for a certain product. And when someone writes that piece of software, they get that money. I know, who decides if they meet the requirements? How about having some kind of review board, like the lieutenants who deal with the patches to the linux kernel. Obviously there are a lot of details to work out, but I think I've posted the gist of it.

Copyright was invented to protect cost of printing

[Swordfish]

The whole purpose of copyright was originally to protect those people who invested in the typesetting of printed works against unscrupulous printers who would then set up their printers only for the proven best-sellers of the other printers who took risks.

Nowadays, the cost of typesetting and printing (or composition, arrangement, recording etc.) is borne by the artists, and the publishers do nothing of value that a kid in a garage can't do. So there is no further need of copyright to protect the printing investment. Anyone can record, print and distribute for essentially nothing.

The question is now whether monopolies should be retained when the cost of publishing is essentially zero. The answer is clearly no. If all copyright on music is removed, the result will be a flowering of music and literature from artists who otherwise would have been strangled and suffocated by the dominance of the monopolists.

In short, technology has made the protected markets of music and literature publishers obsolete. Considering the trashy sounds that pass for published music these days, I don't know why anyone keeps buying that rubbish. At least 10% of people nowadays can produce much better music in their garage. So why not just stop buying the commercial garbage and just get unencumbered music off the net for free?

Assume a spherical cow

[abb3w]

Further, it is a theorem of economics that in the long run, competition will force prices to the level of manufacturing costs. As goods become popular, the investment needed to produce them will dwindle in proportion to the number of goods produced, and their prices will fall. In a DRM system, popular information goods will be inexpensive, and well supplied. There will be no shortages. DRM is an optimal way to manage information goods.

...provided that you have no externalities, neglect information costs, have no economics of scale and scope, have goods that are homogeneous, all market utility is pecuniary-metric, time-value utility effects are neglected, and there are no barriers to market entry. Any takers?

Also note that one fundamental assumption of the original question (zero marginal manufacturing cost) is incorrect. Costs are de minimus, not zero; there are marked differences in economic effect.

Pay for labor, not for copies.

[Kadin2048]

I've discussed this in other threads before, but I think the way that you make money without DRM is by not trying to make entertainment on speculation.

Basically the entertainment companies go out right now, and make a movie/song/whatever, and spend a whole lot of money doing it, in hopes that they can then go and sell the end product over and over and over to make up the investment. There is really not any way to do this, without DRM. As I think DRM is fundamentally flawed, so is this business model. That doesn't mean it might not stick around for a few centuries, but it's eventually doomed.

The problem is that DRM tries to artifically limit the supply of something that requires very little labor in order to reproduce. The n-th copy of a digitally delivered Brittany Spears album costs virtually nothing; it's only the first copy that really costs a lot to make. (Okay, so this sets aside that the net value of any given Brittany Spears album may in fact be negative.)

In the past, since the recording companies basically controlled the means of producing more copies (vinyl/CD stamping factories), they could artificially inflate the cost of the marginal (that is, n-th) copy, in order to pay for a bit of that first one. The only reason this works is because they have a monopoly on the means of producing more copies. That's it.

What digital delivery, and computers/the Internet in general, do is make widely available the means of production. (Apologies if I'm sounding a little Marxist here, but it's tough to avoid the terminology.) When anyone can make that 'one last' copy, you can't fix the price of it anymore. You just can't. DRM is an attempt to put a finger in the dike, to make it artificially hard again to make an additional copy, but they have a whole lot of information theory working against them. There is no practical way, that I can envision, to allow people access to digital media which does not inherently give them an opportunity to copy it, particularly since copying is inherent to the digital distribution process. And this is only going to get more difficult in the future.

So given this, what to do? The answer is to make people pay in advance. There will always be a demand for new content; even with the entire past produce of human civilization on tap, it is the nature of people to want things that are fresh, that have been created specifically for them (whether individually or as a group). Rather than trying to make money up off of the marginal copies, which have little to no inherent value, charge for the first copy. Charge interested parties, in advance, for creation of the work. If people aren't interested in funding its creation, it doesn't get made. If fans want an artist to continue to produce, then they can pay to commission more albums. Rather than paying an inflated cost for each copy, which has some portion of the original labor's cost built into it, they will pay for the cost of that labor up front. It is the labor which is valuable, not the copies.

This of course would force a re-evaluation of both how we think of the relationship between artists and their public, and also of how much art we as a society produce (right now I think it's clear that we produce a surplus; we produce more new art than the public really demands, and one must understand that in a pay-in-advance system, this would no longer be supportable), but I don't think there's anything fundamentally wrong with it. As people demand new content, they will pay for it to be created. Either they will pay what it costs to create it, or it will not be made.

This is the way the market should work: as people desire novelty, the business models would be formed around the demand. Instead of a top-down approach, it's bottom-up; allowing consumer choice and demand to drive how people will make money. There are lots of ways that they could do it, from straight work-on-commission to more subtle crediting schemes, or donationware/threatware (e.g. "I'll write the next installment of the

Re:Pay for labor, not for copies.

[shmlco]

The basic problem with your premise is that now an author (let's say) need only convince a small, select number of people that they should finance his work for a year. Further, once that work is completed there are many mechanisms the market can be use to judge that work (reviews, word-of-mouth, ratings, picking it up in a store and flipping through it) and find out if it has value to them, and is worth the twenty bucks.

Now, let's compare that with an assurance contract, where I have to convince a LOT of people that I can produce something of value, doesn't generate an advance so I can actually get on with creating it, and really provides no guarantee to the end user that it will be a quality product, or one suitable to you (you were expecting killer hard-code SciFi, not a time-travel romance novel). Once I produce it according to the contract, you have to pay for it, with no recourse.

I don't see paying in advance as the answer either, as it limits the available selection to "known" authors who've already made a name for themselves. Stephen King might be able to get a 100,000 people to pay in advance for the next chapter of his new book. A new and unknown author certainly can not.

Further, I tend to see it generating "more-of-the-same" content. Weber may be getting ready to branch out, but what happens when his fans only want to pay up front for more HH? How much of the storyline of The Matrix do I have to reveal before I can convince several million people to kick in $20 up front?

Finally, the up-front "salary" kills the dream as far as I'm concerned. Every author, singer, actor, and director dreams of the "great american novel" or hit song or blockbuster movie. Those dreams convince them to take risks and experiment with new ideas. I don't want those dreams dampened with a "just a job" mentality, working for minimum wage...

Re:Pay for labor, not for copies.

[JDisk]

Stephen King might be able to get a 100,000 people to pay in advance for the next chapter of his new book. A new and unknown author certainly can not.

Well, not $100000, but even relatively unknown, 'midlist' authors can make money that way. An example would be
Lawrence Watt-Evans, who published one of his books, The Spriggan Mirror in small pieces, only releasing the next chapter when he got enough money. We are talking $100 per short chapter here, so it is not in the order of millions, but he was happy with the result and is thinking about doing it again.

Note that he is a professional writer and did not do this as a hobby.

Re:Pay for labor, not for copies.

[arkhan_jg]

These problems are the same as any small business has getting off the ground. How do I get new customers when they could just go to the big chains they already know?

The answers are the same. You take out loans to pay for marketing, promotions (giving stuff away free), and then pay them off when you're established and making a profit. You might even have to work two jobs to support yourself while you follow your dream and get established.
Not everybody makes it. Either they have a product that not enough people want, or people didn't find out about it, and they go under. That's the free market.

It's very little different to how artists work today. Unknown artists struggle to get exposure, so do bread-and-butter work and 2nd jobs to get by.
Giving away some of your work for free, especially digitally where it costs you virtually nothing, is great marketing. The 'tip-jar' method does work sometimes, as does getting people to pay for higher quality versions of your material. Give away the low-res one, maybe with adverts embedded (hellooooo, radio) and use that to get people to pay for the high-res version. After a few cycles of that, people will pay in advance for the new one to get it made, or released if already made.

The old method of charging many times what something cost to produce is dying. The whole point of the free market is for new businesses and new business methods to be tried out, and live or die in the attempt. DRM is the complete antithesis of the free market as it uses government law to prop up an artificial and failing business model, and removes the freedom of the customer to choose alternative providers. DRM on physical products warps the meaning of physical property itself for the purposes of the big media cartels.

My singlle player version of Half-life 2 DVD is a great example of the evils of DRM on physical media. It's encrypted, so I can't use it without Valve unlocking it for me online. I can't resell it, as my key is now used. I can't even give it away, as the key is tied to my steam account which has other older versions of my games in, and I can't delete the key or move it. The physical DVD in my hand might as well be a blank piece of plastic with a number printed on it, and to add insult to injury, when the game was first released I had to put my DVD in the drive for the DRM check, while people who'd bought it online didn't. It's over a year later, and I'm still pissed at Valve.

Re:Pay for labor, not for copies.

[n0rr1s]

I don't see paying in advance as the answer either, as it limits the available selection to "known" authors who've already made a name for themselves.

First, that's true for current authors/artists too: it's very difficult to get a company to back your multi-million $currency movie without some prior work to show them. In this new system, artists would have to produce their first works out of their own pocket or with a loan, and gradually work their way up, much like an entrepreneur starting a small business (as another reply pointed out).

Further, I tend to see it generating "more-of-the-same" content. Weber may be getting ready to branch out, but what happens when his fans only want to pay up front for more HH?

Then he has the choice of working for the money and doing what the fans want, or pursuing his own interest and working for less this time. Sure, many will follow the money, but those who feel most passionately about their art will not. And again, this is similar to today's situation in which we see many movie remakes, sound-alike artists, etc.

Finally, the up-front "salary" kills the dream as far as I'm concerned. Every author, singer, actor, and director dreams of the "great american novel" or hit song or blockbuster movie. Those dreams convince them to take risks and experiment with new ideas. I don't want those dreams dampened with a "just a job" mentality, working for minimum wage...

I don't think it would "kill the dream": an established artist in great demand could charge a large upfront fee for their work. Many artists make a great deal of money from their fame in other ways too. And if does turn out to make them less rich, I'm ok with that: I'd prefer them to be in it for the art rather than the money anyway.

I think grandparent is on the right track. I'd love to see that sort of system in place, though I know it will take many years for that to happen (if it ever does).

Re:Pay for labor, not for copies.

[SolitaryMan]

As I think DRM is fundamentally flawed, so is this business model. That doesn't mean it might not stick around for a few centuries, but it's eventually doomed. The problem is that DRM tries to artifically limit the supply of something that requires very little labor in order to reproduce.

In other words, DRM tries to enforce conservation law on the matter that does not obey conservation law -- information. The problem is that for many years social laws were based on two fundamental principles: property(things) and service(energy). Both obey conservation law. Now, information does not. What surprises me is that instead of trying to adopt social laws, we are constantly trying to adopt mother nature and enforce conservation law on information. DRM goes even further: it tries to deny the fundamental "share with your neighbour" principle. This approach is never going to work, but what frightens me is that playing gods like this can lead to major disasters.

Re:Pay for labor, not for copies.

[Kadin2048]

While I certainly can't argue with you about your personal feelings on commissioning work or not, I think you're very mistaken to say "Since the dawn of time it's been like this. If you create something, you take a risk doing it. If people like it, it may pay off." That's quite untrue. In fact, the whole 'at-risk' business model of entertainment is fairly new in terms of being universally dominant.

Throughout most of human history, artists made great works basically on commission, at least until they had developed enough of a reputation to ensure a market for their work. We hardly even remember the people that bankrolled the creation of much of our reportoire of classical music (unless it happens to be named for them), and yet without them it might not exist.

Traditionally, a person might get their start by working on direct commissions that offer very little creative control to the artist. An example might be a commissioned portrait, or a piece of music where the end-product is spelled out rather precisely ("I want an opera in the Viennese style, about ..."). The client takes very little risk, because the acceptance criteria are clear, and the artist gets some income and develops their reputation. Provided that they can develop a market for their work, then in the future they can produce in advance, knowing that the next time someone comes through their door, they'll be able to sell them the previously-produced symphony/painting/whatever.

You say that you wouldn't put a down payment on a creation that hasn't been made yet, but I suspect that you do this all the time without really thinking about it. If you've ever paid a wedding photographer, you've done exactly that; you're commissioning artwork, by paying in advance (or agreeing to pay) for somebody's time. If you've ever had a house built, same thing applies: you're paying a "creator" (the tradespeople/contractors who do the construction) to make a "work" (the house), according to an agreement (perhaps plans, or perhaps just your general idea of what you want). A better example might be an architect; they design you a building based on your (potentially vague) criteria and desires, in return for payment. This might not seem very 'artistic,' but it's the exact same concept. And in the economic model I'm suggesting, there's really not much difference between a general contractor and an architect and a painter and a performance artist. They are all skilled tradespeople, and all get compensated for the time that they spend on projects, based on the demand that exists for their trade.

The current economic system favors tradespeople who can produce works which are easily reproducable: you can't take the same house and sell it 10,000 times over, but you can do that with an audio recording; thus a recording artist seems like a more potentially lucrative career than a carpenter. However, once technology collapses the inflated-value bubble that one could previously create by selling copies, the recording artist is left in the same posistion as any other skilled person; their income arrives as a direct result of finding people who will pay for them to do whatever it is that they do.

Re:Pay for labor, not for copies.

[Kadin2048]

This is an excellent point. I honestly don't understand that much information theory, but when you put it in those terms, it makes the flaws in the "intellectual property" business model seem even more fundamental than they already are.

There are certainly ways to monetize information, but attempting to simply force it into a 'conservative' (in the 'conservation law' sense, not the political or economic one) distribution and business model, as if "information" are widgets that can be bought and sold on something approaching a commodity market, is not the way to do it.

Rather, services which interact with information in some way are salable. E.g., when you pay some one to research a topic for you, you are paying not for the information that they return, but for their labor involved in finding and summarizing and presenting it to you. (Though it may seem to be the information that you're paying for, since that's why their labor has value to you.) The information itself, once transcribed into a non-conservative realm, has little real inherent value; the way to monetize it revolves around where the information interacts with more traditional property and service markets, not by attempting to sell the information itself.

Re:Pay for labor, not for copies.

[Dravik]

This is how all artists made there living until about a century ago. This kind of system created all the great artistic masters of history and fed the millions throughout time we have never hear of.

Don't be too quick to draw that line.

[Shivani1141]

But you forget, the Major venue that a classical musician in these days will make his or living is in Performances. A mentionable chunk of those same musicians will also supplement thier income with Musical tutoring. a Cellist(for example) primarily makes his living working for an opera, an orchestra, or some other like institution. If they don't, they arent considered professionals. To a Classical Musician music is not something they own a copyright to. they perform the works of others, they provide music as a SERVICE. And as for the extremely expensive, rare instruments? Afaik, and I am not an expert on such matters, those rare instruments are provided to classical musicians by patrons of the arts.

Because no one would write songs without DRM!

[twitter]

It is a classic theorem of economics that public goods are under-produced.

Oh, do tell. You obviously have the public good formost in your mind. Still, I don't think your abstractions hold up beyond themselves and are meaningless.

How do you explain music, poetry, stories and all that which people created before machine presses and copyright? People have been singing and dancing forever and they will continue to do so despite your inability to profit from or diminish their joy.

DRM turns information goods into private goods. Now they can be sold and owned. They become excludable. The investment needed to produce them can be recovered by charging for their sale. ... DRM is an optimal way to manage information goods.

Let's turn this on it's head. If it were possible to effortlessly and infinitely reproduce bread, would you degrade that process? Do you think it's more important for big commercial makers of wheat and bread to profit than it is for others to eat? Why do you want to do that to information? Music and knowledge are bread for the mind and soul. It is insane to limit their distribution for the benefit of "owners." Ideas are not property and trying to make them so is stupid and wasteful.

I'd like to tell you that DRM will be circumvented by customers, but the market will do it first. Companies that cling to DRM will have no customers when confronted by reasonable competition. Now that's an optimal way to manage information.

Merchandise

[Paul Slocum]

Here's a good example. 95% of their content is free on the internet -- 5% accounting for extra content on the DVDs and CDs. Never even had any ads on their site. And they make a healthy living off merch. They quit their day jobs on just T-shirts!

As people have said, no DRM doesn't mean everybody's going to throw a pirate party and that selling digital content is over. But there are even business models that allow for giving the content away.

Marketing, convenience, traceability, FUD

[okoskimi]

Like someone already said, you don't need DRM to protect copyright. It is just one method (albeit an efficient one) of enforcing it. You can also sell digital content without DRM and still sue people who try to sell it in an organized fashion. This is in fact how a lot of digital content is handled today. Effectively, the people supplying pirated copies are your competitors who have a huge advantage in price but suffer a similarly huge disadvantage in marketing, convenience and legal status. And the pirates actually also suffer a disadvantage in price, because they cannot get any money for the content itself (who would pay for pirated music?), although they can get some money from advertisements.

Hey, Apple sells lots of music, even though they same music is also available for free as pirated MP3's.

So, your basic formula for success is something like:

1. Marketing. This is the only way to reach the great masses, and pirates can't do it efficiently (well, they can send spam...). Also, since the content is free to reproduce, you can keep you customers happy by frequent bonus offers, discount clubs, monthly freebies, and the like. A nice example of taking advantage of free reproduction is the DaZ3D website which sells Poser content. You have got to admire their marketing savvy. And the success - I mean come on, their business case is so good they have created a free version of Poser (DaZ|Studio) just to sell more content! And none of the content is copy protected mind you.
2. Convenience. Giving the users convenience means you have to put effort into organizing the content, into web site design and management, making sure content installation is painless, etc. Effort requires money. If you are a pirate, you are likely not making enough money to do this.
3. Traceability. Discourage people from copying your content to each other. If all content contains a hidden watermark which identifies the original buyer, people are a lot more reluctant to copy content even to their friends (how many of your friends do you trust not to copy the content any further?).
4. Create as much FUD about pirated content as possible. Only legal content is virus-free. Pirate web sites install trojans which will steal your money. Etc. There is enough basis in fact to make it work. And it works in politics well enough...

Just ask Linux

[Kamiza Ikioi]

Not a biased question at all. It's the question asked daily at Novell, RedHat, IBM, etc, etc. Some sell backend services and support (equivilant to live concerts for artists). Some only charge for hard copies, but give the content away for free download (buy the CD, but feel free to purchase the CD with art, lyrics, a wall poster, and extras). Some don't make money at all through their users, except for donations, and the jobs they get because of their expertise (think Christian musicians who basically give away their music to radio stations free, because most stations, like most people, aren't rich... but make money back at wildly sold out concerts of very devoted fans).

There's an economy when the creation costs much, but manufacturing and distribution approach $0. Linux already does it. Music and Movies just need to figure it out as well. And, I have to say that the creative quality and scope in Linux far exceeds that of companies still under the old supply/demand model. Maybe the same could happen with media. Just look at all the crap music that's "popular" (I don't know with who, I suspect major $Payola$). The real break out artists are broke, indie, collaborators (including rotating band members) and just love what they do.

I wasn't even going to mention The Grateful Dead... that'd be too redundant and obvious here, regardless of the fact that its exactly what I'm talking about.

Re:Love, not fear

[gfxguy]

Yeah, that's great, I feel so good that the artist makes $0.001 for each song downloaded, while the RIAA gets the lion's share so that they can hire more lawyers pay more royalties to companies coming up with new and better DRM.

No, I don't illegally copy music, I do use itms (and other legal services), I mostly have just stopped buying music because I realized that full CDs are almost always a rip off (yes, I've bought CDs where I like every song on them, but they are few and far between), and downloads are crippled enough that it's not even worth the $1 they want. In order to use my itms purchases on my mp3 player, I need to burn and rip a CD. The quality just isn't there.

I like these guys who are producing their own stuff. I like the idea of completely bypassing the riaa. That's the model we should strive for. I even go way back before mp3s were popular and I've bought CDs from artists on the web. $5 could buy you a very interesting CD at the time.

Hi, my name is Lizzy Faire!

[Travoltus]

Tell it, patriot!

No profit means no music.

That's been true since the dawn of time.

[parody off]

DRM Doesn't stop anything

[homebrandcola]

The question implies that DRM stops people releasing unprotected tracks to the Internet for illegal download. But it doesn't. It is a trivial matter to bypass any DRM and extract the content. No ammount of DRM has even slowed illegal downloads, if anything it has added to it. People would rather have a non-DRM copy. If you want to know about an economy without DRM talk to emusic, or Audio Lunch Box. It might not be all the music you are interested in personally, but they have a business model based on non-DRM music downloads.

InterWeb, as well

[kripkenstein]

Given the presented variables, there are serveral ways to still make money.

1. Distribute the product yourself for free, request donations.
2. Merchandise goods that do not meet the same criteria.
3. Recreate the initial (creative creation) stage in live venues.
4. Control physical access to content.

Let me add

5. Monetize the website

- which seems forgotten in the other responses to this thread, as well. How would this be done? In many ways:

a) Ads.
b) Paid subscriptions for early access to material (works on Slashdot), bigger avatar on messageboards, etc. etc.
c) Leverage the other things mentioned in the parent post - advertise and sell your merchandise.

If the official website is slick, it can make a lot of money for an artist. Release a live tour video once a week or so and you will have massive traffic (assuming the band has fans). Put the license for the video as 'free to download, but illegal to redistribute', and you get tons of downloads but no fansites that just mirror you.

This is the 21st century. It is time artists and labels got with the new program.

Why DRM is counter-productive

[pen]

Let's say I just heard a song I really liked. I liked it so much that I want a copy of it to listen to again. Maybe even the whole album. Ok, what are my options?

I can buy a CD from a store or order it from Amazon. This means I have to either put on some pants or wait for days. And my computer doesn't have a CD-ROM drive. And this is really inconvenient.

I can sign on to iTunes or similar and buy the song. Except it's DRMed so I can't get an MP3. And that album was released by a label that doesn't participate in iTunes.

I can buy the MP3s from a grey market place online such as allofmp3.com. This is pretty much illegal, I have to pay for it, and the artist still doesn't get jack. Oh, and their selection is better than most stores but still sucks.

Finally, I can log on to my P2P network of choice and more than likely download whatever I want, in decent quality, pretty much instantly.

Now, should I support a corrupt, backwards, outdated industry that is working overtime to make my life a pain in the ass by lobbying for all kinds of crazy laws and filing lawsuits left and right, even if this is less convenient to me?

Re:Why DRM is counter-productive

[BadAnalogyGuy]

Please accept my sincerest apologies for the inconvenience of not breaking the law. Is it inconvenient for you to wear pants? I apologize profusely and wave my magic wand (no, mine not yours, you sicko) and you can now walk around pantsless all you like outside.

Do you find it inconvenient that you don't have a CD-ROM drive? I don't know what kind of cheap-ass system you have there, but by all means go ahead amble into your local Best Buy with your dick swinging free and grab whichever stereo system grabs your eye. Hell, take two. My apologies that it was illegal and inconvenient to do that until now.

I bet paying the phone company is pretty inconvenient as well. Stop paying! Hey, sorry it was set up that you had to pay each month. Now it's all yours, no charge. We'll still need a credit card number, so steal one from an old lady at the Best Buy parking lot.

Yeah, things were pretty inconvenient. Sorry, man.

You can't DRM my stuuf if I don't want you to.

[jotaeleemeese]

You are speaking from the perspective of somebody that would seem to have a vested interest in the succcess of DRM.

For millenia "content creators", as you call artists and thinkers, in a very RIAA-MPAA-ish kind of way, had zilch protection against the unaauthorized copy and dissemination of their output, and yet many of them have always found ways to make a living, very handsome at times.

Galileo's works for example were copied all around Europe and translated, more often than not without his consent. He was not a happy bunny, but the popularity of his works earned him a reputation that allowed him to teach in the nascent universities of his time and to be the scientist to the reach and famous. Heck, they even attracted the ire of the Inquisition.

My point is that the only thing that is not reproduceable is the individual himself, ideas (which is what works of art and science essentially are) have this pesky habit to be propagated if they are interesting or useful. For bunnies sakes, that is what makes us human, our capacity to learn and propagate useful knowledge.

Copyright is a completely artificial construct, has no base in how ideas are distributed, and is based in concepts first born around the Industrial Revolution, era in which everything, even ideas, became trinkets that could be traded. If there was no copyright wathsoever artists and scientists would still find ways to earn a living, their reputation would preceed them (notice that in a world without copyright you still keep the right to be recognized as the author of the ideas produced by you).

Lets grant for a moment, for the sake of argument, that copyrights are a necessary construct. Organizations of intermediaries like the Record and Movie industries, authors guilds and unions, have pushed copyright to obscene lengths. What is the rationale to keep compensating a dead person's relatives (or legal entities that somehow manage to get hold of the copyrights) well after their deaths? What is the justification for keep extending creators rights ad nauseam to make them for all practical purposes, indefinite? (and there are some goverments that are even considering charging for using works in the public domain, because if it is public, then it must surely belong to the state, right?).

Enters DRM.

You paint DRM like if was giveth in the 10 commandements by god burning in a bush itself (do not correct me dear /.ers, this is poetic license).

You are wrong. DRM is the construct of the companies that want to keep a monopoly in the distributions channels. If they were interested in the artists and creators at all, they would long time ago have demanded standarization of the DRM methods. If Apple could dump DRM, they would do it in a heartbit, the proof is that it is so simply to get non DMRed music from iTunes stuff that it is not even funny.

What DRM provides is also a means of control of the artists, in a world were everything is DRMed, trying to provide content that isn't may become a competitive disadvantage due to the hassle that may probe to play such content.

As things stand sites like emusic (2nd most popular after iTunes), magnatunes and the individual efforts of artists (musicians, writers, film makers) that distribute their content free of DRM bullshit, proof beyond doubt that DRM is not indispensable for artists and anybody producing ideas.

It may be indispensable for the monopolists, but that does not mean we should assume is a given, specially if it inconvenience us, the consumer.

Re:Wrong, that's a myth

[Jah-Wren Ryel]

The rational consumer is a defective myth, people regularly pay for things they can have for free, just ask Evian.

Indeed, the rational consumer is one of those things that only exists in the laboratory of the mind. Not because people are irrational - individuals may be irrational, but as a group they are rational - but because the environment is never so "clean" as in the economics text books. There are always real-world costs (and perceived costs due to bad information, like advertising, brand-loyalty, and bad risk evaluation (c.f. the lucrative market for extended warranties)) that the text books don't usually dwell on.

But, for the most part, if you could measure all of these additional costs and factor them in, then the model of the rational consumer should still hold. It is just that it is almost impossible to measure ALL of those costs, that measurement itself being a cost that may dwarf some of the actual costs, which means that a rational consumer will often just "wing-it" as a cost-savings approach.

The rational consumer argument breaks down quite quickly when you aren't dealing with super-huge commodities markets where the consumers and producers take great care to be dispassionate about the commodities they trade.

That is essentially the same point I made when I mentioned feasible scale.

However, I would argue that even niche markets are subject to the rational consumer model, its just that smaller markets allow for other cost factors - one of them being that if the niche is small enough, then people can feel comfortable that the risk of the "tragedy of the commons" kicking in and screwing up an "honesty" based approach is minimized, and so too the costs of "honesty" are reduced below the potential value of "honesty" - which really ought to be called cooperation at this level.

Re:Wrong, that's a myth

[Schraegstrichpunkt]

The rational consumer is a defective myth . . . just ask Evian.

. . . or any advertiser.

More factors than supply/demand

[ben there...]

You're right in a sense that there's no problem creating demand. There is a problem limiting supply.

But another important aspect of the equation is that "something that can be infinitely and freely copied" costs nothing to the artist to (re-)distribute. Whether 1,000 people or 1,000,000 people hear it, that costs the same. It is no more work for the artist.

Like any business you can make more money by selling your products for less (on average--only some people actually buy it) but selling many more of them. So if you can sell 1,000 or freely redistribute 1,000,000 and convince 2,000 of those to pay for it, congratulations: you just made more money by letting people redistribute it.

Does anyone find it odd that those that redistribute music are actually doing the record label's job, for free no less?

What's The Question?

[Bob9113]

How do you create a market for a product, and make money of a product that has a huge initial creative investment, but then no manufacturing cost, and is in infinite supply?

What is the product you are attempting to sell? What question are you asking?

Consider how most software engineers make money. We are performance artists. We are paid to perform a creative act. Most of the world's software (in terms of lines) is never sold on a per-copy basis. Most lines of code are written on a performance basis; custom enterprise code.

Historically, this is also how musicians were paid. It is how most musicians are paid even today (far more musicians play in bar bands than have record deals). It is an extremely efficient economic model, because it is a free market model. Most musicians exchange their time performing music for compensation; playing out in bars across the country. A musician's time is a naturally limited commodity, and there is demand for it. Hence, there is a natural price. That price is reached almost perfectly in our currency-based free-market economy.

One interesting recent development in this model is the ability to distribute music inexpensively. This grants the performing musician the ability to advertise for a very low price, recently approaching zero with the advent of the Internet. Musicians can now audition for gigs in distant cities at the drop of an email. They can build their local audience by giving away CDs at their shows - CDs that can be produced for far less than the total cost of producing and broadcasting a television, or even radio, commercial. (for additional material here, consider the potential for performance musicians to advertise by having their music played on the radio, and consider how the relationship between the record labels and the radio stations may affect that channel)

In the past 100 years, another model of trade in the music industry has evolved; the sale of copies of performances. It is backed by a government enforced fiat monopoly. That is, it is not a free market model. The model remained fairly practical for the first 60 or 70 years, while the cost of duplication for the home consumer was high. As long as the cost of duplication was high for the majority of customers, the inefficiency of the monopoly was hidden. The monopoly price did not dramatically diverge from the consumer's perceived value, because the cost of small-scale reproduction was dramatically higher than the cost of large-scale reproduction. The monopoly market has always been enormously inefficient, but that inefficiency was hidden by the fact that the vast majority of consumers percieved themselves as paying for the duplication. The efficiencies of scale overwhelmed the inefficiency of the fiat monopoly.

Now this is all changing. (for more material here, consider the lobbying and legislation that accompanied the invention of radio, and the subsequent symbiotic trust that has developed between radio and the record labels)

After radio, the next big exposure of the fiat monopoly's inherent inefficiency came with audio and video cassettes. Another round of legal wrangling occured, but it was slightly different - Washington came out more on the side of the fiat monopolists this time. They instituted stricter copyright infringement legislation.

In this, the latest round, cost of duplication has effectively hit zero. The inherent inefficiency of the fiat monopoly is now completely exposed to most of the target market of the music industry. Once again, there has been a great deal of wrangling in Washington. And it has shifted further in favor of the fiat monopolists. It has shifted so far, in fact, that many more consumers than during any previous shift are engaging in civil disobedience.

All of which is to say, are you sure you are asking the right question? Should the question be, "How do we make this inherently anti-free-market model work?" Or should it be, "Why are we using police force to artificially support an economically inefficient model,

Re:Wrong, that's a myth

[Anonymous Coward]

The rational consumer is a defective myth

No, it's a statistically valid theory (i.e. is a better predictor of consumer behaviour than random selection of outcomes), but it doesn't fully explain consumer behaviour by any means. I very much doubt you could find a single economist anywhere in the world who would claim that consumers are perfectly rational, and thus that a rational behaviour model perfectly explains consumer behaviour.

If history has shown anything then it's that ... consumers aren't rational.

Not at all. You have three basic relationships that are possible w.r.t. the rationality of consumer behaviour:

1. Consumers are perfectly rational: the rational consumer model correctly explains/predicts consumer behaviour 100% of the time

2. Consumers are neither rational nor irrational: the rational consumer model explains/predicts no better than random selection of outcomes

3. Consumers are perfectly irrational: the rational consumer model incorrectly explains/predicts consumer behaviour 100% of the time

As with most theories, the reality is likely to be either 2 (the default assumption), or some point between either 1 and 2, or between 2 and 3. If the explanatory/predictive power of the theory is anywhere other than 2, based on statistical tests, then it is a valid theory, and should be used for explaining/predicting consumer behaviour until such time as a more valid theory (i.e. one with a higher level of statistical significance, or alternatively, with greater explanatory/predictive power whilst remaining statistically significant) is found.

As an aside, the use of game theory in economic models has helped to explain how the expected reactions of other market participants can lead rational consumers to make sub-optimal choices. This doesn't mean they're not rational, only that expectations of the way in which other participants will behave are important variables in any model attempting to explain or predict rational behaviour.

Product Integration

[jacobw]

Actually, the entertainment industry has several decades of experience in making a profit from two products that can be infinitely reproduced with no marginal cost. Those products are called "TV" and "radio."

Think about it. The cost to broadcast The Jack Benny Show were the same whether one person had his radio turned on or a million--and once those listeners had bought their radios, they could listen to radio all day long without paying any additional costs.

So how did Jack Benny make a living? Advertising.

So the real difference between the pre-digital age and the post-digital age isn't the ability to make copies. It's the ability to fast forward. Seriously. If you couldn't skip the ads, then an additional million people watching Survivor over P2P would be just as profitable for CBS as an additional million people watching it on TV. (Obviously, CBS would need a way to measure the P2P viewership in order to charge advertisers, but they'd just pay Nielson to develop a way of doing it.)

And that's why product placement is the way of the future. I chose Survivor as a deliberate example because there's already a lot of built-in placement there. Reward challenges don't just involve food or money; they involve Fritos and Visa credit cards.

Now, there is still money to be made by interstitial ads, as evidenced by the fact that the broadcast networks still have them. But as more and more people get PVRs, or download shows via P2P with the ads already edited out, product placement is going to become a bigger and bigger percentage of media companies' profits. And at some point, we'll be back to the old days, when shows had titles like The Maxwell House Concert. (Yes, that really was the name of a show!)

People in the entertainment industry know this already, which is why (for example) the union representing TV and film writers made a major push to be included in conversations about product placement. The Writers Guild didn't pick this issue at random--it's the way of of the future.

An interesting question, though, is whether the networks and studios will own that future. I would argue that the most profitable entertainment product of the past several years didn't appear on TV or in the movie theaters. It appeared on Revver.com. I'm referring, of course, to the Eepybird Mentos Fountain video, which cost $300 to make and had already generated $15,000 in advertising revenue for its creators by June (as well as an additional $15,000 for Revver.) By my estimate, it has since earned an additional $15,000 for the Eepybird guys, bringing their total profit to $29,700. That's 99 times their initial investment. By way of comparison, Pirates of the Caribbean 2 cost about $225 million to make. To be as profitable as the Eepybird video, it will need to make more than $22 BILLION.

I don't think the major entertainment companies will vanish. Hollywood, as an institution, has proven remarkably resilient. But I do think that, 20 years from now, the entertainment industry is going to be a lot more decentralized, and a lot more driven by small groups of creators doing relatively low-budget stuff.

TCP does not work.

[hummassa]

Repeat with me, once again: TCP/DRM does NOT work.
Why? Simple.
Cryptographically, DRM means you have the cyphertext AND the key... so, YOU have the plaintext also.
But one'll say: "but the thing is protected, inside an IC, etc. .etc.". So I say: The analog/digital loophole. How? Simple. Even if your audio output is digital and encrypted, you pry open your digital loudspeaker, reverse-engineer the digital datapaths till you find the DAC and plug some wires there. Even if it is completely integrated in the same IC, you rip off the coil from the speaker, and wire your ADC there so you have a reasonably-high-quality analog input.
Even if all plasma/LCD tv sets are all-encrypted, they'll have to put _some_ color in _each_ pixel in the end, so you just yank the screen off and see how is color represented for each pixel. End of story.
Now, I know that the USofA (and Australia? and where else?) they have that insane DMCA thing, but this depends on each one to combat idiot legislation. I am doing my part down here (I keep an eye for legislative insanity, and scream as loud as I can when I see one)

Re:TCP does not work.

[LordRobin]

Repeat with me, once again: TCP/DRM does NOT work. [...]

Simple. Even if your audio output is digital and encrypted, you pry open your digital loudspeaker, reverse-engineer the digital datapaths till you find the DAC and plug some wires there. Even if it is completely integrated in the same IC, you rip off the coil from the speaker, and wire your ADC there so you have a reasonably-high-quality analog input.

If there's a better argument for why DRM does work, I've yet to hear it.

Remember: Security is not about making stuff impossible to steal, it's about making it so difficult to steal that it's not worth it. The fight against piracy is being waged in two ways: first, make it so hard to make copies that only the elitist of techo-geeks will bother, and second, drive file-sharing sites far underground to avoid the law. You can't eliminate piracy, but you can push it so far out of the mainstream that 90% of your market doesn't know how to do it.

Re:TCP does not work.

[gutnor]

You summarized the wet dream of xxAA, Sony, Microsoft, Apple, ...
with a minor correction

"we can preserve intellectual property creation as a valid way to make a living"

should be

"we can preserve intellectual property creation diffusion as a valid way to make a living"

Intellectual property creation has been a valid way to make a living since thousands of years. That's diffusion that is a relatively new problem. Intellectual property laws are usefull to prevent diffusion companies to use your Intellectual property to make money instead of you. Idea is not bad in theory, but has been perverted too much in the recent year and nowadays seems to serve only the opposite objectives.

Re:TCP does not work.

[Kamots]

Ah... but all you've done is made it impossibly difficult for the average person to exercise thier fair-use rights. Format-shift? Time-shift? Space-shift? Nope! Make a clip for a school presentation? Nope! Make a backup? Nope!

Also DRM isn't about making something difficult to copy (not steal... but that's a different arguement). DRM is about making it difficult to crack the DRM. Once the DRM is cracked, it's easy to copy. That's the inherent flaw of DRM schemes.

But... the hardcore hacker community will see this as a challenge and set out to rip and release as much as they can. We see that today with rips of movies being released before they're even released to the public, with CSS being cracked, etc, etc. There's a lot of people who are willing to spend thier time on these pursuits without financial compensation. They're not going to magically go away if/when DRM gets tougher to crack.

Finally, as others have pointed out, once you've got a copy with no DRM, then we're right back to the filesharing we've got today.

All DRM will do is keep paying customers from executing thier fair-use rights and not do much to stem the flow of illegal copies.

If you want to reduce piracy then stop giving people new reasons to pirate stuff!

Re:TCP does not work.

[Shaper_pmp]

Except that when you're sat at home wanting to back up your entire DVD collection, who goes on bittorrent and waits to download them all? And who just suddenly guaranteed that every movie I own is available on bittorrent?

There are only so many hacking groups, and you can only rip and transcode so many movies per day, y'know. And with DRM+TCP both of those numbers are effectively set to decrease dramatically.

You're missing the point - even if piracy is always possible, and even if making the ability to hack hardware a requirement doesn't stem the flow too much, and even if the more specialised requirements and necessity of having a physical (no doubt quickly-made-illegal) device doesn't make catching and prosecuting pirates easier, it's the normal users who are effectively stuffed.

If I want to pirate the latest Stargate SG-1 or Desperate Housewives, I'm fine on bittorrent. If all I want to do is back up my $obscure_movie DVD that I already bought and paid-for, I'm boned unless I can rip it myself.

Maybe you weren't aware of this, but many people like watching movies that there isn't a huge mainstream audience for, or that unaccountably aren't popular with the early-adopter geek set.

And maybe you've missed this, but not everyone is interested in the pirate's viewpoint. If you just want to serially rip off movies, great. Ethically indefensible, but great. I've even done it myself before now. But there are those of us who value quaint concepts like personal freedom and fair-use copyright exemptions, and we're the ones who're getting fucked in the arse by DRM/TCP.

Re:TCP does not work.

[Shaper_pmp]

If it can be played (by me), it can be copied (by me)? No.

I don't care if professional pirating gangs on bittorrent can still pirate movies (although you'd have to be pretty out of it to think this extra layer of complication isn't going to slow the flow at all) - if I can't exercise my fair-use rights with media I paid for, that's fucking wrong.

Come with me on a journey... I own $obscure_dvd. I want to back up $obscure_dvd. At the moment I can rip it to another DVD, or (even better) transcode it into Xvid and stick it on my machine for playing whenever I want. So far so legal.

With DRM+TCP I can't do this. Even if $obscure_dvd does somehow gets ripped by TV-flavour-of-the-month obsessed pirates, and even if it has enough mass-market appeal that the torrents don't just die through unpopularity, by downloading it I'm comitting a criminal act - why the fuck should I have to become a criminal in order to exercise my legal rights?

You're right - DRM+TCP is entirely "survivable" for people who only like mainstream media and just want fr33 sH1t 0ff t3h 1nTern3t5, but for those of us who give a fuck about our rights or prefer something a little more obscure than the latest Paris Hilton album, we're boned.

Re:TCP does not work.

[dgatwood]

Precisely. The fundamental reason that DRM cannot work is that you are protecting the same content millions of times. The law of averages says that if one in every hundred thousand is able to do it, there are ten people with a copy of a given work who can do it. It only takes one. More to the point, as soon as that scheme has been broken for one piece of media, it has been broken for -every- piece of DRMed media. It only has to be broken once before -every- piece of content encoded with that crypto scheme is available to people who haven't purchased it. The only way to avoid that problem would be to make the media do the first stage of decryption itself, which might happen someday, but not any time soon....

You can make it harder for transient content (e.g. cable signals) to be cracked because it is of lower value after the data is stale since it cannot be readily stored until you're ready to decrypt it. In that way, all you have to do is provide a separate encrypted stream for every customer and it becomes a lot harder to decrypt. But that is literally what is required for DRM to have any real effectiveness: a separate copy for each person with a separate key for each person, coupled with never letting them store the data, even temporarily. For most content, this makes no sense, and until we have ubiquitous gigabit wireless networking everywhere in the world, it will never make sense. Even then, the cost of the computing overhead needed to encrypt millions of copies of a stream simultaneously with sufficiently strong crypto will likely exceed the benefits of doing so for the foreseeable future.

Creating perfect DRM is a fundamentally unsolvable problem, and creating "good enough" DRM is never truly good enough. All you can really do is protect it for the short term to prevent initial sales from being cannibalized (and even then, only if your DRM scheme has never been used before). After that, all bets are off.

Re: I'll run Linux!

[Anonymous Coward]

China does this because they're still not fully integrated into the new, globalized economy. Once this happen, they won't need counterfeiting anymore and they will stomp it out. Judging by their success in effectively stomping out internal political opposition, there is no doubt whatsoever that counterfeiters will be doomed once they're not useful anymore to Chinese economy.

It may not be the big companies making this gear, but _someone_ will be making it.

Oh really? You can maybe build a PC in your home, you can maybe assemble a working motherboard in a home lab, but how do you make TC-free chips? Have you any idea of the cost involved? And how hard will they be hunted down by the market-friendly law enforcement? You can't relocate a chip factory that easily, you know, and they're easily found out.

The world is shrinking. There is no way out. Nothing you can do. Say goodbye to your "rights", they've been already bought and paid for.

Get used to it.

Re:"I'll run Linux!"

[JockTroll]

What did you expect? Did you really believe all that crap about the "digital revolution", "information taking the place of money" and so on? It took some years but the economy has reacted, so harshly that all your dreamy-eyed fantasies will be crushed totally. Your beloved computers will be, forever, your prisons. Those of us who haven't turned stupid machines into a reason to live will carry on as always, and nothing will change for us, while you computer geeks will have to resign yourself into having been utterly defeated. No more ridiculous revenge plans for your failed lives, no more parasocialist ideals, nothing more of that forever. The corporate geeks have caught the computer geeks, they have beaten them up and left them defeated and humiliated, as always. To paraphrase your beloved Orwell, the future is a jock, shitting on a nerd's face forever. Suck it up.

drm is snake oil

[orabidoo]

For all the noise about it, for and against, and all the moral high, low and middle grounds that the slashdot crowd so loves to argue about, the obvious fact is that RIGHT NOW we have a working economy without DRM. So obviously one is possible.

Just look at it. The music industry's entire catalog is pretty much available on a digital, easily rippable, non-DRM'd medium: the good old CD. For all their noise and complaints, I don't see the labels shutting down CD stores to prevent "piracy"... and you can be sure that 99% of illegal music copying originates in CDs.

And if you look at video, you have the same thing. The DVD was originally DRM'd, but that was broken a long time ago and DVD ripping programs abound these days, from reputable sources even. Do you see the industry putting a stop to DVD sales, or somehow trying to prevent computers from having DVD drives with ripping ability in them? Actually just the opposite is happening - until recently people didn't have much of a (legally bought) movie collection at home, because original VHS tapes of movies were way expensive, so people resorted to renting them. The industry has actually figured out that by pricing movie DVDs quite cheap, people will buy lots of them, and the industry makes a BIGGER PROFIT!

So what's all this DRM noise then? Well, Yahoo themselves summed it up pretty well, and considering their position in the industry, you'd think they know what they're talking about:

DRM doesn't add any value for the artist, label (who are selling DRM-free music every day -- the Compact Disc), or consumer, the only people it adds value to are the technology companies who are interested in locking consumers to a particular technology platform.

As far as I can tell, that's good news for all of us. DRM is now like cryptography export regulations were a decade ago: a big threat that we all get so worked up about, but is ultimately irrelevant on its own grounds.

Just like there comes a point where crypto knowledge is "not that hard anymore" and cannot be kept in a box, in the long term, the greed of DRM vendors combined with the fear of audio-visual producers is just not enough to make something as techically broken *and* useless as DRM fly.

archiving is a moot issue

[poptones]

None of those people in grandparent (penny arcade, etc) would be making ANY money without the banking institutions - that is, unles they could ifnd a way to convince people to shove their money in envelopes, stamp it and mail it. Oh, but then they'd still be at the mercy of the post office, so if they were offering something the ever increasingly fundamentalist world governments dislike they could be cut off in an instant and hauled in front of some kangaroo court on "mail fraud" charges - or something much worse.

Archiving is moot - the notion that a world of indiviiduals will be able to provide a more comprehensive archive is a fallacy; here's an example: I've bought at least two copies of grace jones' slave to teh rhythm, yet don't at present have one because the cassette and the cd both wore out. For months I have been jonesing for some of this out of print material and even amazon didn't have any used copies every time I looked. I checked p2p, torrents and usenet, and all that's there is her greatest hits and such. Finally it dawned on me I had installed real player for linux some time ago, so I hit up rhapsody... guess what? Not only is the CD I want there, but a halff dozen others as well. And Rhapsody gives me 25 "free full downloads" essentially every time I visit (I only allow session cookies) so... here's an example of DRM inciting the legit publishers to provide for me what no "commons archivist" have thus far been willing or able to do - high quality downloads (the sound actually is better than the last mp3 version I tried of the title track) that I can access from my desktop anytime, free.

There is room for both - this notion that drm is inherently evil is as moronic as any other bigotry. And when all those bad and nasty things happen and linux DOES get locked out of the mainstream media industry, you'll need only go as far as your nearest mirror to see who to blame.

Balance is what is needed, not zealotry.

Re:archiving is a moot issue

[NeutronCowboy]

Let's keep the discussion on-topic and the insults out of it, shall we? My post wasn't about DRM, it wasn't about who makes money or how (which what the first paragraph is about, I think), it was about current copyright law. You provided a fine example of finding a specific album that you were interested in. Good for you. But that's not the scenario that I was referring to.

In your example, the album is fairly recent (1985). The company who produced it is still around, and the original rights holder is still available. To boot, you happened to have a media player that ran on the OS of your choice, which allowed you to play the music you bought. Great. Hooray. Now let's consider some other scenarios. Movies from the 20s are still copyrighted, yet a good number of the rights holders are dead, which makes finding the current rights holder a pain in the ass. Was it bought by someone? Inherited? Given away? Who do I talk to about archiving if I find a celluloid of some old movie that I would dearly love to present to the rest of the public? How do I do that legally? Keep in mind that time is running out - a lot of those old movies are pretty much falling apart by now. You might argue that what's worth preserving is already being preserved, but I think there's plenty of reasons not to let a small and highly specific subset of people decide what's worth preserving.

Then there's another example - what happens if your OS of choice is deemed to not be the proper avenue for releasing music players? The drive towards trusted computing is exactly that - the drive to remove the ability of individuals to control their hardware and software. What good to you are all the Grace Jones files then? They'll be worth exactly the same as the random noise in your /null partition.

The problem with copyright law - and by extension, DRM - is not that it makes things impossible to live with *right now*. It's the consequences of the current trend towards using copyright as some king of license to print money that are truly horrifying - if you are interested in anything that is not currently being flogged by the people in charge of the copyrights. If you are only interested in 20 year old stuff that's still more or less current, good for you. Before insulting dissenting opinions though, remember that there is far more to media and culture than what's being produced in that time frame. And that's what's at risk of being lost forever.

The Problem is The Product as defined

[jcdick1]

As I see it, the problem is that the CD or the MP3 is what is being defined as the product. I have said it before, and I will say it again, the music is the product, and not the media used to distribute it. If the artists want to be musicians, then they need to be making music, not CDs. The goal should not be a platinum-selling album, but a 250,000 attendee concert series. I should be able to go out on any night of the week, with ten dollars in my hand, and have my choice of any style of live music by bands that aren't local, regardless of where I live. So I say to the musician, "Don't be a recording artist, just be an artist." Will there be tons of money to be made? In the case of the Grateful Dead, you betcha. But you better have the staying power. Is there decent money to be made? Absolutely. You won't be buying a Ferrari any time soon, but then, if you are in it for the money, most people probably don't want to hear you anyway.

Financing the "Star Trek" society

[Paul Fernhout]

An essay I wrote in 2004:
    http://www.kurtz-fernhout.com/oscomak/AchievingASt arTrekSociety.html
An excerpt:
"Now, let us move on to the question of where could more money for
education and creativity come from -- such as to fund more creation of
free copyrights and free patents? And where could budget cuts be made so
US parents (and everyone else) could work less hours and devote more
time to their families and charitable hobbies -- including informally
educating their children? As we shall see, a hundred billion dollars
here, a hundred billion dollars there, and soon we are talking real
money. :-)

Let us consider ways to free up money for the non-profit sector (or
reducing working hours) by cutting wasteful government and consumer
spending in these areas with (annual estimate of easy savings):
    * Healthcare ($800 billion),
    * Military ($200 billion),
    * Prisons ($125 billion),
    * Agriculture ($40 billion),
    * Transportation ($250+ billion),
    * Housing ($350+ billion),
    * Manufacturing (very variable),
    * Media (very variable),
    * Banking ($14000 billion up front, $320 billion annually), and
    * Education (very variable).
This is a total of $14000 billion up front and at least another $2085
billion per year. And this is even without considering any lifestyle
changes such as from widespread adoption of Voluntary Simplicity:
    http://world.std.com/~habib/thegarden/simplicity/
which will ultimately result in the largest savings in the US and
worldwide (but I discuss no further here). "

Re:Yeah sure.

[Kadin2048]

I don't think there's any charity involved at all, necessarily.

And I do think that people would pay an artist for future results; this isn't some stunningly new way or doing business, you pay people in advance of performance all the time. In fact, that's why contracts and contract law exists; it gives people a way of setting out the conditions for payment in advance, so that you can either pay and be relatively secure that the work will get done, or the worker can do the work and be secure that they'll be paid afterwards. Both would work with art; sometimes you might pay in advance, sometimes you might pay on or after delivery according to a contract that you had signed in advance. Either way, you'd want to agree on the terms beforehand, just like you'd do in any other business transaction.

What I'm really trying to get to here, is that there's nothing special about art. Really, there isn't. A painter is a photographer is a machinist is a doctor; they're all skilled laborers. If you want one to do something for you, you pay them. There's nothing revolutionary here. None of them require the amortized business model that's so common today in entertainment in order to exist.

And while you might not particularly like what's on YouTube, that's a personal value judgement. If that's all that was available, perhaps you'd feel it necessary to spend a few dollars in advance -- take a small risk, in other words -- and fund someone who would create the sort of entertainment that you'd want to watch. It's all about what people are interested in paying for.

There is obviously a demand for entertainment, and there is a clear supply; the only thing we need to do is place as few barriers as possible in between those two groups, and let the problem work itself out.

As to your comment about DRM not being funadmentally wrong, I disagree. I disagree not on moral terms, but because of the negative effects they have on our society in general, because they make it harder for people to interact normally and use the rights which they ought to have, and because such restrictions distort the market from what it ought to be naturally.

Simple Answer: Monetize peoples Attention

[Henri Poole]

How do you create a market for a product, and make money of a product that has a huge initial creative investment, but then no manufacturing cost, and is in infinite supply

Simple: Just monetize peoples attention instead of trying to monetize the media.