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Why DRM Cannot Open Up New Business Models
An anonymous reader writes "Techdirt has a cool post up that doesn't just explain why DRM is bad, but gives a really interesting economic explanation for why DRM cannot create successful new business models. Since the RIAA and MPAA keep insisting that DRM will create new business models, it's useful to see an argument for why that's basically impossible." As the article says, anyone can create a "new" business model. Creating a successful "new" business model is what is so elusive here.
Or the terrorists will listen to our music for free!
Do you want your children to listen to the same music as terrorists?
I thought so...
The legitimate download industry has a problem. Their products can't compete with the freely available infringing versions of the same content.
Their products cost more and they are less useful. The only selling point they have is that the copy they give you is legitimate.
However, rightly or wrongly the vast majority of people are willing to ignore this if the unlawful version is materially better than the legal version.
The music industry has to react logically to the situation rather than emotionally. Until they do that, decline is all they can look forward to.
Simon
So the idea of selling digital downloads of on-the-radio songs for 99 cents doesn't count?
You could do that without digital restrictions and should. If you try to restrict your customers, you will be dependent of M$ and or the RIAA majors to deliver your product. Those people are not known for fair competition and are both kings of repositories of stale, second rate junk pushed at monopoly rates. If you think you can make a "new" business in that kind of market, more power to you. I think you will be just another RIAA vassal station.
DMCA, Hollings, Palladium. What might have sounded like paranoia is now common sense.
I believe the argument is that iTunes has succeeded in spite of DRM, not because of DRM.
markets always favor efficiency. pre-internet, the cd makers, tape makers, lp makers, etc., they could successfully stand between the artist and the consumer and collect tolls for a valuable service they performed: distribution of media
however, the internet renders such a model inefficient in comparison. now, the artist and consumer can interact directly. the internet has replaced the distribution model the riaa's constituent companies are attempting to defend. there defenses are unsuccessful so far, and will continue to be
the consumer is served, the artist is served. the only person left out in the new internet distribution model is the old guard distribution model. i could say "adapt or die" but that doesn't even apply here. there is only one valid economic choice for the riaa's backers: die
obviously they aren't dying gracefully, but no one ever did. forgive the dinosaur its death throes i suppose. but the riaa is history. it's simply a matter of time and the inevitable march of progress
the artist becomes the distributor. seems like a better world to me. the distributor's money in the old distribution model warped true artistic expression i think. so it's progress all around: we get better artists. the unfettered democratic interaction of artist and consumer on the internet will let the cream rise to the top, instead of whomever is backed with the most cash and radio plugs, a la the old model
go ahead riaa, try to stop progress. good luck to you
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
Its success will be predicated on how much pain/reward the model brings to the customers when accepted versus the collective pain/reward of civil disobedience when it meets force.
.. that is what we are getting now.. Zecco.com - Free stock trading Joost - Free video content YouTube - Free video content etc etc We cried for things to be free, well now it is happening things are becoming FREE, due to a new business model, ADVERTISEMENT SUPPORTED business model. Now that is not enough we want our cake and eat it, we dont want ads now. So can you suggest a new business model that we wont cry about?
http://www.rense.com/general79/wdx1.htm
The fallacy of this argument is that the author equates rearranging scarce physical resources (ideas about things) to create added value (economic growth) with ephemeral nonphysical ideas like music, writing, film, etc. If one follows the logic of this, extracting "added value" of media content would be in controlling its creation and then distribution. Which is exactly what DRM attempts to do.
Music is not a red pepper. Argument by analogy often leads to ridiculous conclusions, as has happened here. The problem with DRM is not in mechanistic enforcement of copyright law, but that copyright law is broken. It has ceased to function as an economic promoter of new ideas and technology, and is instead now a mechanism of monopoly for a corporate cartel. Ending DRM won't fix that problem.
While Mr. Jobs has made some money with it, and it does seem to lead the pack of legal downloading systems, it is not successful in the way that McDonalds is. It is not successful in the way that Kleenex is. It is not successful in a ubiquitous way. There are four music fans in my house. One of them has an iPod (teenager - coolness is status for her), and there are zero iTMS accounts.
There is a simply reason why; DRM and cost. When I buy music, I don't want to pay for it again, ever. Yes, I converted all my old vinyl to CD. No matter how nice or good iTMS is, I will not lock myself or my family into a single choice of music players, no matter how cool they might be.
We continue to have the choice of sources for music downloads, and always will. We jointly spend quite a bit on music, but iTMS isn't getting any of that revenue. So while it is successful in the eyes of Mr Jobs and Mr Gates, its not successful in everyone's eyes, especially those of the RIAA as they aren't getting much money at all.
To be successful like McDonalds, everyone in the world needs to know firsthand how your burgers taste. This is not true of iTMS.
Support NYCountryLawyer RIAA vs People
No, it's not a new business model.
Did I miss the documentary that showed the ancient Romans invented it?
Sometimes the world changes in such a way that you just have to give up and move on. We have technology in place
and available that allows nearly anyone anywhere anytime to freely copy music and videos and people not going to let
DRM or any moral objections or law stop them from doing it.
And maybe that's justice in a way. The industry doesn't seem to have any objection to making money from music and movies that praise some of the very behaviors responsible for their own decline. They produce songs like "Smack My Bitch Up" and "Been Caught Stealing" and "Murder Rap" then wonder why they can't get people to "do the right thing" and pay them for their product. They're fucking hypocrites. They're getting what they deserve.
Yeah, right. As if good old Red Book CDs weren't selling like cupcakes. Except for the most tech savvy share of the population, Joe Sixpack and Mary Housewife (the gross of the population) will not know/bother to "pirate" music (or movies, for all that matters). As one exec said in a previous article, "would daddy give his daughter The Little Mermaid on a DVD written with a Sharpie"?
Sell it for an affordable price and people will buy. Don't, and people won't buy (or "pirate"). Whoever is getting it for free will continue, regardless of DRM, as time has been proving repeatedly.
Successful new business models are about creating those non-scarce goods and helping them increase value. Any new business model must be based around increasing the overall pie
But the music industry is making a product - the music! And anybody who think modern popular music as represented by the RIAA is anything but the product of an industry is kidding themselves. The Britney Spears of the world didn't get big due to their solitary musical genius, it was marketers and promoters and sound guys and hundreds of other people working behind the scenes.
The music industry is just working it's darnedest to inhibit unlimited copying. A number of industries do this. Publishing companies have sued Google to not put their books online. I can't buy Gucci knock-offs, attach a knock-off Gucci label, and then re-sell them from my expensive boutique store, unless I want to hear from Gucci lawyers. I can't create a site which scrapes msnbc.com content but replaces all the ads with my own. I can't publish a photography book, using images I ripped off from flickr.
And even if DRM is a flawed business model, is Slashdot the place where we review the sustainability of various business models? This cheerleading got tiresome a long time ago. Review how poorly-implemented DRM is a security hole, or DRM lowers the real value of buying a CD, but this BS doesn't deserve to be here.
Slashdot: providing anti-social weirdos a soapbox, since 1997.
No he could buy her the stuffed cuddly toy and take her to the cinema instead.
http://www.rense.com/general79/wdx1.htm
So, we have some article here purporting to claim that it is impossible to build a business based on DRM.
It only takes one thing to counter an impossibility. I know of somebody who makes about 4 million dollars a year on what is effectivley shareware, a type of DRM. His software is hackable and crackable, but basically at the end of the day DRM, that is, the set of restrictions he puts on his items so that he can sell them digitally, is what makes it work. Furthermore, his business has obsoleted several brick-and-mortar type businesses who were doing about the same thing.
It's time slashdot stops linking to these highly ideological opinion pieces attempting to pass themsleves off as "analysis." It's particularly easy to debunk them when they claim that something is impossible, however.
You can't show that, it's not even an argument. You can't support that line of thinking because there is no version of iTunes without DRM to compare to. Saying iTunes succeeded "in spite of" DRM is more wishful thinking than any kind of argument, it's sort of like climate change denial: "we can't affect the polar ice caps, that's silly! oh, we are? well it would have happened anyway".
The problem with DRM is it switches off peoples brains. The linked article is a great example. The guy writing it apparently doesn't understand economics at all, and compensates by throwing around buzzwords and reducing everything to absurdity. He goes on to make a series of obvious statements like "For a new business model to make sense, it needs to provide more value" and another series of meaningless ones like "value is not a scarce concept" (you can't have a non-scarce concept).
Finally, his argument (I use the term loosely) is invalidated by counter-example - DRM clearly does let you create 'new' business models because it lets you rent things that otherwise you'd have to buy. For instance you can get all-you-can-eat access to a large music library for as long as you pay a subscription. Whether these business models will succeed or not, I cannot say. I know people who subscribe to them and are happy with them. Nonetheless it's impossible to argue that this is not a business model enabled by DRM - if your access did not expire then it'd be equivalent to giving away huge amounts of content for free.
His other article is a waste of time too. He says:
Economics is a study of scarcity, that's pretty much its definition. He implies a market can function without scarcity but doesn't elaborate on how that would work, instead simply claiming the unbelievers are "uncomfortable" due to a "fundamental misunderstanding". But we already know what happens when something becomes non-scarce - it's price drops to zero, as can be seen by logging onto any big filesharing network.
Basically, he claims there's an economic solution to non-scarcity of information that doesn't involve DRM. I've been looking for such a theory for some time, and never found one. Extraordinary claims require extraordinary proof and he presents none.
Restrictions kill business and it's a lack of those restrictions which make iPod what it is. Restrictions, other than those imposed by M$, had nothing to do with the success of iTunes. Good hardware design, compatibility with existing CD collections and a lot of bad decisions from M$ are what made iPod and iPod made iTunes. Restrictions can and will kill iTunes and iPod if Apple is not careful.
Without iPod, no one would ever have bought anything from iTunes and restrictions have hurt it. People load their iPods with CDs, not restricted tracks from the iTunes music store. iPod is responsible for the success of iTunes, but that is tiny trickle of what it could be without restrictions. People took more time and trouble to purchase the same thing on CDs. If they really could have exactly the same thing from iTunes as they get from CDs, they would have bought much more.
Both iPod and iTunes would have been a flop like WMP and "Plays for Sure" if Apple had put restrictions on music that originally had none. People got angry when they learned that WMP made it impossible for them to transfer their CD based music collections, had to rip everything again if Windoze flaked out, and when WMP itself was not stable due to all the paranoid checks and M$ using it as a conduit for advertising. All of the M$ imposed restrictions made media on M$ decidedly second rate. M$'s suppression of the ogg format probably spared both M$ and Apple of early Linux competition, but that did not make WMP any better. Apple won because they had the easiest to use and least restrictive package.
Competition will continue to threaten non free music. iTunes sales will collapse as people continue to discover legal and restrictionless music online. If Apple makes it difficult for people to buy and load restrictionless music though iTunes, iPod will die. iPod also faces a significant threat as makers of music players embrace ogg and free software. M$ let those makers down by not delivering on sales, stabbed them in the back by eliminating the whole "Plays for Sure" DRM and all of them are now under the mp3 patent litigation cloud. Music player makers who deliver a quality product that works with all file formats and does what the user wants can and will supplant iPod.
Friends don't help friends install M$ junk.
For instance you can get all-you-can-eat access to a large music library for as long as you pay a subscription. Whether these business models will succeed or not, I cannot say. I know people who subscribe to them and are happy with them. Nonetheless it's impossible to argue that this is not a business model enabled by DRM - if your access did not expire then it'd be equivalent to giving away huge amounts of content for free.
No not for free if you pay for the subscription. Maybe you would be selling music for very low prices then, but that is not a problem since there is no limit to the amount of music or downloads that the world can supply. Just make more. If the artist makes a song, and only get's one tenth of a cent for each download, but a 10 million people download it, that's $10,000. Make ten decent songs a year, and you have a good living. Sure you can wank about advertising costs and millionaire rockstars, but those things are not necessary to good music, they might even inhibit it. There are thousands if not millions of people it this world with worthy musical skill. Recording and distribution only consume electricity and bandwidth, which are easily renewed and plentiful. Why is the supply of music kept as artificially low as the supply of diamonds? Same reason: to inflate the price. At least with diamonds there is a limited supply.
We are all just people.
Sorry, but economic theory says that a succesful business model depends on both the consumer and producer benefiting from the model. Producers in the business of content production (music, movies, software, pharmacueticals etc.) will eventually stop if they don't get some sort of benefit from this. DRM provides new ways of assuring getting this benefit and thus enables new business models.
I'm not saying the content production will stop if producers don't get rewarded - people will still write, take pictures and make music for fun. But the business of producing it will stop.
The basics of Performance & Availability & Desirability of artistic expression have changed over time, and are changing again.
Performances in times past were always done live. 20th Century became more and more recorded and then finally more digitized and transportable. Major Market Content in the late 20th Century became more centralized in handfuls of mega distributor/publishers. 21st Century with the Internet is putting mega-distribution at a breaking point, partially because of the breadth & depth of content, most of which is not served by the mega-distributors:
1. Not every consumer wants "new" content: Casablanca is as viewable to day as the 1940s, and Gershwin's Rhapsody in Blue is still as beautiful today.
2. Not every consumer, or even young consumer thinks Britney Spears is actually a listenable likable singer.
3. Listening is useful while concentrating on other tasks, and "MTV" type performances may not mean much as audio.
4. Consumers of specific market segments other than current "pop" are not likely to be served well by the mega distributors, as in percussion, brass bands, folk songs, & dozens of others, but the Internet makes those sources readily searchable and AVAILABLE.
DRM is destined to be of minimal use or "success", because consumers do not see value in it for typical performances and a lot of non-mega performers do not see it giving their distribution method and success of their careers a boost.
I have too much complexity in my life as it is, to have to bother with whether my "music DRM" is now not going to let me put my music on my 4th mac or my 5th iPod.
I simply will not allow any more distractions and complexity to interfere with enjoying life.
How Time/Warner, Paramount, EFI, BMG, Sony or any other mega handles DRM will not affect me, as I simply will not buy their content. They have lost me forever with DRM. Could they get me back? If I buy a copy of a performance that I can use and keep 'forever', and I accept the price, then yes.
Consumers will ultimately determine which performance supplier/distributors win, and which will not. Lets see, there was Sony RootKits, MS PlayForUnsure, & Apple iTunes. Looks like at the moment, the consumer has voted for minimal hassle. But then even those suppliers pale by comparison to CD/DVD sales which have no DRM, so the super majority of consumers have elected to buy and continue to buy with no DRM at all.
But we already know what happens when something becomes non-scarce - it's price drops to zero, as can be seen by logging onto any big filesharing network.
Maybe that is the point here... Certain types of "information" are now so ubiquitous that they are infact worth just about zero. Maybe we should not worry so much about wether the system will encorage people to produce entertainment, or even art. Maybe we as a society are producing too much entertainment.
I hate to say this but it is after all the option nobody seems to be considering, perhaps we have reached a point where this stuff is so easily had that without a questionably legal cartel to artifically prop up prices supply is in excess of demand. If less entertainment was produced people might not choose to patronize those who produce work they like, they might thing hey given the releative SCARCITY of media products I like maybe it would be fun to have the physical materials that normally come with or join their subscription service to get their new stuff sooner, whatever. As it stands now there is so much out there for everybody that I think most consumers can't figure out what they *want* but they can get *everything* free so they do and end up buying nothing.
I think there certainly *is* a market for music, film, art, etc just not as big of one as has been created by legislative and technological(DRM) rent seeking the industry has engaged in. The amount of value this society places on these products has become HIGHLY distorted. I bet if we roll back copyright rules to what they were at the end of the nineteenth centry and call the *IAAs what they are organizations that enable illegal colusion and price fixing we get as a result in a pretty short time frame:
1. A much smaller entertainment industry dollars and cents wise
2. A much smaller entertainment industry in terms of product output
3. Much higher quality entertainment products that are produced
4. Consumers paying(voluntarily) for a much larger portion of the entertaiment products they use
5. A functioning market place where consumers reward producers for stuff they like and stuff they don't like sits unsold on shelves and ceased to be prodcued. Since the industry would no longer be able to afford the marketing power to tell people they like something when the really don't.
Repeal the 17th Amendment TODAY! Also Please Read http://www.gnu.org/philosophy/right-to-read.html
I hate the $0.99/DRM-protected song as much as anybody, but I do see another scenario that requires DRM: subscription music services. At $15/month I need to listen to at least 15 new songs each month to break even. As a way of finding new music it works pretty well. You find some music you enjoy and then look at the list of recommended bands and try out their music. It's not much more than satellite radio, but you get to choose what's playing.
But, you could never have a service like this without DRM. Imagine a movie rental store that burned movies on DVD-Rs instead of handing you the original disk. Then they tell you that instead of returning your movie in a week you must throw it in the trash. I'd imagine just about everyone would keep their collection of DVD-Rs. Furthermore, many people would stop paying full price for a movie and get it for the rental price (or even the have 3 discs at a time plan, as long as you throw one away before picking up another).
Say my music budget is $15/month. If I buy DRM-free songs at roughly $1/song, it'll take me over 41 years to fill a 30GB music player (roughly 7500 songs). If I download DRM-protected songs using my music subscription I can fill that player every month (or more frequently) and constantly change the music that is on there. As long as music filesharing is easy to do, hardly anybody who owns an iPod is going to spend the thousands of dollars on music to fill it up. DRM makes it a dumber thing to do (since you'd lock yourself in for thousands of dollars), but DRM-free isn't going to make music sales take off much faster.
You don't have to be a thief/pirate to abhor DRM.
But, you could never have a service like this without DRM. Imagine a movie rental store that burned movies on DVD-Rs instead of handing you the original disk.
Note that your "movie rental store" is actually private lending library. If they hand you the original disk they need to know who you are so that they can be sure of getting it back. If they gave you a copy then they have no reason to care. All they need to do for a viable business model is to ensure that they charge you enough money to at least cover their costs, which could include a royalty payment as well such things as the cost of the disk, the service of burning it, some amount towards the overhead of running the shop, etc.
Furthermore, many people would stop paying full price for a movie
This is more an indication of a problem with the business model behind "full price" DVDs that any kind of endorsement for DRM.
DRM provides new ways of assuring getting this benefit and thus enables new business models.
DRM doesn't do any such thing. It doesn't assure anything.
1. It makes it more expensive to distribute product, reduces the profits per sale at a given price, and ensures that the products that don't take heroic measures to prevent copying will be cheaper and higher quality.
2. It doesn't prevent online distribution of unauthorised copies.
That's why online music distribution hasn't taken off. NOT because people are ripping music off rather than buying it, but because the online version is worth so much less to the consumer than the DRM-free CD version... even if the CD version is more of a hassle to buy... and putting DRM restrictions on the online version hasn't kept people from ripping it anyway.
3. Not having DRM doesn't prevent producers from being rewarded.
Since DRM doesn't actually do much to prevent unauthorised copies, and providers are still getting rewarded, it seems like DRM isn't what's making it possible for producers to get rewarded after all. In fact, lots of producers are putting their music online in DRM-free formats... if I recall correctly eMusic has been in business longer than iTunes, and lots of people... including some big names... are still publishing music through them. For eBooks, Fictionwise and Baen Books don't seem to be in any trouble.
The new business models are viable without DRM, as proven by the fact that they exist without DRM, therefore DRM isn't what's needed to enable them.