Does DRM Enable Online Music Innovation?

chia_monkey writes "An article at the Tech Law Forum asks the question 'Does DRM Enable Online Music Innovation?'. The piece looks 'at the range of legitimate online music distributors to see just how much the presence or lack of DRM affected business models.' It's a rather interesting read as the author breaks down seven online music stores (iTunes, Napster, Yahoo! Music, Zune, eMusic, Amie Street, and Magnatune...four of which use DRM and three that don't). The article mainly focuses on the ownership and 'renting' of the music (which can be seen with the 'buy the condo downtown' and 'rent a mansion in the slums' analogies) and how it applies to innovation and perceived business models. The numbers don't lie ... price-per-download is the clean winner while DRM-based models also take the lead. Will the market shift toward subscription based models in the future? Or, will DRM go the way of the dodo bird (as Steve Jobs has already proclaimed his preference for)?"

Comments

Missing a critical element of the business model

[jfengel]

There is a huge difference between the various services that the article does not take into account: mass marketing of the underlying music.

The companies that want DRM on their music are the ones that they spend a lot of money making popular. Their business model is to get a lot of people aware of certain songs, and then sell the song to each of them individually. That's the RIAA's model.

The independent labels don't have a huge marketing budget, and so they care a lot less about whether they get paid for each individual download. For them, passing songs between people really is free advertising.

So the success of any individual music store has more to do with how effective they are at getting you to find the music you want than with the DRM. iTMS sells a lot of the RIAA's music, which the labels spend megabucks marketing (an investment they want to protect). eMusic sells songs that aren't heavily marketed.

There are a few performers who straddle the line, who got famous on the RIAA's dime and then managed to extricate themselves. They get the best of both worlds: a huge audience without the need to make each individual download pay. But these are the exceptions, not the rule; don't forget how they got famous in the first place.

That's the key here: promotion. It's way more important to most people's music choices than nearly anything else.

No allofmp3.com?

[Anonymous Coward]

...price-per-download is the clean winner while DRM-based models also take the lead [in profit].

The fact that they decided not to include allofmp3.com in the "study" should give you a hint regarding how objective this "study" is.

Personally, I think allofmp3.com is the best of them all.

Re:No allofmp3.com?

[Anonymous Coward]

They also didn't include emule, kazaa and bittorrent.

Or was it limited to legal means ?

How Enlightening!

[FranTaylor]

Companies that charge for music make more money than companies that give it away.

In other news, gravity is still in effect, and time is still going forward.

In the mean time, the music distributors, with even less musical talent than Karl Rove, are still making millions, and all of my musician friends are still broke.

Oxymoron

[SatanicPuppy]

DRM doesn't enable anything...All it does is restrict. So how can it possibly enable innovation? What would happen if there was no drm? Would music stagnate? Doesn't seem to have in the past.

I believe in limited copyrights to protect an artists ability to profit from his works. I don't believe those copyright should be transferable to corporations. I don't believe those copyrights should have anywhere near the duration that they currently enjoy, and I don't believe I'll pay a damn dime for drm encumbered crap that does nothing more than deprive me of rights that I should have by virtue of paying for the damn content...At least if I stole it, someone would have taken off the damn drm!

Innovate that.

Re:Oxymoron

[jfengel]

Music used to be heavily restricted. You bought an LP/cassette/8-track and you couldn't back it up, make extracts from it, mash it up with anything, or do much except play it on the device for which you bought it. You could try to make a copy, but you were going to suffer extreme quality loss and after only a couple of generations it would be unlistenable. The Rights Management wasn't Digital but it sure was Restrictive.

It's only since the creation of the CD that you could do any of those things. The old model has to go out the window; people like the stuff that they can do with the new format. But it's not clear where to go from there, since free copying tends to encourage exactly one pricing model: give it away. It may be the only model, given how ineffective DRM is compared to the old "press it into vinyl" model.

Re:Oxymoron

[Hans Lehmann]

Music used to be heavily restricted. You bought an LP/cassette/8-track and you couldn't back it up, make extracts from it, mash it up with anything, or do much except play it on the device for which you bought it.

You could only play it on the *type* of device for which you bought it, but there was nothing that prevented you from playing it on your friends turntable, and if your turntable died you could just buy another one and all your music would still be playable. Furthermore, once you were tired of an album there was nothing preventing you from either selling it or giving it away. Try doing that with your iTunes files.

Well

[RobertM1968]

I would say DRM based models would take the lead at least for now, since there havent been many non-DRM based models, much less ones with the marketing power of some of the DRM based models such as MS's Zune, and iTunes. This point in the "research" is currently irrelevant until choices (DRM and non) are available with similar market penetration, and enough of a time period passes to recompare the two.

Re:Steve Jobs is a liar

[TheRaven64]

Wow, thanks anonymous coward. You're a great source for insider info.

If the major labels do decide to ditch DRM in the next few months, then we will all be able to see if Steve Jobs is lying by how quickly iTMS switches to DRM-free.

Re:Yes

[garcia]

Ack. You have fallen for the conglomerates' campaign. You are now officially brainwashed into thinking that DRM is "good".

DRM exists for the benefit of the distributors and not the artists as they so readily claim. Why do the various distribution schemes out there have to have DRM in order to be viable? For some reason allofmp3.com worked just fucking fine for everyone (streaming and/or downloading) without the DRM. For me, it worked even better because I could get them in various bitrates and/or FLAC/WAV if I saw fit (and I did at times).

We need to REJECT at every turn the conglomerates' suggestions that we should bow to their demands. They are businessmen and they will respond favorably when the populace stops giving the fuckers money. It's people like you (and nearly everyone else) that makes DRM laden music viable.

Me? I'll stick to what is best... Music that is freely distributable by bands that don't make their money by sitting in a studio for one album but instead are out there working their asses off touring. I'm planning on going to see 5 shows in the next few weeks (it's what I can afford right now) and they are all bands that I would support.

That's what everyone should be doing to "give the artists the money they deserve", not paying the RIAA thieves so that the artists can gain a few pennies after a lower quality DRMd download.

Yes for rent, no for purchase

[dupont54]

I agree with you : I haven't problems with DRM being part of a "renting" or "access to a catalogue" business model, where you pay a monthly fee. Because in this case, if you are not happy with the DRM, you can stop paying and that's the end of the story. So the provider must do its best to keep you happy.

But like the vast majority of people, I am not interested in these business models. I still like to buy things, build a collection, ... I prefer the classic "buy once for all" business model. And in this model, DRM are completly inacceptable.

There is not such thing as "BUYING" a DRMed media, those things are just too volatile : change your hard-drive/OS/players too much time and your file self-destroy ; providers can go bankrupt with their activation servers ; buy new hardware which happened to be incompatible with non-standard DRM techniques, have your player key revoked because some hackers found it, etc... And of course, if the DRM is efficient, you cannot make backup or "interoperable" copy. So sooner or later, your media is broken for no reason and you can't do anything about it...

You cannot buy a DRMed media, you are renting it ; the provider just forgot to tell you for how long... And if you are not happy with the DRM, too late, you have already paid. I suppose that's qualify as a business "innovation".

What would turn this on its head

[cdrguru]

Set up a server in a country where it is nearly impossible to get shut down. I guess that is anywhere but the US today.

For a couple of months before launch collect every freely distributed bit of music it is possible to collect. This would take some searching and downloading, but it would result in a significant collection.

Make it all available with an ad-supported service and use the ad revenue to buy up anything else available from folks like the Russian mob (allofmp3.com) and various other quasi-legal services. Grab their collection before they are shut down.

Extend this into P2P, collecting more and more and mixing it in so it would be impossible to tell for any given music clip where it came from. Allow anonymous user contributions and hide behind the DMCA like YouTube. Take something down and it would immediately pop up again from anonymous contributors.

Have a rating and keyword system for finding stuff. All free and just ad supported. Of course, since the original material was freely distributed or "contributed" the ads just support the service - no need for any revenue sharing except you could mail out prepaid Visa cards every so often to people that put in an address. Nothing large, say $20 or so just to keep the interest up. Still utterly anonymous.

And the RIAA would be powerless to stop it.

Re:What would turn this on its head

[Anonymous Coward]

What I think will really drive John and Jane Public to spurn DRM is when they find out that they'd technically be 'criminals' for using their FairPlay iTunes purchased songs on little Johnny's non-Apple player that they got to replace his lost/broken iPod..

Right now, the average person isn't making the correlation between one product from another (which is only made worse because they don't understand the scary, almost magical technology). To them it makes sense to buy songs from Apple to play on their Apple product. On the other hand, if they could only purhase gas for their Ford vehicle at a Ford only gas station I bet they'd get the point.

Re:Yes

[Josh Coalson]

no, password authentication is not DRM. the basis of DRM is the encryption of data to be distributed with a key, plus a way to distribute the key in a way that is hidded from the user so the distributor can control the decryption. this in no way resembles password authentication no matter how hard you try to twist it. calling password authentication DRM just confuses the issue.

your example of personal encryption software could be massaged into DRM if you somehow wanted to distribute your encrypted data then control how/when it was decrypted.

Re:Yes

[Jherek Carnelian]

It is hard to imagine how you could have a service like Rhapsody without DRM. Having "all the music" accessible whenever you want, for a flat monthly rate, really changes your listening habits and how you think about music "ownership".

If that monthly subscription fee was paid to musicians working on commission to create new music, then you could have an even better service without DRM. The artists get paid and the public gets their entire catalog without restriction. Of course the middlemen who currently 'distribute' music would lose out. But they don't add value, so they don't deserve to be paid anyway.

Re:Yes

[garcia]

But allofmp3 didn't give you unlimited, flat rate access. If you're not interested in such a service, that's fine, but many people are. So the question is, would such a service would be viable without DRM?

You are correct, they didn't have an "unlimited" flat rate access but they offered streaming music for free. I would happily listen to the streaming feed of an album prior to purchasing it and we're not talking 30 second clips of each song that I have to manually click to get it to play.

I just don't understand why you feel that DRM is necessary to make this type of service work. Is there something inherently different about paying more money to download based on a monthly fee rather than a traffic based or per song model? Not to me there's not.

Re:The hidden cost

[thePowerOfGrayskull]

Ironically as a short-sighted response to this the record companies are making cotracts even more restrictive and making their products less desireable by adding DRM. For some reason they think us consumers are too stupid to spot or be concerned about the DRM. Newsflash: once you get out of slashdot-land, most consumers DON'T care about DRM. It's not that they're stupid, it's that it doesn't affect them, so they don't care. My wife gets her music from itunes. She can listen to it in her car, on her 'pod, and on her computer. While I've certainly made her aware of how evil DRM is, she doesn't actually care. And why should she? As far as she is concerned, there is no DRM that affects her: she is not prevented in any way from doing the things she wants to do. And millions upon millions of itunes sales says that this is not an uncommon belief.

Re:Yes

[whoever57]

I manage the rights to my *nix box digitally, through the use of a password. It's DRM.

Let's apply your criteria to downloading Red Hat ISOs and binary updates, shall we:

Access to Red Hat's ISO and binary downloads is controlled through a password. Thus Red Hat Linux must be a DRM-laden OS.

No, the point of DRM is that it allows control of access to the work after the end user already has it in his/her possession -- after (s)he has already downloaded it.