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

Yes

[seanadams.com]

I used to be dyed-in-the-wool against DRM, but since using Rhapsody with the Sansa player and with Squeezebox* I have to say it is pretty hard to defend the position that DRM is universally bad. 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".

* I work for Slim/Logitech

No

[speardane]

Unfortunately the conclusion is more a summary, and the analysis not that detailed.

It needs to compare the artists marketed in each model and ask what it means.

I think that 10% for eMusic is remarkable, considering these are primarily either artists have not yet achieved major commercial success; or achieved it some time ago.

For my money and they get it. eMusic is doing a fine job of widening the range of available artists, and in the new business model, the costs of doing so are marginal and the potential profits high.

My only complaint and the reason I will one day move away from them is there continued overcharging of non-US based customers. Electrons and bits don't cost more on the other side of the pond!

Re:No

[Zonk (troll)]

For my money and they get it. eMusic is doing a fine job of widening the range of available artists, and in the new business model, the costs of doing so are marginal and the potential profits high. eMusic is very good. I have an account with them and get all kinds of good music every month. However, I do have one issue with their pricing model: It's based around songs. I don't buy songs, I buy albums. Often I end up having to wait until the next month to download the rest of an album. It would rock if they would offer something like "5 albums a month" as an option instead of "50 songs a month".

hrm

[spleen_blender]

I always thought it was hardware that spawned innovation...

Steve Jobs is a liar

[Anonymous Coward]

Please stop repeating that canard that Steve Jobs has a "preference for getting rid of DRM." That is absolutely false. Almost all independent music labels (the labels not owned nor controlled by the four majors) have been licensing their content for resale in the mp3 format for several years. If Jobs wanted to sell such mp3s, he could do so today.

Apple has absolutely no reason to get of DRM -- the iTunes DRM locks consumers into iPods.

I am an IP lawyer working on music licensing. The industry consensus is that Steve Jobs is a publicity hog and pro-mp3 his editorial was an attempt to take credit for upcoming rumored announcement from the major labels regarding selling in non-DRM format. Rumor has it that such shift will occur within a few months.

Define 'Innovation'

[ThosLives]

For some definitions of 'innovation' I would agree that DRM might be an enabler. I consider the the definition of 'innovation' as "1) something that allows you to do the same thing as before with less effort; 2) maintain what you were doing before with no increase in effort even though environmental conditions have changed; 3) do more than you're currently doing with no increase in effort."

Hrm, looking at that, DRM could be considered an innovation for the distribution industry because it enables them to keep some lock on their product/service in light of a changing market landscape.

So I guess I don't have a problem with the concept of DRM being innovation. I think the more important question is "innovation for the benefit of whom?"

Exactly.

[pavon]

As far as I am concerned it is all about the difference between purchase and a service. If I buy something, then I should have every right to use it however I want, as long as I do not distribute or publically perform the work. In my opinion, not only is DRM unacceptable, but I think the law should be changed so that a purchace comes with an implied license to copy for any reason. That would cover almost all of the consumer rights issues that are currently up in the air with regard to fair use. (Producer rights, like parody, criticism, education would still have to be dealt with seperately.)

On the otherhand, broadcast and rental are very nice business models for some types of media. As far as music goes, I prefer buying, but I almost never buy movies or anime - the replay value just isn't high enough for me to justify paying 5x the rental price and have more junk cluttering up my apartment. Without some sort of DRM, rental is impossible in the digital relm, and I really don't care if my devices make it difficult to copy something that I rented because I never had the right to do so to begin with. As long as the implementation is convienient I don't have any fundamental problems with DRM on rentals, and other services.

DRM is a complete failure when it comes to preventing piracy, and always will be for basic fundamental reasons. However, when it comes to rental/broadcast the purpose of DRM isn't to prevent piracy but theft of service. For that purposes DRM actually works fairly well. Because you control the stream, it is easy to change keys whenever one is cracked, as opposed to static media and players which cannot be changed after they are sold. This is why AACS was effectively broken within weeks, while the DRM for digital satallite is still secure after years. This is a situation where "Open" DRM (licened under RAND terms) can be valid and useful, much along the lines of the CableCard standard.

That said I would hate to see the situation where media is locked up and only provided as a service, and never made available for purchase. But as long as we don't get to that extreme have think both non-DRM sales and DRM'd services can coexist peacefully.

Re:DRM not neccisarly just RIAA big label.

[UncleTogie]

First, it's "necessarily..."

The biggest complain I hear from my friends touring to death is the amount of piracy that goes on. Fans will come up to them bragging about how they copied their cd from a friends.
So the fans you mentioned copied it from a friend. Loss to the artist of about $3, max. Your friends can't see the forest for all those darn trees, though; would that fan be at the show if he didn't hear the music? It's a given that the money's in touring, NOT record sales.

In short, your pals are griping about new fans coming to their shows, making them MORE money than what a CD purchase would make. I've worked road crew locally in the past and never heard any gripes from any artist *I've* worked with in the past 10 years. Must be just the nationals.

Re:DRM not neccisarly just RIAA big label.

[Bill, Shooter of Bul]

No. Loss to the artist closer to $10, if they were to but the disc at the show. They reap higher profits off of the cds bought at the concert, then the stores. Maybe I'm talking too small scale for your experience. These bands often get paid a flat rate per performance rather than per ticket sale usually, unless its a big show, in which case there take per ticket might be $5, and they came to see the larger headline act. Sometimes they tell them that they are going to copy the cd from a friend. Future tense, as in they came to the show for some reason, but have deemed their music good enough to steal now.

Maybe my friends can't see the forests from the trees. But Itunes, provides a way to bypass a lot of the crap that goes into production and distribution of discs, for a similar rate of return. Having DRM on itunes might actually be irrelevant in that respect, but it makes them feel better about it.

Watermark Me!

[bill_mcgonigle]

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.

Copyright law still protects the artists' work. I'd hate to see that go away given how well the GPL has worked.

So the problem in digital duplication is figuring out who violated Copyright law. There's an easy solution to that - watermarking. I wrote about this a few weeks ago - watermarking technology is such that it's robust and does not impair quality for lossily-compressed music. I'm not about to violate copyright law with the music I buy online, but the current DRM schemes aren't about copying, they're about control. I lost a disk with my iTunes Library on it just after purchasing a song, and I had to re-purchase it again, I couldn't just download it again, and that's where the real money is - repurchasing. Ironically, it's the only time I've used iTunes since JHymn stopped working. Yeah, I'm only out $1 extra, but the principle sucks. Lala has a much better model.

Executive summary: Watermarking combined with Copyright Law is an effect copy control measure, but DRM is about repurchasing, not preventing copying.

The hidden cost

[JustNiz]

The big point this report is totally missing is that the record companies whole cake is shrinking faster than the extra part of the slice they're gaining from DRM. More and more musicians are realising they can now idependently sell their own music directly over the internet instead of going to a record comapny.

Record companies contracts are so agressive that signed musicians earn very little from even millions of sales via the conventional channels. The record companies have traditionally been able to get away with this because of their monopoly on the marketplace, however the internet has thankfully broken their monpopoly in that a few sales on the internet now earn musicans more money than a million sales through a record contract. Furthermore musicians also get to keep their rights to their own music which are usually also demanded by the record company.

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. Just like every other accounting-driven business, record companies have a large blind-spot with respect to lost sales thorugh bad treatment of customers as there's no way to calculate the exact figure so they ignore it. This also explains why most companies feel its ok to keep you waiting in phone queues for 20 minutes over the cost of one more minumum wage phone clerk.

Ultimately record companies will just have to accept that they've lost their monopoly on the marketplace and will be obliged to either start making products that people actually want, and treat musicians like equal partners, or fade away into obscurity. However until then, they are kicking and screaming like the fat cat spoilt brats they are. But rest assured the change is being forced on them wheter they like it or not, so they can't keep it up forever.

That must be a real kick in the ass...

[Otis2222222]

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.

...to hear some new music that you really like from a friend, only to find out that it's a band that's signed to a major label. What does your sense of morals tell you to do in that situation? On the one hand you really liked that song you just heard. Loved it, in fact. But on the other hand, they are "the enemy" and you must resist, since giving even once cent of your money to a record label furthers their cause.

Look, I hate DRM too. And I've supported independent music that I like. But I'm also man enough to admit I have bought albums by major acts at the music store and didn't feel the least bit bad about it. Frankly, until the CD is outlawed (not even DRM can stop you from ripping a CD) there is really no cause for alarm vis-a-vis DRM. Damn shame that DRM-free downloads aren't more popular, but right now there are still alternatives.

And look on the bright side. The tide appears to be turning against record labels. The public is starting to really get the message and it's only a matter of time before the labels either die or figure something out that's fair for everyone.

Re:Yes for rent, no for purchase

[rtb61]

The big catch of course is the rental model is a joke, the biggest target audience, teenagers, and the majority can't afford it, the only thing the majority will pay a subscription for is their mobile phones. It's a crackup all these greedy corporations waffle on how they are going to get hundreds of dollars a month out of children who don't work to pay for all those subscriptions, MMOG, music, mobile phones etc. 21st century kids will never go out, never buy clothes, never dream of owning a car and only pay rent.

The group lives for it's new found independence and will only buy and the majority really don't have all that much to spend. The 20th century music publishing model required the ability to control the message reaching teenagers, the B$ marketing as news about which band/musicians/singer were good (whether they were or not) which were popular (whether they were or not) etc. the music scene is going to break up, local bands etc. will take over, the marketing B$ of so called music 'stars' is coming too a end.

Live music will come to the fore, dead music is dying. Besides by far the majority, greater than 90% make little or nothing from CDs and their only real hope of income is to use them as marketing to get people to their live performances, they reality for them is, if the money isn't being spent on dead music, there is a chance it will be spent on live performances instead.