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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)?"
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
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.
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!
if "Faith" could be proved with facts - would it still be faith? So why does "Faith" try to present beliefs as fact? -
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.
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.
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.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
It helps build smarter code crackers, but thats probably not what TF meant by 'innovation'.
_Vishal www.squad9.com
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.
StarTrekPhase2 - The Five Year Mission Continues!
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.
... I prefer the classic "buy once for all" business model. And in this model, DRM are completly inacceptable.
But like the vast majority of people, I am not interested in these business models. I still like to buy things, build a collection,
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".
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?"
"There are a dozen opinions on a matter until you know the truth. Then there is only one." - CS Lewis (paraprhase)
DRM Is a delicate balance. I have friends in the industry from struggling artists, to record managers. 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. When you have limited appeal every merchandise sale counts.
... or anywhere else for that matter.
Thats why many of them put their music on itunes and tell them to download the songs from it. No easy piracy, increased hassle free distribution.
I have yet to buy a RIAA/ big label record from Itunes
Well.. maybe. Or Maybe not. But Definitely not sort of.
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.
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.
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.
Don't tell me to get a life. I'm a gamer; I have LOTS of lives!
Damn, some nerd I am. I'd heard of allofmp3.com but had no idea how great it is. Between that and last.fm I think I've got all the online music I need. (Sorry if this comes off as advertising; it's not meant to be.)
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.
Well.. maybe. Or Maybe not. But Definitely not sort of.
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 $1 extra, but the principle sucks. Lala has a much better model.
Executive summary: Watermarking combined with Copyright Law is an effect copy control measure, but DRM is about repurchasing, not preventing copying.
My God, it's Full of Source!
OUTSIDE_IP=$(dig +short my.ip @outsideip.net)
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.