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Why DRM Cannot Open Up New Business Models
Posted by
CowboyNeal
on Sat Mar 03, 2007 11:40 AM
from the supply-and-demanding dept.
from the supply-and-demanding dept.
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.
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YOU MUST SUPPORT DRM! (Score:5, Funny)
Do you want your children to listen to the same music as terrorists?
I thought so...
DRM is a con trick (Score:2, Insightful)
The only reason to use DRM is as a con trick, it is basically admitting that you think your own product is crap, so we will keep selling you the Beatles over and over again because we hate all modern music and we will keep selling you the one blockbuster because we think 90% of our films are
Re:DRM is a con trick (Score:5, Insightful)
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 $1/song, it'll take me over 41 years to fill a 30GB music player (roughly 7500 songs). If I download DRM-protected songs using my music subscription I can fill that player every month (or more frequently) and constantly change the music that is on there. As long as music filesharing is easy to do, hardly anybody who owns an iPod is going to spend the thousands of dollars on music to fill it up. DRM makes it a dumber thing to do (since you'd lock yourself in for thousands of dollars), but DRM-free isn't going to make music sales take off much faster.
Parent
Re:DRM is a con trick (Score:5, Insightful)
Note that your "movie rental store" is actually private lending library. If they hand you the original disk they need to know who you are so that they can be sure of getting it back. If they gave you a copy then they have no reason to care. All they need to do for a viable business model is to ensure that they charge you enough money to at least cover their costs, which could include a royalty payment as well such things as the cost of the disk, the service of burning it, some amount towards the overhead of running the shop, etc.
Furthermore, many people would stop paying full price for a movie
This is more an indication of a problem with the business model behind "full price" DVDs that any kind of endorsement for DRM.
Parent
Re: (Score:2)
Say what? (Score:2)
No, that does not count. (Score:3, Interesting)
So the idea of selling digital downloads of on-the-radio songs for 99 cents doesn't count?
You could do that without digital restrictions and should. If you try to restrict your customers, you will be dependent of M$ 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
Re: (Score:2)
Tell me I'm not alone in wanting to shoot people who use [M$].
I'm sure a few brainwashed chair throwers in Redmond would agree with you, but they are all sad and angry people. Why don't you take a nice little iPod break to calm your nerves? Visit the archive.org live music collection and pick up some cool new tracks in your choice of ogg, flac, mp3 and others. Free culture is soothing like that.
Re:Say what? (Score:5, Insightful)
Parent
Re:Say what? (Score:5, Insightful)
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 [google.com]. 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.
Parent
Re: (Score:3, Interesting)
No not for free if you pay for the subscription. Maybe you would be selling music
Re:Say what? (Score:5, Interesting)
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.
Parent
Lack of DRM responsible for iTunes success (Score:5, Interesting)
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.
Parent
Re:Say what? (Score:4, Insightful)
You don't have to be a thief/pirate to abhor DRM.
Parent
huh? (Score:2)
Re: (Score:2)
Re:huh? (Score:4, Funny)
Did I miss the documentary that showed the ancient Romans invented it?
Parent
No, iTMS isn't successful really, hear me out. (Score:3, Interesting)
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
Waking up to the reality (Score:5, Insightful)
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
Re:Waking up to the reality (Score:5, Insightful)
I disagree, legitimate download industry at a certain price point has a problem competing with better (DRM-free) product of the same content.
As a legitimate supplier of songs you have an advantage - you have guaranteed quality, broader availability and last but not least - legitimacy. Problem is that traditional profit margins enjoyed by the monopolistic industry are not sustainable with this business model.
Parent
Re: (Score:2)
If I could download high-quality (FLAC!), DRM-free music I'd pay for it. I'd pay for knowing that it's tagged correctly, named correctly, and actually is the content that it says it is. I'd pay for not having to rename my music and listen to each song the whole way through to make sure it's a complete song, free of artifacts and background noise, etc. I'd pay for knowing the artist is getting the money (minus some cost for the music store directly).
Re: (Score:2)
reality: restrcitons suck and people hate them. (Score:2)
The legitimate download industry has a problem. Their products can't compete with the freely available infringing versions of the same content.
They can't compete with CDs either. Study after study shows that portable music player owners buy more CDs than other people do, but avoid restricted music. It's not the price, it's the overall convenience and lack of trust that people have for restrictions that keep restricted music sales down in the dirt.
Re: (Score:2)
Actually, they never say that Linux is free of their intellectual property. For $699 you buy "protection" from their lawsuits. They are licensing to you whatever code they might own that happens to be of their property.
there's a better argument here (Score:5, Interesting)
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
Re: (Score:3, Insightful)
All of what you said is great and all but you're forgetting the one important thing that the RIAA/MPAA has that the general public does not: government on their side.
government is slow and stupid (Score:2)
Re: (Score:2)
Re:there's a better argument here (Score:5, Insightful)
The only way the RIAA and/or government could begin to control it is through stricter DRM and stricter laws. And that will just drive people away faster. The government spends billions per year trying to stop the movement of drugs in this country, and they can hardly dent it. What chance do they have against a product that is trivial to mass produce copies of, and which can be transmitted across the globe practically instantly.
Parent
Re:there's a better argument here (Score:4, Insightful)
The RIAA companies could adapt to fulfill that role. However, they will be much smaller and less profitable. In the short term, it's better for them to try and defend their dying business any way they can. In the long term... the managers will probably be working for another company, so they don't think about the long term.
Parent
Re: (Score:2)
Google to the rescue? (Score:2)
Cool. I want to buy some Jazz music. Let me just type that into Google. Oh goodie, only 97,100,000 pages to browse through.
Yes, fans can put their own pages together, but that's amounting to the same thing, and corporations will usual
Yes it can (Score:5, Interesting)
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.
Re: (Score:2)
You can make money by robbing banks and bribing all the judges and cops, but that's more of a battle plan than a business model.
(Yes, you may infer from this that I think the MAFIAA are essentially thugs)
We wanted everything FREE.. well. (Score:3, Insightful)
A suggestion (Score:2)
Let creative people do what they do, share it with each other (and the world at large) under whatever terms they can get other people to agree to. There is no State-backed copyright.
You may say "egad! under such circumstances you'll just get 'amateur' 'independent' movies, etc. No one would make something expensive like *Titanic*! Or rather, they probably wouldn't. Or rather, maybe they wouldn't."
I answer that the State doesn't really have that much interest in *Titanic* being c
Re: (Score:2)
This line of thinking is pretty dangerous because it implies that the problem can be "fixed" with a solution that might work for music, probably won't work for things like big-budget movies and certainly won't work for things that are incredibly expensive to produce and take huge full-time effort over many years, like search engines or new cancer drugs.
It is, in effect, the lazy mans solution. It isn't a generic solution yet we are faced with a generic problem. It's like saying we don't need copyright bec
music is not a red pepper (Score:4, Insightful)
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.
Re: (Score:2)
Contrary to what you said, scarce physical resources != ideas about things.
FTFA: Note that it's the non-scarce products, the recipes and the ideas, that helps expand the value of the limited resources, the ingredients.
I'd suggest that the flaw is in his assumption that "Any new business model must be based around increasing the overall pie."
/where's BadAn
The customer is always wrong! (Score:2)
Surely there's a successful business model hiding in logic like that?
They should just give up (Score:4, Insightful)
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.
Drivel (Score:4, Insightful)
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.
Re: (Score:2)
And this supports the argument that the labels are good? I'd argue that what we need is LESS prepackaged canned crap like Ms. Spears.
Re: (Score:2)
As a musician, may I ask *what* musical genius? The music industry are the MacDonalds of music, pretending junk music is the only music there is. People are growing tired and suspicious of junk music, and now want to preview music before paying for it, from the convenience of their homes.
If a supermarket can have people sample free cubes of cheese and make a profit out of it, why can't the music industry? Because they're alwa
Reality trumps idology masquerading as analysis (Score:3, Insightful)
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.
The Usual Crap (Score:4, Insightful)
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 usual FUD (Score:4, Insightful)
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.
Parent
Society & Performance (Score:3, Insightful)
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.
Re: (Score:2, Insightful)
Sell it for an affordable price and people will buy. Don't, and people won't buy (or "pirate"). Whoever is getting it for f
Re: (Score:2, Insightful)