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)?"

Yes

[seanadams.com (463190)]

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 (905475)]

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:

[Binestar (28861)]

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!

No, but converting from your currency to our currency isn't free (it's a service provided by banks generally, and at a price). Passing costs on to the customer is normal business practice.

Re:

[TheRaven64 (641858)]

My bank charges me 2% to convert between pounds and dollars in small quantities (a few thousand dollars), and this price drops a lot when it you are talking larger quantities. The price difference between the UK and US stores is closer to 20%.

Re:

[Binestar (28861)]

Well, certainly you're not going to get the service at cost, and presumably you could go to your bank and convert that money to dollars, then buy at the US dollar price?

That said, it's not just 2% charge, it's the infrastructure to support the multiple currencies (now, I don't know, nor do I understand everything that would be required for that, is it as simple as getting payments into your account in Euros/Pounds/Lira/Peso's and having your bank run a batch conversion? Or is the bank taking a transacti

Re:

[Zonk (troll) (1026140)]

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".

Re:

[CastrTroy (595695)]

Well, you could always buy a booster pack to get the rest of the album. Sure they are a little more expensive per song that way, but the credits don't expire for a full year, so it's very likely that you would use them up, especially considering it happens so often that you have to wait until the next month to finish downloading your albums. The Albums thing breaks down when you see EPs with only 4 songs on them. Should those be counted as 4 songs, or as albums? It would be nice if they did something li

Re:Yes

[garcia (6573)]

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.

DRM not neccisarly just RIAA big label.

[Bill, Shooter of Bul (629286)]

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.

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

Re:

[UncleTogie (1004853)]

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 fr

Re:

[Bill, Shooter of Bul (629286)]

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

Re:

[garcia (6573)]

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 under

Yes for rent, no for purchase

[dupont54 (857462)]

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

Re:

[Mateo_LeFou (859634)]

'member all those stories from Middle School history about Native Americans being unable to comprehend the concept of "owning" land?

Same thing here with art. Except it's us primitive native pre-DRM guys who are having difficulty comprehending.

Re:

[rtb61 (674572)]

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 pa

Re:

[SatanicPuppy (611928)]

I like the idea of services like Rhapsody, but I hate their insistence on crappy codecs and heavy drm...If I want to pay for a monthly service, I want to be able to listen to that music anywhere, on any format...It's doable in some ways, but it's not seamless, and it is annoying.

It also bothers me that no one really has "all" the music because some goddamn content owners refuse to ever license their stuff for distribution.

In the end, I think that pay subscription services will end up dominating the market,

Re:

[danpsmith (922127)]

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 have mod points, but I don't feel like using them. I hate the idea of music on

Re:

[gfxguy (98788)]

This is what a lot of younger people don't understand, and it goes along with leasing cars and renting apartments - after years and years of payments, you will have nothing.

I'm wary of online music because, after years and years of buying records and then CDs, I have a whole huge collection; converted to digital formats that I can use with just about any music player. Certainly the model of buying a whole CD when you don't want a whole CD is lacking, but I think it's not nearly as bad as paying and paying

Exactly.

[pavon (30274)]

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:

[NickFortune (613926)]

I have to say it is pretty hard to defend the position that DRM is universally bad.

It's generally very difficult to defend any overly broad generalisation. On the other hand, I think I'd find it quite easy to defend the notion that DRM is almost universally bad.

It reminds me, (if I may be permitted a short digression), of Robert Lory's Dracula books [blogspot.com]. In these, an obsessive paraplegic criminologist uncovers the Count's resting place and (as one does) implants a tiny remote control stake in the Vamp

Re:

[shark72 (702619)]

"It's generally very difficult to defend any overly broad generalisation. On the other hand, I think I'd find it quite easy to defend the notion that DRM is almost universally bad."

Another example: I use a form of DRM (password protection) on the *nix box that holds my web site. I do this because my web site is my revenue stream, and I would like to prevent people from either copying my code (yeah, I subscribe to that ancient "closed source" model) or sabotaging my web site.

I grant that I'm probably t

Re:

[Josh Coalson (538042)]

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

Re:

[whoever57 (658626)]

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.

Re:

[Jherek Carnelian (831679)]

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

Missing a critical element of the business model

[jfengel (409917)]

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.

Steve Jobs is a liar

[by 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.

Re:

[TheRaven64 (641858)]

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:Steve Jobs is a liar

[nine-times (778537)]

Please stop repeating that canard that Steve Jobs has a "preference for getting rid of DRM." That is absolutely false....

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.

Holy crap. I guess I've just been entirely gullible to believe Steve Jobs. Not anymore, though! From now on, I'll only listen to the record industry's lawyers!

Re:

[Phanatic1a (413374)]

the iTunes DRM locks consumers into iPods.

Jesus, that's putting the cart so far before the horse that the horse won't catch up before the heat death of the universe.

Nobody, but nobody, buys an iPod just so they can buy songs off of iTunes. That's laughable. The figure repeatedly comes up that the average iPod user only has less than a dozen songs from iTunes on the thing.

The iTunes DRM was there so that Jobs could dupe the music labels into jumping on board with the iPod, while all the time he realized th

Re:

[Mateo_LeFou (859634)]

"I am an IP lawyer working on music licensing"

How's that working out for you?

Re:

[Steve525 (236741)]

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.

Yes, Steve Jobs may be a publicity hog. Why shouldn't he be? Good for him as long as it's good for Apple. It's impossible for us to say how sincere Steve Jobs' editorial was, but I'm sure it has more to do with the European antitrust issue

No allofmp3.com?

[by 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:

[TheGratefulNet (143330)]

(I second that emotion) ;)

in fact, I just tried a*mp3.com and while visa was still 'disabled' mastercard still works. works fine.

3 cheers for the russians.

(can't believe I am saying this. 20 yrs ago, who would have thunk...)

Re:

[by Anonymous Coward]

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

Or was it limited to legal means ?

Re:No allofmp3.com? (THANKS!)

[Wicked Zen (1006745)]

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.)

Oxymoron

[SatanicPuppy (611928)]

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 (409917)]

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.

Watermark Me!

[bill_mcgonigle (4333)]

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 [bfccomputing.com] about this a few weeks ago - water

Re:

[Hans Lehmann (571625)]

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 a

Sure..

[pickyouupatnine (901260)]

It helps build smarter code crackers, but thats probably not what TF meant by 'innovation'.

tangible

[bigwavejas (678602)]

im definitely not an expert here, but i personally feel if i spend money i want something i can keep, not something i can use for a few times. i think what a lot of people are doing is streaming the music via napster or whomever,then ripping the stream into mp3s and posting the torrent.

Well

[RobertM1968 (951074)]

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.

Define 'Innovation'

[ThosLives (686517)]

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?"

What would turn this on its head

[cdrguru (88047)]

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.

DRM and the dodo

[natpoor (142801)]

DRM is going to be killed off by monkeys and stray dogs?

Ignores ORIGINAL Napster

[jafac (1449)]

To ignore the utility and innovation in the original Napster (which was more than just a P2P download service; it was P2P downloading, bundled with social networking, and a grassroots ratings service).

Everything else has been downhill since.

The Business Models - Translated for UK readers

[giafly (926567)]

Buy the Condo Downtown (iTunes) = marry
Buy the Small Condo (Napster) = marry slapper
Buy the Small Condo Downtown (Yahoo!) = marry chav
Buy the Even Smaller Condo Downtown (Yahoo!) = marry troll
Buy the Ranch On the Edge of Town (eMusic) = marry cutie
Buy the Ranch in the Country (Amie street) = marry heiress
Rent the Mansion in the Slums (Napster) = hooker
Rent the Mansion in A Different Slum (Zune) = rent boy

The hidden cost

[JustNiz (692889)]

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.

Re:

[thePowerOfGrayskull (905905)]

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.

Re:TFA is absolute correct. DRM does cause enable.

[laffer1 (701823)]

Using this logic, it may even push people away from Vista.