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The Almighty Buck Media Music Businesses

Why DRM Cannot Open Up New Business Models 131

Posted by CowboyNeal
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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Why DRM Cannot Open Up New Business Models

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  • by Anonymous Coward on Saturday March 03, 2007 @11:47AM (#18218270)
    Or the terrorists will listen to our music for free!

    Do you want your children to listen to the same music as terrorists?

    I thought so...

    • DRM is a con trick (Score:2, Insightful)

      by Marcion (876801)
      People who like music, who are passionate about producing their product, do not need DRM. If your song/movie is good and you stand proudly behind it, then people will be happy to pay to come to your concert/film showing.

      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
      • by VertigoAce (257771) on Saturday March 03, 2007 @03:15PM (#18219944)
        I hate the $0.99/DRM-protected song as much as anybody, but I do see another scenario that requires DRM: subscription music services. At $15/month I need to listen to at least 15 new songs each month to break even. As a way of finding new music it works pretty well. You find some music you enjoy and then look at the list of recommended bands and try out their music. It's not much more than satellite radio, but you get to choose what's playing.

        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.
        • by mpe (36238) on Saturday March 03, 2007 @04:23PM (#18220476)
          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.

          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.
        • by cypherz (155664) *
          >but I do see another scenario that requires DRM: subscription music services
          (snip)
          >But, you could never have a service like this without DRM.

          I have no idea what you are talking about. eMusic (a subscription music service) is very successful and has no DRM. With my subscription I'm getting DRM-free tracks at about 6 cents per track.

          After re-reading your post *several* times I'm assuming you mean subscription services that offer all-you-can-eat type plans like Napster. The Napster model isn't the onl
        • Well actually the $15 subscription works in another case too... If you can release >15 good new songs a month.

          Considering that they have the whole world to work with (5 Good songs from U.K. 5 U.S. 5 Canada or whatever eh?) isn't unreasonable.

          The model for finding new music would have to be much better, likely this would be accomplished with something like last.fm instead of carrying about individual artists there would only be genre's for example a Grunge Emo (note second level of genre,making it eve
    • by Da Fokka (94074)
      You mean like this [unbossed.com]?
  • So the idea of selling digital downloads of on-the-radio songs for 99 cents doesn't count?
    • by Allicorn (175921)
      Is that impossible to do without DRM?
    • by Erris (531066)

      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

      • by westlake (615356)
        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.

        The majors' repositories go back to the beginnings of recorded music. The majors' respositories include recordings that are the core of any serious collection, in any genre you could name.

    • Re:Say what? (Score:5, Insightful)

      by merreborn (853723) on Saturday March 03, 2007 @11:55AM (#18218322) Journal
      I believe the argument is that iTunes has succeeded in spite of DRM, not because of DRM.
      • Re:Say what? (Score:5, Insightful)

        by IamTheRealMike (537420) <mike@plan99.net> on Saturday March 03, 2007 @01:16PM (#18218962) Homepage

        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:

        They don't believe that the free market can function with a lack of scarcity. It's understandable why that could make some uncomfortable -- but, it's a fundamental misunderstanding based on this desire to force scarcity where there is none, just so economics can continue to be the study of scarcity

        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.

        • Re: (Score:3, Interesting)

          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.

          No not for free if you pay for the subscription. Maybe you would be selling music
        • by fymidos (512362)
          > 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

          Really? potatoes are not scarce, but i don't see the price dropping to zero anytime soon...
          What is different with this, is that the actuall *cost* of producing it is zero. And there is no
          logic in DRM.. you simply cannot put the worms back in the box. The music and movie industry
          will simply have to cope with selling for much lower prices... There is
        • Re:Say what? (Score:5, Interesting)

          by DarkOx (621550) on Saturday March 03, 2007 @02:53PM (#18219796) Journal
          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.

          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.
        • by Belial6 (794905)
          "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"."

          Chewbacca Defense.

          "you can't have a non-scarce concept"

          I really have no idea how you came up with that. A 'concep
          • by tajmorton (806296)

            Um..Then the video rental business neither exists, nor has ever existed? Non-DRM rentals of products have been happening for a very long time.
            Huh? The video you rent expires after a certain time (when you return the video). You can't "rent out" DRM-free music, as it's never "returned."
            • by Belial6 (794905)
              A) Returning the video is NOT DRM. B) Perhaps you lived in a cave through the 80, but people having HUGE collections of movies they copied from VHS rentals was common. It's just that the vast majority of people that rented didn't care to keep the data permanently.
        • 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.

          Like the radio? And before you come back with "of course not, that's *different*" realize that the same argument was made about commercial radio back when it was new tech.

          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 som

        • Although I don't disagree with a lot of specific claims in the piece, I disagree that those claims can be applied as sweepingly as they seem to be. Generalizations are useful as a way of gathering insights, but are often not predictive unless also exhaustive and rigorous. I gained some useful insights from the article, and yet no confidence that it would predict behavior because it appeared implicitly to give permission to overlook other things of importance in its rush for what seemed to me a too-facile

        • by sakusha (441986)

          You can't support that line of thinking because there is no version of iTunes without DRM to compare to..

          Actually, that's the whole point. Without DRM, there was no iTunes Music Store. With DRM, the studios permitted downloads via the ITMS. The lack of DRM prevented ITMS from launching, it exists only because Jobs convinced the studios that DRM would minimally protect their product and then they committed to the new business model.
        • by Quantam (870027)
          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.

          Ah, so I'm not the only one who thought so. There's a quote from one of the design meetings/debates at our company: "The database can't be so abstract that it doesn't contain anything!" I think that's exactly what this article is - so abstract that it doesn't reall
        • by newhoggy (672061)
          Maybe the article should not claim that DRM is an impossible business model, but rather claim that DRM is bad for the economy because it reduces the total value of the economy and therefore should not be allowed despite the fact that it is possible to make a business model out of it.
      • by twitter (104583) on Saturday March 03, 2007 @01:22PM (#18219014) Homepage Journal

        ... the argument is that iTunes has succeeded in spite of DRM, not because of DRM.

        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.

    • Re: (Score:1, Informative)

      by Anonymous Coward
      So the idea of selling digital downloads of on-the-radio songs for 99 cents doesn't count?

      Doesn't count as what?

      Digital music is a non-scare good; however, adding DRM isn't adding value to the person paying for it. It is removing value by limiting the choices that the music can be played upon. In essence, you are subtracting value or functionality.

      Remember that RIAA wanted to create a variable pricing model for digital music. Now lets apply that to the above example. How much woild you pay for DRM'd m
  • by Kohath (38547)
    iTunes Music Store isn't a successful new business model?
    • by garcia (6573)
      What, delivering content online and having a required device to play this content without modification? No, it's not a new business model.
    • While Mr. Jobs has made some money with it, and it does seem to lead the pack of legal downloading systems, it is not successful in the way that McDonalds is. It is not successful in the way that Kleenex is. It is not successful in a ubiquitous way. There are four music fans in my house. One of them has an iPod (teenager - coolness is status for her), and there are zero iTMS accounts.

      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
      • by Americano (920576)
        How is this even remotely interesting? Your argument is that to be "truly" a successful business model, everybody must use the product / service? That's a curious definition of a business model, because I can point to at least half a dozen people I know who wouldn't eat at McDonald's if you paid them, and who prefer other brands of tissues than Kleenex. Your definition of ubiquity as success is ridiculous, because it's impossible.

        Is there room in the market for iTMS to grow? Absolutely. Could they g
    • by VJ42 (860241) *
      iTMS is successful despite DRM, not because of it. It would have been more successful had apple not forced DRM on it's tracks.
  • by Ckwop (707653) * <Simon.Johnson@gmail.com> on Saturday March 03, 2007 @11:50AM (#18218290) Homepage

    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

    • by Teresita (982888)
      RIAA admits they got the idea for this business model from SCO Group. You give SCO $699 USD, and they give you a piece of paper that says your install of Ubuntu is totally free of their intellectual property. Never mind that your spouse took the same CD you burned from the same .ISO from the same FTP mirror, until she gives them $699 SCO cannot certify that her install of Ubunto is totally free of their intellectual property.
      • You give SCO $699 USD, and they give you a piece of paper that says your install of Ubuntu is totally free of their intellectual property.

        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.
    • by sinij (911942) on Saturday March 03, 2007 @12:03PM (#18218394) Journal
      >>The legitimate download industry has a problem. Their products can't compete with the freely available infringing versions of the same content.

      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.
      • by Eivind (15695)
        You have an advantage to start with. Only this far, in -practice- the legitimate services has choosen to voluntarily toss away this advantage in the name of restricting their customers. (DRM does nothing to piracy anyway, so the pirates aren't affected)

        A DRM-infected version of an album is, in practice, grossly inferior to any openly documented format. Ideally flac or ogg, but even plain-old mp3s are an order of magnitude more versatile, despite the patent-crap on them.

      • by Kjella (173770)
        As a legitimate supplier of songs you have an advantage - you have guaranteed quality, broader availability and last but not least - legitimacy.

        Ok, not songs but TV shows and movies:
        1) Until quite recently I could get way better quality from HDTV rips from the states than locally. I still can't get HDTV without a big investment in new hardware.
        2) As for availability, there's usually half a week lag between US/UK (Dr.Who) air date and availability, which is way faster than the legitimate supplies.

        I guess tha
    • by ephedream (899351)
      Well RIAA ARE reacting logically, and not emotionally, to the situation.

      Logic:
      1. Given they must make as much profit as possible for their shareholders, they must then find any method they can to keep the money coming in.
      2. This means bribing politicians in pathetic attempts to make oppressive DRM laws like making every single electronic device having built-in DRM and things like the DMCA to make "breaking copyright protection" a criminal act. Then work with companies like microsoft to create DRM standards
    • by daeg (828071)
      But that doesn't have to remain the case.

      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).
    • 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.

    • True, here's two examples.

      Imagine Prada bags on the street started being better quality than the originals Better Stiching etc.

      Now imagine this happened consistently, suddenly "Knockoff Prada" becomes a better brand than Prada.

      This is the same with Pirate Music, Pirate Music is better than Music therefore Pirate Music is the new hot brand.

      What got me thinking about this is my knock off Rolex, I like it because it's heavy and well made (Well the band is nice, the internals are cheap) I got it for $1
  • Just tell Joost that (www.joost.com), they managed to get Viacom's portfolio signed up, now Viacom is issuing takedown notices to their content hosted on YouTube and clones but Joost has their content because they have a DRM delivery method.
    • Re: (Score:2, Insightful)

      by vivaoporto (1064484)
      Yeah, right. As if good old Red Book CDs weren't selling like cupcakes. Except for the most tech savvy share of the population, Joe Sixpack and Mary Housewife (the gross of the population) will not know/bother to "pirate" music (or movies, for all that matters). As one exec said in a previous article, "would daddy give his daughter The Little Mermaid on a DVD written with a Sharpie"?

      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
  • markets always favor efficiency. pre-internet, the cd makers, tape makers, lp makers, etc., they could successfully stand between the artist and the consumer and collect tolls for a valuable service they performed: distribution of media

    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)

      by garcia (6573)
      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

      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.
      • but yes, even government eventually comes around to common sense. i didn't say how long it would take, but it will happen. simple common sense is an acid which dissolves all barriers
      • by JonWan (456212)
        But that will only prolong the process. Sooner or later the artists will decide for themself and go with direct distribution, the music companys will bleed slowly to death. I hope it happens sooner than later.

      • by cowscows (103644) on Saturday March 03, 2007 @12:55PM (#18218824) Journal
        Even if the government, for some reason, threw everything they had at helping the RIAA...it'd only delay the inevitable. People want music, musicians want to provide it. Right now most people are still happy getting their music from the labels, and enough of the artists are willing to work the the labels to fill that demand. But that is slowly changing, and the process will accelerate as it proves itself to be a valid way of doing business.

        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.
    • Unfortunately with all the the support the RIAA is getting they might live longer than one would think. And until they finally die they could possibly do a lot of harm to consumers and artists. I wonder how long it will take until more and more artists actually make use of the Internet, because up until now it seems like most of them continue to publish their works the old fashioned way.
    • by qbzzt (11136) on Saturday March 03, 2007 @01:27PM (#18219060)
      Even in the Internet world, publishers can serve a useful purpose. I gladly pay Baen $6 for an e-book when I can find something to read for free. Why? Because they do the work of selecting good manuscripts, editing them, and even training beginner authors so they'll write better books in the future.

      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.
    • by zoftie (195518)
      RIAA has nothing to do with recording companies, except that it collects money from them, charging premium for legal&detective services. As such it may well outlive many of the recording companies that authorized its existence. Perhaps the most harmful thing can be done, is do guerilla marketing campaign to associate people who buy CDs with fact that if they rip the CD into MP3 they will face possibility to be jailed by recording company that has sold them the CD via RIAA. Or be faced with fine that wil
    • 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

      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
    • by mapkinase (958129)
      The fallacy of your argument is that there is no energetic barrier between artist and consumer. Well, free energy has not only entalpy component (barrier between consumer and artist), but also entropy component (there are billion of other artists besides you, and your consumer will have smaller chances to find you in the world of egalitarian marketing which internet is)
    • by mpe (36238)
      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

      You also have the likes of DVD region coding, which attempt to replicate inefficancies of older distribution methods.
  • Yes it can (Score:5, Interesting)

    by bemoosed (1053854) on Saturday March 03, 2007 @12:07PM (#18218434)

    "Fundamentally, DRM cannot create a successful new business model."
    Sure it can. Just not in a relatively free market. It can be quite successful given the purchase (investment?) in the right legislation, followed by litigation and/or force.

    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.
    • You're right but I think that "business model" is not the correct term at that point.

      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)
    • "Fundamentally, DRM cannot create a successful new business model."

      Sure it can. Just not in a relatively free market. It can be quite successful given the purchase (investment?) in the right legislation, followed by litigation and/or force.

      What does DRM have to do with that? Given the purchase of the right legislation, any business model can be made successful no matter how ill-conceived -- e.g. look at the US paying farmers NOT to farm their land.

  • by JackMeyhoff (1070484) on Saturday March 03, 2007 @12:07PM (#18218436)
    .. that is what we are getting now.. Zecco.com - Free stock trading Joost - Free video content YouTube - Free video content etc etc We cried for things to be free, well now it is happening things are becoming FREE, due to a new business model, ADVERTISEMENT SUPPORTED business model. Now that is not enough we want our cake and eat it, we dont want ads now. So can you suggest a new business model that we wont cry about?
    • Not a business model, though.

      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
      • by HighBit (689339)
        Yes it does.. releasing movies that people pay to watch is a successful business model that the state earns tax money from
      • 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

        • "it annoys me that some people want an "amateur rules!" system which would preclude professional productions."

          No offense, but this is a strawman. Go to jamendo.com, or another site where artists create things and do not reserve all rights to them. There is plenty of 'professional production' there. 90% of the population would be unable to hear any difference in musicianship/professionalism between what is there and what is on the radio -- if any difference exists.

          It is true that certain kinds of artists are
          • You're again lacking genericity. I can quite believe that amateurs can make very high quality music, I used to be an amateur musician myself (though I sucked at it) - but all the tools are there and it's cheap. Amateur music is something I hear pretty often. Amateur movies, not so much. With software you can get "amateur" (using the word to mean non-fulltime) products that are really quite good, like the Gimp or the Linux kernel, but it only works in a few cases - there has never been any open source compet
            • "You're again lacking genericity"

              It is not necessary that -- when I propose copyright reform or repeal -- I figure out a way to make sure the same number of blockbusters movies and 3D FPS games will get made. It is actually supposed to be incumbent upon those who would restrict liberty (via copyright) to demonstrate the state's interest in those blockbusters or games.

              By default, I think we should be free to share whatever works of culture we encounter. In the interest of funding some big-budget, expensive,
    • by Imaria (975253)
      And look how YouTube has grown; people will always complain, but at least with the no-cost open models, they are still using the service.
  • by maynard (3337) <j.maynard.gelina ... m ['il.' in gap]> on Saturday March 03, 2007 @12:07PM (#18218438) Journal
    The fallacy of this argument is that the author equates rearranging scarce physical resources (ideas about things) to create added value (economic growth) with ephemeral nonphysical ideas like music, writing, film, etc. If one follows the logic of this, extracting "added value" of media content would be in controlling its creation and then distribution. Which is exactly what DRM attempts to do.

    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.
    • by TubeSteak (669689)

      The fallacy of this argument is that the author equates rearranging scarce physical resources (ideas about things) to create added value (economic growth)

      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

      • by maynard (3337)
        Contrary to what you said, scarce physical resources != ideas about things.

        Actually, within the author's argument, yes it does. The 'rearrangement of scarce physical resources' is just another way of saying 'recipe' within this analogy. That is, the value add is not in the ingredients, but in how those ingredients are arranged (mixed and cooked).

        He says that it's the ideas themselves which add value to products, not the implementation nor the work involved in bringing those ideas to fruition. He essentially
        • by mpe (36238)
          And here we have the (obvious) difference between physical things and ephemeral IP, one can be copied, used, and reused indefinitely. The other cannot. Yet copyright law exists to create an artificial duplication boundary for such ephemeral products, ostensibly so that creators will be able to extract economic value from their work as an incentive to create more.

          Copyright is thus intended as a means rather than an end in itself. There may thus be an optimal level of copyright to do this. It's even possibl
    • Music is not a red pepper.

      These guys [redhotchilipeppers.com] beg to differ.
  • Surely there's a successful business model hiding in logic like that?

    • by Colin Smith (2679)
      The customer is always wrong is the clarion call of management consultants the world over.
       
  • by mc6809e (214243) on Saturday March 03, 2007 @12:37PM (#18218688)

    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.

    • by westlake (615356)
      They're fucking hypocrites. They're getting what they deserve.

      Hypocrisy isn't confined to the industry. The Geek has a full share of it as well.

      It isn't true that nearly "everyone" copies. The entry requirement is, after all, typically, a mid-line computer and a broadband connection, perhaps 40% of American households.

      I suspect that the file-sharing demographic can be defined much more narrowly.

      ---which implies that the majors have the option of shifting production to better serve their paying customer

  • Drivel (Score:4, Insightful)

    by kamapuaa (555446) on Saturday March 03, 2007 @12:39PM (#18218702) Homepage
    Slashdot is cherry-picking articles purely for agreeing with its editorial views, rather than any instrinsic merit. This article is complete nonsense.

    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.

    • by sconeu (64226)
      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.

      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.
    • by mrjb (547783)
      The Britney Spears of the world didn't get big due to their solitary musical genius

      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
      • by Dunbal (464142)
        The music industry are the MacDonalds of music, pretending junk music is the only music there is.

              Lol. Britney Spears herself is proof that this "junk music" causes obesity...
    • Slashdot is cherry-picking articles purely for agreeing with its editorial views, rather than any instrinsic merit.

      Nope. Slashdot is picking articles that will generate the most page views, which will generate the most advertising revenue. Welcome to a capitalistic world.
  • by mumblestheclown (569987) on Saturday March 03, 2007 @12:52PM (#18218804)
    So, we have some article here purporting to claim that it is impossible to build a business based on DRM.

    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.
    • by Mr2001 (90979)
      Shareware is not a type of DRM. DRM has a more specific meaning than just a set of restrictions on a digital item. DRM is about selling information while keeping it hidden from the purchaser.
  • The Usual Crap (Score:4, Insightful)

    by the eric conspiracy (20178) on Saturday March 03, 2007 @01:39PM (#18219182)
    Sorry, but economic theory says that a succesful business model depends on both the consumer and producer benefiting from the model. Producers in the business of content production (music, movies, software, pharmacueticals etc.) will eventually stop if they don't get some sort of benefit from this. DRM provides new ways of assuring getting this benefit and thus enables new business models.

    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)

      by argent (18001) <peter@NOsPam.slashdot.2006.taronga.com> on Saturday March 03, 2007 @04:36PM (#18220580) Homepage Journal
      DRM provides new ways of assuring getting this benefit and thus enables new business models.

      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.
      • 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.

        If you consider that most content publishers do not distribute electronically because of ineffective or unavailable DRM, and still rely on physical media this is obviously false.

        2. It doesn't prevent online distribution of unauthorised copies.

        That's why online music distribution hasn't taken off
        • by argent (18001)
          If you consider that most content publishers do not distribute electronically because of ineffective or unavailable DRM

          That doesn't mean the DRM is required, it means that they believe the DRM is required. That doesn't mean anything except that the usual FUD is working.

          I think that point is very debatable. I buy CDs for several reasons [...]

          None of which come down to "you are ripping music rather than buying it", they come down to "the online version is less value for money". You're agreeing with my point:
          • That doesn't mean the DRM is required, it means that they believe the DRM is required. That doesn't mean anything except that the usual FUD is working.

            It doesn't matter if it is FUD or not. If you want to realize a business model based on using this content you better have DRM. Otherwise it is a non-starter from viewpoint of the content owner, and that is the reality of the situation.

            None of which come down to "you are ripping music rather than buying it", they come down to "the online version is less value
            • by argent (18001)
              If you want to realize a business model based on using this content you better have DRM.

              The hidden assumption here is that there's specific content that has to be part of the new business model, or the new business model can't happen.

              If some content owner doesn't want to be part of the new business model, because they believe that DRM is necessary for the business model to work, then what that means is that the existence of DRM is preventing the new business model from taking off as effectively as it could.
  • by BoRegardless (721219) on Saturday March 03, 2007 @01:45PM (#18219236)
    The basics of Performance & Availability & Desirability of artistic expression have changed over time, and are changing again.

    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.
  • DRM is DRM(boo!) not because we are "afraid" that companies that use DRM would outcompete the companies that don't. DRM is DRM(evil as evil gets) because it is done by monopolistic organization that would exclude anyone employing some people other than grandpa and grandma from non-using DRM.

    Whether it is the situation or not, is another question, but nobody seriously thinks that DRM is survivable.
  • At worst this article is completely disingenuous. A proper economic anaylsis of DRM may well be able to make a case that it cannot open up a new business model but this article is not it. At the core of the authors thesis is the statement (unproven) "DRM is fundamentally opposed to this concept. It is not increasing value for the consumer in any way, but about limiting it.". However it is easy to argue that DRM provides the incentive for some content creators to do the creating in the first place. As long a

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