Why DRM Cannot Open Up New Business Models 131
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.
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:Say what? (Score:5, Insightful)
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.
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 dog poo.
People want to buy good music, to think people want to buy into the control mechanism itself is ridiculous, completely back to front:
In Soviet Russia the Business Models You.
We wanted everything FREE.. well. (Score:3, Insightful)
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:there's a better argument here (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.
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.
Re:DRM is the only way to get conrtent. (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 free will continue, regardless of DRM, as time has been proving repeatedly.
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:DRM is the only way to get conrtent. (Score:2, Insightful)
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.
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.
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.
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.
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.
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: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.
Re:Say what? (Score:4, Insightful)
You don't have to be a thief/pirate to abhor DRM.
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.
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.