Competing with Free Music and Movie Downloads: The Digital Rights Management Myth
The media is abuzz with reports of illegal music
and movie downloading, peer-to-peer file sharing and the related
legal and legislative battles being played out in courts and
in Congress. Many of these discussions perpetuate a myth that
existing, or soon-to-be developed, digital rights management
(DRM) technologies are the key to solving the entertainment
industry's piracy woes. As support for this notion, many people
cite Apple's successful iTunes music download service. The
conventional wisdom is that since iTunes uses DRM and iTunes
is successful, then DRM must have been instrumental in that
success. The truth is that Apple's DRM technology, called FairPlay,
was indeed instrumental in Apple's success, but not because
FairPlay prevents piracy.
For preventing piracy, FairPlay is not only totally ineffective,
it was built that way on purpose. The iTunes client software
enables consumers to burn the songs that they purchase to audio
CDs. Once on CD, songs are unencrypted, unprotected and completely
beyond the control of FairPlay. You can copy the song to a
file share; make a million duplicate CDs; or re-encode the
song in another format by using legitimate tools like Windows
Media Player. So, since the notion that FairPlay prevents piracy
is simply not factual, why did Apple bother to include it in
iTunes?
There are two very logical reasons for Apple to use FairPlay.
One has nothing to do with the effectiveness of its anti-piracy
features and everything to do with marketing. That is, having
a DRM-based copy protection illusion made it much easier for
Apple to convince record labels to distribute their music through
iTunes. Another reason for FairPlay's existence has nothing
to do with protecting rights holders from piracy and everything
to do with protecting Apple from competition. Apple's iPod
player and iTunes service were designed to work together. FairPlay
is used to keep out interlopers. Any would-be iTunes or iPod
clone maker would almost certainly have to reverse engineer
FairPlay, which makes the task of creating a decent clone much
more difficult and gives Apple both technical and legal counterattack
options. Apple showed its cards when RealNetworks announced
Harmony, a technology it developed to enable iPod users to
buy songs from Real's on-line music store. Apple responded
by threatening that future software upgrades will probably
break Harmony's compatibility. Apple also suggested that Real's
actions may have been a violation of the law because the Digital
Millennium Copyright Act (DMCA) makes circumventing copy protection
illegal. While the validity of Apple's legal argument is far
from certain, one thing is clear: Apple intends to use its
DRM to protect its own commercial interests, which have absolutely
nothing to do with protecting rights holders from piracy.
Hackers have found technical ways around FairPlay. Digital
content pirates, however, do not have to crack FairPlay; they
can simply take advantage of a gaping, built-in hole. But even
if we disregard all past experience with copy protection and
assume that FairPlay could be made foolproof, it would still
provide little or no protection from piracy to rights holders.
Copies of digital content are exact copies. They do not degrade
no matter how many times you duplicate them. Consequently,
even just one unprotected copy of a digital work can be perfectly
duplicated millions and millions of times while being distributed
by using file sharing technologies. Since many of the latest
file sharing technologies, which include the wildly-popular
Bittorrent, are freely available in source code form to anyone,
the tactic of litigating against proprietary P2P software and
service companies is becoming much less effective. The entertainment
industry has started going after the operators of Bittorrent
servers, but as soon as one is taken down, more spring up.
Technical measures for thwarting file-sharing have also been
attempted, but countermeasures are created almost as fast.
The inescapable conclusion is that, short of a complete government-enforced
lock-down of the Internet, entertainment businesses will increasingly
have to face the challenge of competing with free.
Another challenge for DRM is its negative value proposition
for consumers. In the real world, a significant number of microwave
oven clocks blink 12:00 for years on end because consumers
are either unable to learn how to set their clocks, or they
are just unwilling to bother. Yet some in the entertainment
industry continue to flirt with the idea that consumers will
not only tolerate, but also pay for, complex DRM-based solutions
that are terrible for preventing piracy, but pretty good at
inconveniencing the very consumers upon whom commercial success
depends. This notion that DRM can protect rights holders and
help them to compete with free is perpetuated by the purveyors
of multiple incompatible DRM solutions. These vendors find
an eager audience with some executives who are so desperate
to insulate their business models from change that they are
willing to believe that DRM snake oil is the answer.
In order to create a service that consumers would use, Apple
had to provide burning capability in the initial implementation
of iTunes. One cannot be certain, however, that such a feature
will always be available. At some future point, Apple could
decide that it is in Apple's best interest to remove the CD
burning feature. If that happens, the only way for customers
to get Fairplay-encrypted music out of iTunes will be to circumvent
Apple's DRM, which is illegal due to the DMCA anti-circumvention
provision and similar laws in other jurisdictions. It is also
important to note that burning capability is notably absent
for iTunes video downloads. With the growth in popularity of
Apple's iPod, there has been a corresponding growth in Apple's
market power. You can expect Apple to do everything possible
to increase that power and erect barriers to competition. With
laws like the DMCA on the books, a critical barrier to competition
has the full backing of the government's taxpayer-funded law
enforcement resources.
Apple's iTunes has demonstrated that you can indeed compete
with free. But as this document has shown, the actual effectiveness
of Apple's DRM in thwarting piracy played no part in that success.
It is important to note, however, that iTunes could not be
successful solely by using proprietary encryption to lock out
competitors and by promoting its DRM to rights holders as an
elixir to piracy. The other half of the iTunes formula for
success is completely dependent on peoples' behavior: if consumers
did not recognize value in iTunes, they would simply not use
it. Moreover, virtually every song legitimately purchased through
iTunes can be acquired for free via illegal means. Apple's
iTunes service, in combination with the iPod player, offers
consumers a complete and integrated solution that is easy to
use, flexible (e.g. you can burn songs to CD) and stylish.
iTunes is attractive to consumers, not because FairPlay DRM
is restrictive, but in large part because it is not.
Vendors and pundits are doing a profound disservice to the
entertainment industry by perpetuating the DRM myth and holding
up iTunes as an example. With iTunes, Apple has demonstrated
the value of DRM for neither consumers nor rights holders.
Apple has shown, however, that you can successfully compete
with free, and get consumers to open their wallets, if you
offer them something better. The entertainment industry should
take heed from the real iTunes example: create something that
provides convenience and value, not costly complexity, and
and you just might take away the incentive to acquire works
illegally. That would make digital piracy obsolete.
by Jim Flynn
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