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Is DRM Doomed? The Case Against Digital-Rights Management

In the wake of Steve Jobs' call to eliminate anti-copying technology, are the music and movie industries poised to move from protection to monitoring?
In 2004, Flexplay issued a press release saying, "As a result of the enthusiastic response to the no-return, no-late fee movie rental alternative, ez-Ds will next be made available in Phoenix, Ariz.; San Antonio, Texas; Denver, Colo.; and throughout Florida. ez-D's expansion will focus on channels of distribution that have been most successful thus far, namely convenience stores and pizza delivery outlets."

Evidently, the pizza/DVD delivery market dried up. The company's last press release is dated Aug. 6, 2005, several months after Disney reportedly ended its test of ez-D discs. Incredibly, the idea lives on through a Swiss company called FDD Technologies, which markets DVD-D, yet another limited-use DVD format.

Philips Electronics, the other company behind the lackluster SACD format, evidently didn't learn much from the earlier failure of its Digital Compact Cassette format, which lasted from 1992 to 1996. Copy protection, however, probably wasn't the main reason that DCC never took off. DCC arrived at a time when the industry was moving to optical recording media like recordable CDs and MiniDiscs.

In late 2000, IBM, Intel, Matsushita, and Toshiba created Content Protection for Recordable Media and Pre-Recorded Media Specification, a DRM method currently used in Secure Digital cards. At the time, the technology was considered for inclusion in the ATA hard disk specification, raising the possibility of copy control technology on PCs everywhere.

With Napster in its original incarnation still serving millions of unauthorized songs to all comers, this might have seemed like a good idea to some at the time. Nonetheless, outcry over the possibility of hobbled hard drives by the Electronic Frontier Foundation and others contributed to the decision in April by the T13 technical standards committee to reject adding DRM to hard drives.

The Content Scrambling System used to protect DVDs from copying is perhaps the biggest DRM flop of all because it reveals that information cannot be contained. Introduced in 1996, the CSS scheme was cracked three years later by Norwegian programmer Jon Lech Johansen and two unknown associates who produced a short bit of code known as DeCSS. The DVD Copy Control Association embarked on an unsuccessful multiyear legal odyssey asserting that republication of DeCSS violates trade secret law, despite the fact that the code was no longer secret.

CSS is still alive and well on DVDs, and yet the MPAA reports that in 2005, the worldwide motion picture industry lost $18.2 billion as a result of piracy.

It is, of course, tempting to assert that those losses would be higher without DRM, but at least in the music industry, where most music is unprotected on CDs, the absence of DRM -- and the file sharing that follows from that -- hasn't had an impact on sales. A 2004 academic paper, "The Effect of File Sharing on Record Sales, An Empirical Analysis," by researchers from Harvard and UNC Chapel Hill, found that "file sharing has no statistically significant effect on purchases of the average album in our sample."

That's not to say dropping DRM would solve piracy or prompt labels to release more marketable music, just that DRM and piracy aren't intimately related.

As McQuivey puts it, "There's no evidence that a DRM-free world is more injurious than the world in which we already live."

Yet even as DRM is in decline, something better waits in the wings. Under pressure from Hollywood studios, Google is preparing to use Audible Magic's content protection technology to look for the "fingerprints" of unauthorized content on YouTube. Unlike traditional DRM, which is pre-emptive, Audible Magic's approach is reactive. In other words, it doesn't treat consumers like criminals before they've made unauthorized use of media files. It's like the difference between hardwiring a 55-mph maximum speed in a car and ticketing a speeder.

The real advantage of this approach, however, isn't as a means to police content but as a means to monetize it. "These monitoring systems would be used not to remove copyrighted material from these Web sites, but to monetize it by allowing an equitable distribution of income either from subscription or from advertising," said Gordon.

What to call this new form of digital revenue management? Anything but DRM.