BitTorrent, EMI, And The MPAA All Misunderstanding DRM In The Same Day

from the fun-for-everyone dept

Tue, Feb 27th 2007 2:51am — Mike Masnick

Earlier on Monday we had decided to ignore the stories about EMI bailing out on supposed talks to sell unprotected MP3s as well as the story about BitTorrent launching a ridiculous "authorized" movie download site that even the folks at BitTorrent seem to recognize is guaranteed to fail thanks to the inclusion of DRM. However, trying to figure out what to write about the "DRM Panel" at Monday's Tech Policy Summit has had me stumped for the last few hours until I realized that all three fit together.

The panel was supposed to be about DRM and interoperability, but barely touched on the interoperability part, preferring to remain firmly focused just on DRM. Again, I was disappointed in the panelists for not really stating much that was new. It was a stacked panel (again). Gigi Sohn was there as the sole defender of consumer rights and fair use, but missed out on multiple opportunities to points out that the DRM everyone else was defending wasn't just about a fight between content producers and consumers, but that it was simply bad for business.

The rest of the panel, led by the MPAA representative, David Garfield, kept saying over and over and over again that DRM was important because it opened up new business models. Yes, we've heard this all before. We've been hearing it for years, and those business models aren't forthcoming. When that was brought up, all Garfield and the others could say is to give it time. Unfortunately, people have been giving it plenty of time and all they have to show for it is that they feel like criminals in their own homes for doing something that's perfectly legitimate, and worries about what MPAA-pushed legislation will invade their technology next. The reason there are no "new business models" forthcoming from DRM is that it fundamentally takes away value. You don't create new business models on providing the customer less value. You create new business models by providing them more value. The "new business models" don't exist, because they're fundamentally blocked by the concept of DRM.

What became clear after the discussion is that very few people are willing to actually step back and realize this. Pretty much the entire industry has simply decided that DRM is the only way to make money -- even with repeated examples of why that's simply not true. With EMI, the talks broke down over the fact that the music wouldn't pay up in advance to cover the supposed "risk" of offering DRM-free songs. In other words, EMI wasn't looking at dropping DRM because it realized that it would help their overall business of promoting and selling the music of bands in its roster, but because it was hoping to score a huge upfront payment from the likes of Microsoft.

Meanwhile, the MPAA sits and waits for some mysterious magical DRM-based business model that everyone loves -- rather than noticing the insanely long history of failed experiments with DRM. The movie industry offers a product where DRM should be the least of its worries. It's an entertainment product that has always been about the experience of seeing the movie. If the MPAA's execs ever realized that they were selling the experience rather than the movie itself, the issue of DRM would be seen as something that blocked their ability to sell more, rather than helped it. This is seen in the BitTorrent deal as well, which is set up to fail thanks to unnecessary DRM that offers no benefits and plenty of pain points. An audience member asked the panel why every movie download service ever created has completely sucked. Garfield proceeded to claim that you have to give them credit in that they're only just starting, and none of those services have been around for more than a year. He said that if we check back in a year, they'll all be much better. Except, that's totally false. CinemaNow and MovieLink have been around for more than four years and still suck.

The industry is going to continue digging itself into a hole as long as they all insist that DRM is necessary for a business model. It's only once they ditch that myth that they'll realize there are plenty of other business models -- and those business models have the opportunity to bring in a lot more money by providing more, not less, value to customers, giving them more, not less, of what they want and treating their best customers like people who they want to do business with, rather than criminals.

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46 Comments

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Cixelsid, 27 Feb 2007 @ 3:19am

Yeah
I was tottally bummed when I heard Bittorrent was going to approach it in the exact same manner as all the other sucky movie content providers on the net. So far none of the sites available on the net has given me more value than me just walking to the videotheek up the street and renting a dvd for 1 or 2 euro at the automaat (dunno what the word is in English, sortof like an ATM).
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David Griffin (profile), 27 Feb 2007 @ 5:01am

Why not watermark ?
Seems to me that if they uniquely watermarked every MP3 they sell,
- they could trace and punish the bad guys
- it wouldn't get in the way of the good guys

I would happily pay $1 per track for songs of my choice in watermarked MP3 format provided that they play on my phone /MP3 playing portable/ PC car stereo when I get them home. With iTunes I have to write off a blank CD to manage this and I'm still probably breaking the law.
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ConceptJunkie (profile), 27 Feb 2007 @ 5:10am

DRM isn't about creating opportunities for new business models, it's all about trying to breathe life into the rotting corpse of an archaic business model that became totally obsolete a decade ago.

It's all about trying to maintain a monopoly. It's about trying to avoid a changing marketplace and a changing customjer basse. The Internet broke their monopoly on distribution. It's breaking the monopoly on marketing and even huge corporate consolidation can't prevail against freedom of information. It's breaking the monopoly of choice, by offering alternatives to the mass-produced flavorless sludge to comprises 98% of popular media. Controlling every radio station in the country and limiting each to absurdly narrow programming hasn't secured it's future. It's a bullet in the head.

The media companies resent having to work for their money. They resent having to compete. They resent the fact that technology has transformed their industry and the marketplace, and they hate their customers for expecting more value rather than less for their hard-earned money.

DRM is their war against the future and that war was lost before it was even declared.

Rick (massive collector of legal, DRM-free music)
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Scott C, 27 Feb 2007 @ 5:37am

Maybe everybody needs to step back and define a set of principals that all can agree on or at least agree to disagree. And let's acknowledge where parties are wanting to take advantage of the other (e.g., users want stuff for free and producers want to maximize their product's profit.)

For my part, I'm comfortable with content producers wanting to protect their creation from theft. But as a consumer, I expect to treat any content I purchase the same way I do any widget I purchase.
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_Jon, 27 Feb 2007 @ 5:38am

The definition of insanity is to repeat the same thing expecting different results.

These guys keep saying the same thing, hoping it will come true.
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Wolfger, 27 Feb 2007 @ 5:40am

The lameness of the BitTorrent deal
Same crappy deal as any other download service, *plus* I get to donate a portion of my bandwidth to these greedy corporations.
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Anonymous Coward, 27 Feb 2007 @ 5:42am

Re: Yeah
Yes, yes I know it probably isn't technically legal but http://www.usenetserver.com/?agent=acdrateclasses is a damn good alternative to your video store :p
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Craig, 27 Feb 2007 @ 6:06am

It's all about the experience
"It's an entertainment product that has always been about the experience of seeing the movie."

I'm glad to see you're on board, Mike, as this is exactly what I've been teaching my business students for years, now.

The entertainment industry isn't about "content." Content is merely one of many raw ingredients, albeit an important one, that, when combined, give entertainment value. If you also consider the whole scalability argument -- things become progressively less valuable the cheaper they are to produce (i.e., as scalability goes up) -- you start seeing exactly why most people have a hard time paying 99 cents for a song, yet most will pay considerably more to hear the same song at a concert even though they don't take away any "property" from that purchase.

If entertainment were priced accurately per its value, musicians who tour a lot and stage actors would be making the most in the business. Oh, and their managers; we can't forget the parasites that feed off the creative class, can we?
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Lewis Salem, 27 Feb 2007 @ 6:36am

the MPAA.
What do we expect of the MPAA?

They're still mailing out movies to theaters.

Should any company that still does business this way survive?
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Anonymous Coward, 27 Feb 2007 @ 6:41am

Re: the MPAA.
They're still mailing out movies to theaters.

Choose your arguments carefully, as that one is fairly useless to the point you are making.

Mailing out the movie is by far the most efficient and relaible method they have of delivering the content to the vast plethora of theaters.

What exactly would you propose as an alternative?
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Overcast, 27 Feb 2007 @ 6:57am

I'm surprised they still aren't using the pony express.
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Wizard Prang, 27 Feb 2007 @ 7:34am

I agree, but...
...it is probably easier to remove a watermark than it is to remove DRM.

Still, I, too, would support watermarking if they could find a way to make it work.
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Anonymous Coward, 27 Feb 2007 @ 7:51am

Re: I agree, but...
I agree too.

Watermarking is extremely easy to implement and it is a possible solution for the music industry.

And it really is quite difficult to completely remove without 3 or more watermarked samples AND the need to perform a digital-analog-digital conversion. I suppose a framebyframe equalizing engine could be created by someone whos really bored in order to keep it in the digital realm, but they would still need multiple samples, and they will STILL be creating another watermark (albeit slight more diluted) in the process. As in, it will be traceable to them. Two people cannot create the same "unmarked" copy unless they use the exact same samples to create it. Again, there is traceability there. The only way to truly "remove" the watermark is to have so many marked samples into your comparision engine that the final watermark is "diluted" to the point of no longer being recognizable. And you're still not guarenteed to have replicated the original. (There could be something in the mark that is identical in each and every sample used)

However, that solution does NOT scale well, if at all. It might never be a viable solution for video, as each and every piece of content has to be marked individually for each and every customer.

That is alot of processing that doesn't need to be performed under the DRM way.
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Overcast, 27 Feb 2007 @ 7:58am

Well, with any luck - the longer it takes the MPAA to figure out what they are doing, the more time it gives for Indies to get some new films out there.

To be honest; I've seen a number of Indie films that hands-down beat anything Hollywood's producing.
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Anonymous Coward, 27 Feb 2007 @ 9:19am

Re: Yeah
First poster is exactly right. I looked at bittorrent.com yesterday... I can get more value faster and cheaper by just driving to blockbuster than by download a 2hr 700MB movie file.

Not to mention that since it's bittorrent, they're also going to want to borrow quite a bit of my upstream bandwidth while I'm downloading the movie and after I'm finished, but that bandwidth they're borrowing doesn't deduct from the US$4 they're charging.
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Patrick Gregston, 27 Feb 2007 @ 9:24am

Presumed innocence
Mike has nailed it. It isn't just that it isn't interoperable, nor opening up new business. It is that the underlying premise is treating customers as crooks.
I represent a digital watermarking company - USVO- and the foundation of our approach is presumed innocence. You are innocent and therefore the appropriate business posture is to sell you content, and let you use it as you are accustomed to and have rights to under existing 'fair use'.

Our technology embeds proof to catch crooks. That is where the attention should be, right after making money by selling the content. Content is kind of like money. It only has value when it is moving around. The content companies need it to move, but have unwittingly embraced solutions that inhibit that.

Way to go Mike. Keep pointing out the fact that the product is the experience, not just the content, or the physical media that the content is conveyed on. Start looking at alternatives, like watermarking, that provide security without attacking customers.
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Marumm, 27 Feb 2007 @ 3:14pm

License terms for purchased content
In the event that they start "selling" content, here are the rules for the content you "purchase" as stated in the BitTorrent Terms of Service:

5.2. Purchased Content. For Commercial Content that you elect to “purchase” (“Purchased Content”), subject to your payment of all applicable fees, you have the right to play such Purchased Content an unlimited number of times, solely on two (2) Authorized Devices. Those two Authorized Devices must be activated with the Service under the same account ID and billing account (the same credit card). You acknowledge that in this context a “purchase” is shorthand for a perpetual license and does not grant any ownership rights whatsoever in the Commercial Content.

I suppose "All the newest movies perpetually-licensed to two unique machines running the appropriately-updated Microsoft media programs for $19.99" just doesn't have the same ring to it.
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John Hoffman, 27 Feb 2007 @ 5:18pm

BitTorrent DOES get it
I'm afraid I have to disagree with you about whether BitTorrent misunderstands DRM. Here's an interview with Bram Cohen about the new site:

http://www.slyck.com/story1416.html

I believe BitTorrent is marketing content with DRM (1) because they have to, and (2) only until they can convince the studios it isn't needed. And yes, it's going to reduce the amount of business they do, but they have no alternative and this at least gives them access to and influence with the content companies.
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Bumbling old fool, 27 Feb 2007 @ 6:05pm

Re: BitTorrent DOES get it
Becoming a whipping boy and slave does NOT give one influence to make changes.
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|333173|3|_||3, 28 Feb 2007 @ 5:11am

DMCA loophole
For some DRM
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Jeremiah, 28 Feb 2007 @ 6:46am

more of the same...
DRM is a joke...any kid can turn a song with DRM into an mp3. Labels need to lower prices of albums/songs and sell direct to consumers.

Also, The RIAA's efforts against file sharing are soon going to be a thing of the past with all of these new software applications that offer encrypted exchanges. Look at GigaTribe for instance ( http://www.gigatribe.com ), their free software lets users exchange entire folders of albums in a few easy clicks, and not even the ISPs will be able to spot what's being exchanged.

The music model is changing rapidly, and the music industry is just going to have to adapt. I for one will never buy a DRM-plagued music file, nor will I buy one of those "copy protected" CD's I so often see. DRM will just backfire and hurt their sales!!
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Polovision, 28 Feb 2007 @ 2:57pm

War is War
DRM is like the war on drugs....neither is working!
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Kirk, 28 Feb 2007 @ 4:46pm

on new business models
DRM doesn't enable new business models. Digital content enables new business models. The problem is that the record labels and film studios have business models that simply don't translate to the digital realm. No amount of DRM will change that fact.
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Mary, 28 Feb 2007 @ 5:32pm

What is the model?
Will someone PLEASE offer up a suggestion for a viable business model? I have read threads and comments like this so many times and the general theme is “DRM sucks, the content provides suck and they need to come up with a business model that works.” _Jon writes, “the definition of insanity is to repeat the same thing expecting different results.” Well, repeatedly stating that DRM sucks, and hoping the content provides change their outlook, doesn’t make it true.

Most of you seem so focused on the problem (which you perceive to be DRM) as opposed to the solution, which is striking a balance between staying in business and keeping the customer satisfied.

Try to, for a minute, really put yourself in their shoes. They feel under siege, they’re struggling to adapt, but they also have a tremendous amount of influence (lawmakers, consumer electronic mfg, etc.)

I believe there will be a breakthrough, just like the notion of renting videos was a breakthrough, when the evil, illegal and “soon to be the end of the movie producer” device called the VCR hit the mainstream in the 80s. I don’t think anyone has the answer… yet…

I agree, this is a crappy time we’re in, but it will work out and the market (you and me) will call the shots.
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Robus, 1 Mar 2007 @ 1:07am

They should just sell MP3 songs
Why don't they sell unprotected MP3 songs?

I bought some albums in iTunes to use in my iPod, fine, no problem... until I wanted to hear them in my old muvo (I didn´t want to take my iPod to the beach)...

So, I paid for some albums more or less the same price I could have at Virgins' for the REAL CD (with pictures, box and a nice CD that I can rip into iTunes and keep it safe in my shelves... or use it in the car, home stereo... etc...).

I haven´t bought any other iTunes track.

The only real advantage of iTunes was that I could easily hear some tracks in my home, when I wanted... and buy them immediatelly.

If they would sell the unprotected mp3, I would by them... I can have the same by going to the shop, at the same price!... why should I wanted to get less for my money?

That's the consumer point of view... for the producer: "People will copy the music without paying us!!!"... er... dear producer... "They" are allready doing that... and, since a lot of people want to get music at home through the computer, they turn to P2P... and get the music (unprotected) and don´t pay... all advantages...

And that´s NOW with the DRM... remove it! what can you lose? not sales...
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Neil, 26 Apr 2007 @ 3:51am

DRM Business Model
I believe the best business model for this industry is to avoid DRM protection while working with large selection of movies like several movie download stores (e.g., MyVideoLib) did. However, it is impossible for now. It is a pity because it is quite obvious that if a person pays a sum of money for something digital, that can't be touched like real DVD box, he/she should have an ability to do whatever he wnts with it. Perhaps, we'll see some moves towards it soon?
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Mike, 22 May 2007 @ 5:40pm

Re: Yeah
Actually there is a lot of websites that offer cheap movies, e.g. http://www.mvlib.com/. So renting is not a good idea.
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Lea, 24 Oct 2007 @ 5:25pm

Re: Re: Yeah
Absolutely agree with you! BTW, I usually download movies from http://www.movie2b.com/ (it seems like it very similar to mvlib).
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yeah
Same crappy deal as any other download service, *plus* I get to donate a portion of my bandwidth to these greedy corporations.
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DRM doesn't enable new business models. Digital content enables new business models. The problem is that the record labels and film studios have business models that simply don't translate to the digital realm. No amount of DRM will change that fact.
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Same crappy deal as any other download service, *plus* I get to donate a portion of my bandwidth to these greedy corporations.
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HuwOS, 25 Jul 2010 @ 7:11pm

DRM best business model ever
DRM is a fantastic business model.
I don't get why people knock it.

DRM is basically created by people who don't develop or publish content that people want, it is then sold or licenced to people who do publish content which people may or may not want.
It adds to their costs while reducing their sales and despite the fact that it doesn't ever actually work, they don't just dump it and the snake oil salespeople who picked their pocket for it.
Instead the drm people get to say, well that drm method may have failed in somewhat under 10 seconds, which is why you need NEW DRM+ it costs a little more and may not last any longer than the last one, but you need it, to protect your business despite the fact that copyright infringement has never actually been demonstrated to have any effect on your business.
Anyone know what the cost of implementing DRM measures on movies, music or PC software has for publishers?

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Blooming brilliant business model.
But two new DRM methods and we will throw in this amulet that protects you against the evil eye at a reduced price (not for free obviously, as anyone who wants anything for free is fundamentally an anti-capitalist and a thief)
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DRM is a fantastic business model
Blooming brilliant business model
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DRM is a fantastic business model
What do we expect of the MPAA?
Something needs to be done.
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Switch (profile), 13 Apr 2012 @ 8:41am

Re: Why not watermark ?
I agree completely.
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fodder99 (profile), 30 Jun 2012 @ 9:51am

Yes, this makes a lot of sense to me.
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