Wednesday, February 7, 2007

Jobs DRM Bombshell: A Real Stance or an Opening Position?

Apple CEO Steve Jobs' weblog post on the future of DRM-encrypted music has caused quite a stir amongst the online media. The gist of Jobs' rationale for dumping DRM: under 3% of the music on the average iPod is purchased from the iTunes store and protected with their DRM controls. So why should Apple continue to invest in supporting the 70 percent of published music emanating from the four leading music publishers with DRM when most of their customers are content with unprotected MP3s? This is a question that's getting harder to answer as European markets try to open up Apple's iPod to non-DRM content. Jobs' solutions, though, seem to provide a fairly limited list of options: a) stay the course for no true benefit to Apple or its customers, b) create a licensed version of their DRM for other platform providers or c) drop DRM altogether.

Jobs points out that the licensing option increases its exposure to hacking, which would require potentially endless maintenance cycles that would do little to protect what little property of music publishers was sold via DRM and drive up Apple's cost of sales. Instead, Jobs argues that opening up music sales to more innovation in online outlets would increase sales overall. A good point, especially given that most music is sold already via non-protected CDs, but it seems to walk away from both viable technology alternatives and the inherent problems of managing intellectual property online. On the alternatives side, an open standards, open source approach to IP rights management supported by publishers could remove one of the greatest potential threats to protection - accessing proprietary source code and developing hacks - and put the responsibility for rights protection squarely on the shoulders of publishers instead of consumer technology companies. Beyond DRM there are lighter approaches to identifying licensed content such as digital watermarking which could be used to help users to be informed when there was a copyright issue at hand and could link to tools that would help them to "do the right thing" with respecting copyright.

But the real problem with DRM is not technology but licensing: music publishers, as most other kinds of publishers, have yet to define a business model that will prosper when users are in control of most content distribution. Most DRM systems run counter to the notion that audiences can or should be active agents in the content distribution process - which would seem to fly in the face of what really happens with music today. Jobs knows this, and is likely using his weblog manifesto as a starting point for negotiations with publishers that will allow them to take a portion of revenues from new business models such as ad-supported downloads. It's not DRM that's defective but the licensing schemes that it's designed to protect. Adjust the monetization models to fit the realities of the distribution channels and the rest will fall into place rather quickly.

If publishers move in the direction of accelerating rather than slowing down user-managed distribution channels they are far more likely to build online revenues than if they had dragged their feet. Instead of wringing their hands about lost revenues from online distribution music publishers could be focusing on how to harvest the best music that the online world has to offer and to package it for physical media such as CDs and other platforms most effectively. Just as print publishers are thriving with custom printing music publishers can begin to build a new industry profile by using their CD production capabilities to build more high-end products tailored for individualized tastes. Hopefully media companies lift up their focus from the next-reporting-period grind and begin to plot out ways that online distribution can benefit their long term profitability goals.
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