FairPlay: Case study on why content providers hate DRM too [LWN.net]

FairPlay: Case study on why content providers hate DRM too

Posted Aug 6, 2006 7:46 UTC (Sun) by jsarets (guest, #39560)
Parent article: A Five Minute Guide to Opposing DRM (Linux Journal)

Theoretically we live in a world where overly restrictive products and services are rejected in the marketplace. In practice, however, consumers are willing to put up with quite a bit of abuse. In the content business, the big providers have every reason to believe the public with buy their cripplewear without much resistance.

Therefore, it is more useful to consider the downsides of DRM from the perspective of the content providers. When the dust settles on this issue, it will be the content providers that determine the future of DRM.

To investigate DRM from their perspective, we look at the most popular modern (read: not CSS) DRM system, Apple's FairPlay. Apple implemented just enough protections to make the content providers happy but not screw over customers that horribly. Its restrictions are surprisingly mild, albeit quite arbitrary in many ways, and there's the obvious CD loophole. I guess you could say that Apple did DRM right, and they're laughing all the way to the bank.

The most important property of this DRM implementation is that it is a single-vendor system. Only Apple can license a 3rd-party device that decodes FairPlay-protected media. In contrast to Apple's lax DRM restrictions, their licensing policy can best be described as paranoid. I refer you to the case of the Motorola ROKR disaster.

Apple didn't create FairPlay to protect the IP rights of the media industry, they created it to sell iPods. Apple is not a media company, they sell lifestyle devices. FairPlay is a carefully designed business ploy to sell a couple billion mp3 players at about $299 apiece--and make suckers out of the record industry in the process.

Hollywood took the bait, licensing much of their audio portfolios for distribution on iTunes. They thought that FairPlay would help protect their IP, but instead it give Apple a near monopoly in online music distribution. The record companies can license their portfolio to play on other players, but they can't let their customers play their FairPlay-protected music on anything other than an iPod. In the US, that would be a violation of the DMCA.

Apple calls the shots, sets the price, and controls the licensing. I refer you to a mental image of Steve Jobs laughing hysterically at the requests for tiered pricing. This quite an uncomfortable business relationship for the record companies, especially since for Apple, the iTunes revenue is just gravy on top of the already profitable iPod business.

Between FairPlay, the Sony rootkit, and the competing DRM systems in the HD media market, the content industry must be about ready to commit DRM to the history books as the failed experiment that many of us always knew it was.

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FairPlay: Case study on why content providers hate DRM too

Posted Aug 7, 2006 6:58 UTC (Mon) by mjthayer (guest, #39183) [Link] (4 responses)

[Quote]
Theoretically we live in a world where overly restrictive products
and services are rejected in the marketplace. In practice, however,
consumers are willing to put up with quite a bit of abuse. In the content
business, the big providers have every reason to believe the public with
buy their cripplewear without much resistance.
[Unquote]

The laws of the market only work if there are a high enough number of
competing offers. In particular, this happens when it is easy to enter
that market, which it is obviously not in this case. When the laws of the
market fail, that is the time when the question of whether to regulate
that market arises.

FairPlay: Case study on why content providers hate DRM too

Posted Aug 7, 2006 13:07 UTC (Mon) by epeeist (guest, #1743) [Link] (3 responses)

> The laws of the market only work

Are there such things as "laws of the market" (in the same way as laws of physics) or are they merely conventions?

If there are indeed such laws then presumably the suppliers of DRM will work to ensure that their products actually sell. This may mean purchasing politicians to get them to pass laws mandating the use of DRM. If everything is determined by market forces then tame politicians must be part of the market as well.

FairPlay: Case study on why content providers hate DRM too

Posted Aug 7, 2006 15:35 UTC (Mon) by AJWM (guest, #15888) [Link] (1 responses)

Are there such things as "laws of the market" (in the same way as laws of physics) or are they merely conventions?

I'd say they were like "laws of physics" the way e.g. Charles's Law and Boyle's Law (gas laws) are: they only apply when talking about sufficiently large numbers (of gas molecules in the case of Charles's and Boyle's laws). Similar to other statistical laws that only apply with a sufficiently large sample size.

When the market (or gas pressure/volume/temperature experiment) is artifically constrained (as in, say, a monopoly situation), it doesn't necessarily follow the laws. The content market has some restrictions in that content isn't completely fungible -- not all music or movies are created equal. Non-DRM'd recordings of didgeridoo music just aren't going to outsell highly-DRM'd pop-50 stuff, because other factors outweigh the DRM/no-DRM decision. (Hey, I like the didgeridoo, but it is a little out of mainstream.)

FairPlay: Case study on why content providers hate DRM too

Posted Aug 8, 2006 14:06 UTC (Tue) by Wol (subscriber, #4433) [Link]

Don't forget, those laws also only work for a "perfect gas". In other words, where the temperature/pressure is sufficiently above the liquifaction point.

In any area of trade, in a free market, the number of players tends to about 5. In other words, the "molecules" are sticky. In an emerging market, there are lots of players, the energy is high, and the rules work well. As the market matures and "cools", the molecules begin to stick together, and the system breaks down.

A very good analogy :-)

Cheers,
Wol

FairPlay: Case study on why content providers hate DRM too

Posted Aug 10, 2006 6:52 UTC (Thu) by ekj (guest, #1524) [Link]

They are more like maths. assuming the assumptions hold, they predict the end-result.

Frequently the assumptions do NOT hold, but free market evangelists pretend that the "invisible hand" of the market will still somehow, magically, work.

A free market, in the original sense, assumes that there is a large number of suppliers of equivalent product. For copyrigthed works that's obviously bunk, there's precisely *one* supplier for most works.

It assumes that there is a large number of buyers. All having complete knowledge of the market. That the buyers are capable (and interested) in objectively comparing the offerings made by the many sellers and choosing the one giving the best price/performance for them. This is *also* frequently bunk.

There *are* markets where this is close to true. Petrol, for example. There are several gas-stations. There are many buyers. Buyers are generally atleast reasonably aware of the current pricing. Buyers *will* fairly consequently prefer the cheaper alternative. Try selling petrol at a price 10% over or 10% under the market-price in the are. At 10% over, you'll sell miniscule amounts. At 10% under you'll sell enormous amounts.

That ain't even close to how the market works for most things though. Frequently there is a monopoly or oligopoly, uninformed buyers, high barriers to entry, artificial barriers to trade, (region-coding anyone?), network-effects (ie you buy X because then you'll be able to interoperate with your friends having X, even if Y offers a better price for an equivalent product) and so on.

Markets do work fairly well -- when the assumptions hold. But most of the time, they don't. Certainly with any kind of goods with a state-given monopoly it's almost ridicolous to talk about a "free market" at all.