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Digital Rights Management Q&A
Predictions: Summer, 2001
Following are some highlights from a dialogue I had about the future of digital rights management (DRM) with Judie Mulholland, who was - as of this interview (Summer, 2001) a PhD candidate in the School of Information Studies at Florida State University.
JM: Is the present conceptualization of Digital Rights Management (DRM) as access/distribution control and clearance mechanisms too limiting a concept? If not, why not? If so, how should it be expanded?
AH: Yes, the current thinking about DRM is too limited. Many more content interactions are tentative than definitive. They entail the progressive development of trust, and require greater ease-of-use, and simpler, more predictable and more reliable ways of transacting. Expansion of DRM may need to include deliberate devolution of complexity, as well as concepts for the release of content, for negative values, and for the incorporation of both more detailed, and the referencing of both less and more detailed credentials. To have any traction, DRM also needs to incorporate the concept of risk management (e.g. of un-intended release), and of negotiation for value.
JM: Do you foresee a clash of "cultures" as we move from conveying products to accessing services?
AH: The product to service clash is just part of it. Radically different cultures exist in different content industry segments, including gaming, software, news media, music, financial services, professional services, film/video, art, science, and academia - to name a few. Boundaries will be challenged not only by the technology, but by the sheer combinatoric possibilities of business norms and pricing models as these industries blend and morph.
JM: How do you think conflict(s) will be resolved (i.e., through legislation, technology or the courts)?
AH: All three will play a role (legislation, technology, and the course), but a lot will also be resolved through simple negotiation, mergers, partnerships, and cross-licensing agreements. Some of this will also be influenced through regulatory oversight of adjacent domains, e.g. by the FCC for web radio, by the FDA for medical information, by the SEC for financial information, etc. This will be especially true as the web goes wireless, and as it becomes a platform for services that can be bundled, redirected, and resold. Outside of that, the important question is the sequencing of these methods. I.e., how do technology, legislation, and legal rulings influence one another?
JM: What kind of a time frame are we looking at?
AH: Full development, and cultural acceptance of new business models could easily take thirty years. By that I mean the point in time by which the innovation curve has flattened out, and where workable content forms and business modes have become generally understood and accepted. History provides some perspective here in the transition to radio. It took a long time for a general understanding of radio's potential, its most appropriate use, and its limitations to fully evolve, and in many ways it's still evolving now with web radio, talk formats, and specialized syndicates. Similarly with printed books, and (in successive waves), with film and recorded music as the media by which they can conveniently be conveyed continue to change.
JM: How are business structures being transformed? With digital distribution, do you foresee massive disintermediation or will new forms of intermediation come into play?
AH: One business structure that will be challenged is the notion of what it means to be an editor, director, producer, etc. New, trusted filters and reference sources will spring up that will challenge established brands. New upstarts will be able to break through, if not in greater numbers, at least faster and with less imposition of legacy tastes. At the same time, big brands will be reinforced, a trend occurring in many industries beyond virtual goods. So yes, disintermediation will be one aspect, but it will be overshadowed by innovation among, and re-invention of the distribution channels and intermediaries and the respective brands they present to consumers.
The other thing that will be challenged will be production resources. Imagine a future in which everything is real-time, stream-of-consciousness, reality “programming” and content. With so many "windows on the universe" - very few of them filtered effectively - it will become ever harder to find the interesting, valuable stuff on one's own. In that kind of environment, value will still accrue to the brands and trusted filters after everyone is done being titillated watching one another brush their teeth.
JM: Is the threat of "Napsterization" real or imagined?
AH: Yes. In one sense, “Napsterization”, (and even more importantly “Gnutellization” or "Kazaaization") are just easier, more visible and popular forms of what’s been going on for a long time, with tapers, music bootleggers, software pirates, video pirates, etc. Have any of these industries seen an actual net decline in sales of traditional packaged forms, or even a decline in the growth rate as a result? For the most part, no. The only documented decline occurred after Napster was severely curtailed by the courts, and that effect may have more to do with the economy than anything else. But now content providers are upset that they didn’t think harder earlier about the elasticity of demand. This is a misattribution of the problem, but an understandable one given the myopia of many content owners.
Now the big record labels have two
price-points: $15.95, and $0.00. Neither one is viable. In an environment where a whole generation of
consumers (including my kids and their peers) are being conditioned to the latter, it will be hard to experiment
with new business models between those two extremes, because anything with a
price will be seen – by those groups at least
– as a retreat; something less than they had before. But everyone grows
up. If the industry can simultaneously add new value that’s not easily
trade-able on a file level, then they have a chance. But that implies
competing with their channels, and also their ‘suppliers’, and doing that will always
be a challenge.
JM: Will the deployment of widespread DRM systems by rights-holders essentially end P2P file sharing of copy protected products and services amongst users?
AH: No, P2P file sharing is here to stay, though effective DRM may bleed off some of its energy and growth. Longer term, the threat is more insidious in that the traditional vetters of new content will be challenged by a peer-to-peer mode of information exchange and review (as distinct from file exchange). But this will vary by intermediary. Take the New York Times or Wall Street Journal. Now name your top three to five favorite columnists for each one. How many people can do that? Repeat the exercise for Disney. Much harder. Now try Fox Networks, Warner Brothers, etc…. much of the battle will be about brand management. Interesting longer-term thought for the film industry: the leverage of invented characters and how that works when they can truly become rules-driven “free-agents” in the network rather than just Buzz Lightyear on a lunchbox.
JM: What kinds of business models are likely to emerge?
AH: This is probably the most important (and most ignored) question that a content or service business faces today. There will be many un-imagined hybrids of four timeless, familiar forms: subscription, admission, time, and usage. The mix will depend on whether we’re talking about static or dynamic content, granular pieces or bundles, and casual (anytime) or truly real-time interactive experiences. Advertising and free (subsidized) content are simply variants on the above models, but with zero or negative values attached to the content objects or flows. Often, providers in one industry lock in prematurely on a business model that's historically comfortable in their industry. To date, despite the recent Internet and e-business frenzy, there's been only limited experimentation with truly new business models across industry lines.
JM: What ever happened to the idea of "superdistribution"? Do you think this concept will take off in a P2P business environment?
AH: Superdistribution was a neat idea content creators thought they could cast their (always worthy) content goods on the waters of the net and watch their bank accounts fill up. But distribution will always require marketing acumen and discipline, and hard choices about what customers to serve, what they want, how to serve them, and how to reach them effectively. In one sense, superdistribution already exists, and is working extremely well in the form of peer-to-peer trading networks (and prior to that, Napster). It’s just that what’s being distributed in that fashion is not tethered to anything – rights, terms, credential filters, authentication mechanisms, incentives, payment or billing systems, etc. None of this helps content providers to monetize their efforts very easily, though it has set consumer expectations.
Superdistribution will re-emerge in the sense that people will always refer people to things they think they ought to see. This is the age-old concept of word-of-mouth; “hey, check this out”. Referral mechanisms are already getting more robust, flexible, and open (see the “e-mail this” service, attached to the Wall Street Journal, The New York Time, or CNN for example), not to mention the early trials of emergent amateur editorial systems like ThemeStream, Plastic, TheVines, etc. Similar phenomena are popping up in financial services as well, e.g. Mutual Minds.
JM: What about pricing strategies, how are these likely to change, or will they?
AH: Pricing strategies will also see a lot of experimentation, especially as business models morph and meld underneath them. One of the next big frontiers will be in dynamic market pricing - like what Dell and others (especially the telcos) are doing, so that depending on who you are and how you get to their offer, the price will be different. The trick though, will be keeping this at a level where it doesn’t create confusion, cynicism, gaming, or outright reluctance among consumers (see phone plan pricing and how that has see-sawed between simple and complex). In the short to medium term, we’re already seeing a regression to the mean in terms of expectations for what advertising can do to support complex, differentiated pricing.
JM: Assuming free-riding is
practically reduced to zero in a
DRM-dominated world, what effect, if any, will this have on pricing strategies?
AH: There will always be free-riding to one degree or another, partly because systems will be broken by parties with sufficient motivation, and partly because some content will be released that creators never intended to have under firm control in the first place. But the alternative business models are many and varied, and thoroughly viable. These include admission (to live ‘events’ and communities), subscription (to various long-running content streams), pay-per-view (or use), and time-based interaction. Advertising will also play a role, but the lesson from '98 to '01 was that advertising must become much more focused, targeted and voluntary, even as some of it (the more visible stuff that everyone complains about) becomes louder, less voluntary and less focused (e.g. spam, web-window pop-ups, etc.). Many also overlook the power of voluntary payment, though some bloggers are experimenting actively with this and seem to be doing OK. Some providers are already getting far more clever with this by injecting humor, and enticing micro-relationships through micro-interactions. The ability of someone to take content and disappear into the void never to hear from that provider again will be less and less plausible.
JM: What do you think it will take for DRM systems to be accepted by consumers?
AH: It will take many factors coming together in some very exacting ways for classical DRM to work effectively on a large scale. These things include: transparency, ubiquity of the interface, compelling volume of content (very hard!), the acknowledgement of community and secondary use, reliability, a PR campaign for moral acceptance, flexibility to combine and create value added things, the ability to make value bets that are perceived as ‘win-win’ (that is, the flexibility on the part of sellers to provide choices to consumers on how they’d like to pay, like we have with magazine subscriptions today, but on a much expanded scale and scope), plus global reach and compatibility (less critical, but could trump something that is not.)
JM: Is the idea of
"ownership" anachronistic in a digital environment?
AH: No, ownership is fundamental. Ownership is essential to commerce – in anything. But what is clear is that ownership in virtual goods won't be as simple as when everything required physical instantiation. Ownership as supported by legal infrastructure and precedent is important, but ultimately it is a defensive concept. The pro-active concept of brand value is at least as important. Art for art’s sake (with no commercial intent) will always exist. The clever (and popular) will realize that what they own that’s most valuable is not a static information object, but their own minds - the font of their creativity. Most importantly, what they can own and control is their brand. Personal "brand" reputations (and brand management) are getting a lot more attention recently in many spheres - and for good reason. The ownership of brands and trade-marks (even colors, voice prints, synthesized likenesses, jingles, mascots, etc.) will be at least as influential as the laws that apply to content objects.
JM: What about fair use?
AH: Fair use is a red herring that academics like to
debate, and that copyright holders would love to reign in. But it will never be fully defined, and it will never be reigned in to the
full satisfaction of copyright holders - many of whom never liked the concept in
the first place. It will always exist at the fringes. Societal
precedent and practice will shape the enforcement of law - more so than the other
way around.
JM: What about the first-sale
doctrine?
AH: This could go either way. Where, after all, is the boundary between a copy of a work and the “underlying work” itself when the expression of that underlying work is itself intangible, or fungible? One way this could develop is for pricing to acknowledge both modes: one price if you want full rights to “own” your copy and distribute it, possibly with limits (which might be geographic, copy based, time-based, quality based, etc.) and another price if it’s somehow attached to you. It's difficult to use technology to enforce it either way, so content may just default to a price that assumes a level of re-distribution, bounded by societal and moral norms. But this then raises the issue of instant global audiences where those societal norms and traditions differ radically. Creators and distributors with rights interests would do well to invest now in PR and education around moral norms that don’t look whiny or defensive. Some are starting to do this, but the tone is often wrong - not engaging or funny, and it smacks of a rear-guard action. I question the ability of clearly interested parties to engage the public in a moral dialogue that will have any real effect.
JM: Currently, the length of time for copyright protection is 70 years after the death of the author or 95 years in the case of a corporation. Is that length of time reasonable in a digital environment? If so, why. If not, why not?
AH: I don’t know that the timeframe will be changed by virtue of a new, fluid distribution mechanism. What is interesting recently is the re-mining of old content that’s out of copyright, e.g. "Sun Tzu and the Art of War", Homer's "Odyssey" (including for example, the movie "Brother Where Art Thou"), and even old Disney characters that are being re-used (somewhat maliciously) in the movie Shrek. A revitalization of the classics would have some nice side-benefits for society. But we're also at risk of sliding back into the early battles between ASCAP and BMI that were fought over music rights earlier in the twentieth century. At that time, radio was temporarily put in the position of re-hashing Civil War fight songs that were out of copyright: completely anti-innovative for all concerned.
JM: What impact will DRM systems have on innovation? What about access?
AH: If DRM systems succeed, (which is a huge “if”), they will be less noticeable at the consumer level, but more prevalent at the wholesale level. This could have the side benefit of reducing the time, expense, and hassle of assembling, combining and innovating from the old stuff. The music won’t all of a sudden die some day because the industry runs out of money. Rather, music (for example) will simply come out through new channels and be made accessible on new terms (e.g. concert admission prices go up and even go on line, but record sales go down.)
JM: Is DRM going to work?
AH: Yes in the sense that it will be used in some areas - particularly back-end, business-to-business interactions, as well as "under the covers" to drive some new consumer-oriented business models. But "no" in the sense that it will be extremely difficult to make DRM (as it's classically thought of) all-pervasive and entirely object-based, which is the vision of many creators, and some of the technology providers. Payment systems, credential-differentiated pricing models, structured experimentation, and sheer imagination will be huge determining factors in how subtle, flexible and transparent this becomes, and how quickly that occurs.