Why DRM is a bad strategy

I thought this was obvious, but apparently it isn't, in which case it deserves to be posted here.

When a company makes a decision to use DRM on a product that they're selling, they are deciding to do two things :
* Pay for the DRM itself - maybe in-house development or buying a third-party product, either way it has to be paid for.
* Make the product less useful for some group of people - be it the inability to play imported disks, limits on number of copies, or whatever.

Taken together, these amount to a more expensive product that does less than the same product if they were to omit the DRM.

I'm no economist, but if there's any competition, this is a recipe for failure. Your competitors can omit the DRM and sell a better product for less. The only way it can possibly work is if you have a monopoly on your product, and even then you're going to annoy your customers.

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Circle the logic..

The only way they don't have competition is if the statutory monopoly (Copyright) is effective, and there are no copies available except from them.

If the monopoly is ineffective then they are competing with something that is both more valuable (you can do more with it) and cheaper. I believe this is the core issue you are trying to make people realize, which is that DRM is counterproductive as a way to make money.

If the monopoly is effective, then there needs to be some reason other than copyright infringement to justify DRM given the sales pitch they have used thus far is that DRM stops infringement (IE: technologically protects their statutory monopoly).

I happen to believe that, contrary to the misinformation they tell politicians, DRM is really about exploring new business models. These business models all appear to be based on "theft" in that they take some right normally afforded to someone else (IE: the owner of tangible media, the owner of a computer, etc) and then try to rent that back to the owner in some restricted way.

Free/Libre and Open Source Software (FLOSS) consultant.

but with perfect DRM...

Yes, that's the core issue I was getting at.

I was thinking of competition like "I'll buy this CD rather than that one", which is pretty limited for most works.

Isn't the counter argument that "we need to use DRM to make our monopoly effective" ? Of course that assumes that a DRM scheme could be 100% effective - anything less and the whole argument collapses.

Interestingly, I'm sensing a movement in the US to challenge DRM and the DMCA on the grounds that they deny users their "fair use" rights (which are ultimately first amendment rights).

And yes, I think DRM is actually about selling you something that's traditionally been included in the price. I've even seen that used as a justification, except that it's usually phrased to imply that the price would be reduced for people who don't want things like "fair dealing" rights, which doesn't match what we've seen so far.

Market Substitutions...

The problem we have is that while some of us are willing to acquire substitutes when the content we want is not lawfully offered in a format we are willing to pay for, other people are not so "political". They will eithor put up with the limitations offered, circumvent any technological limitations for content they have purchased, or simply acquire the content unlawfully.

I am being highly political when I only purchase DRM-free content, subscribed to eMusic, buy CDs from independent and unsigned artists, and boycott any music that comes via the major labels, rather than simply infringing the copyright of the major labels. I still only have a couple of DVDs and have refused to purchase an authorized DVD player until the legal uncertainty surrounding anti-circumvention is clarified.

Anti-circumvention legislation can only reduce revenu for copyright holders given this middle group (people who pay for the content but circumvent technical limitations) effectively goes away and are far more likely to simply stop paying for the content if their usage methods are deemed illegal anyway. Why pay money to people who already consider you a criminal?

I don't see how DRM can make their monopoly effective. All DRM can always be circumvented. They cannot change the laws of physics: Content can't be both accessible and non-accessible at the same time to the same recipient. DRM itself lowers the value of content, frustrates legitimate customers, and drives them to illegally acquire already-DRM-free versions of the content that will always be easily available.

While I hope Canada will adopt a living Fair Use regime that can keep up with the times, rather than our narrow Fair Dealings regime, I don't think this is the most effective argument against DRM. The controversial form of DRM is a combination of two locks: one on content and one on devices. All the conversations focus on the lock on the content which might be considered 1% of the problem, while the lock on devices -- locks on something they don't own which might be considered 99% of the problem -- is almost entirely ignored.

Free/Libre and Open Source Software (FLOSS) consultant.

Honest ways to get what they want...

When discussing some of the business models issues with Barry Sookman, I came to realize that there are ways that they can get similar business models to what they want without infringing the rights of their customers. (IE: Not basing their business models on "theft").

Picture this: Rather than buying a digital tuner (audio, video, whatever), you only rent it. Then the owner would not be the person who possessed the device, but the person who supplied the device. The owner of the device, consistent with property rights, would then be legally protected in lock down devices they own.

Think of it as a digital kiosk where, rather than being large and only in public places, these kiosks would be small and in peoples homes.

Digital content wouldn't be sold directly to audiences, but only these kiosk suppliers. They may be viewed by individuals, but these individuals didn't receive a 'copy' or a 'communication' of the content any more than they do when they attend a traditional movie theater owned by someone else.

While this model would solve the rights infringement aspects of what the content industry has been proposing so far, there are of course tradeoffs for them.

Since they are not selling the hardware, mobile kiosk suppliers end up taking on all the ongoing maintenance and other costs: they can't outsource all that risk/cost to their customers. If they provide analog or unencrypted digital outputs, then they can be plugged into the persons own home theater. If they aren't willing to provide these unencrypted outputs, then they also have to themselves supply all the equipment necessary to enjoy the content.

The content companies also have a massive risk which is that, since they are not selling directly to audiences, they have a middle-man that effectively controls the distribution. They have no way in this type of market to simply skip this middle-man or go to a competitor given it is unlikely that a given household will have multiple competing kiosks.

Then there is the unknown question whether any customers will rent these kiosks, and whether this market will be large enough to be worthwhile. If the kiosk providers are so frightened as to not offer outputs compatible with existing home theater equipment, then there is the unlikelihood that people would be willing to rent entire home theaters.

We see how the content companies want to get onto peoples personal PCs as they know that there are so many of these. If they decided to take this kiosk approach they couldn't do that. The only content that should be lawfully available on PCs is content where any digital locks applied to content can be unlocked by the owners of these PCs. The only digital locks on these PCs should be those that are added by (or authorized by) the owner.

Free/Libre and Open Source Software (FLOSS) consultant.