DRM Use and Impact

Let us look at the initial impact and subsequent use of DRM technology. Yocha Benkler in his talk about open source economics remarked that P2P technology is an opportunity and that social production is a part of human organization. For some time this opportunity was threatened by the advent of Digital Rights Management (DRM). DRM had a profound impact on the business structure of the music industry. Whether it will have any lasting/staying power in the next 10 years is very questionable. RIAA believes that it will. The effects are dwindling but have led to a better understanding of the needs of customers. Its failures have led to the current changes in the music industry, giving customers more freedom to manage their music collections.

An exception can be seen in the proprietary three tier system that is Apple, that consists of hardware (iPod, iPhone), software (iTunes, DRM system FairPlay), and web access. The packaged combination only works with each other, allowing Apple to establish a dominant position in the music industry with a large share of digital music sales and portable music player sales. Itunes is now the number one music store in America, even though the majority of its catalog available via the iTunes music store has DRM protection managed by their proprietary FairPlay system. Apple also offers DRM-free content via its iTunes Plus service that costed users a little extra at first. It appears that consumers are willing to sacrifice unrestricted access to their music files for high quality devices and applications that function exactly the way they want.

A second reason for Apple’s popularity may be directly because of its popular music devices. For example, I’ve owned a 3rd generation 40 Gb iPod since the summer of 2003. Even though I am forced to use iTunes to manage my music, I have never purchased a single track from the iTunes music store. I have an iTunes account and have obtained free music tracks and videos from the store, but I have never paid a single dime for anything from the store. I still buy physical CDs from record stores as nothing can compare to the nostalgia feeling you get from opening a CD package and indulging in your favorite artist’s lyrics and album artwork. DRM restrictions has also influenced my preference of purchasing CDs from a recrod store. I also add DRM-free MP3 songs that I have downloaded from else where to my iTunes and then sync all these at my discretion to my iPod. However, I am a fan of the iTunes software and will continue to use it. (i.e. adding/syncing my songs and albums). My point here is that I am not the only one doing this. By using the software and promoting it to my friends, I’m contributing to its continued success. In this way I am not restricted from backing up, copying or sharing my music with others because DRM is not an issue; and at the same time I am still able to use the Apple brand.

Apple was pressured to apply DRM protection to its online store by the major record labels when it first came into business. Now the record labels are clamoring for songs to be sold without DRM which can directly affect Apple’s three tiered system and allow competitors to catch up, if it were to open up its software and devices. Nevertheless, Apple will still gain from this new movement. Apple CEO Steve Job supports this move, but the details are still yet to be worked out. What does this mean for the music industry? While the most likely result will be an increase in digital music sales, since fans will not have to worry about DRM and will be able to play downloaded music on any digital music device. Therefore everyone benefits with little DRM restrictions. The music industry recognizes this and the labels are moving to take advantage of this new business model.

David Pogue, a New York Times tech columnist summarizes the battle between iTunes and the RIAA in this satirical mini-medley performance.

References:

Benkler, Yochai. (2008). Open Source Economics. Ted.com. Retrieved May 25th form http://www.ted.com/index.php/talks/yochai_benkler_on_the_new_open_source_economics.html

Kravets, David. Death of DRM Could Weaken iTunes, Boost iPod. Wired Magazine. Retrieved June 30th from http://www.wired.com/entertainment/music/news/2008/01/rip_drm

Kahney, L. (2007). Steve Jobs: Apple Would Love to Sell Unprotected Music. Wired Magzine. Retrieved June 30th from http://blog.wired.com/cultofmac/2007/02/steve_jobs_appl.html

Pogue, David. (2007). Ted Talks - David Pogue: A 4-minute medley on the music wars. Ted.Com. Retrieved July 6th from http://www.ted.com/index.php/talks/david_pogue_on_the_music_wars.html