DRM Doesn’t Protect Innovation

There are a ton of articles that I have read over the past couple of hours that I want to comment on. But this struck me as an interesting conversation. Fritz Attaway, a senior executive with the Motion Picture Association of America, debates DRM and the stifling of innovation with Wendy Seltzer, a law professor who specializes in intellectual property and First Amendment issues. 

My opinions about DRM have become pretty hard over the past year or so. I believe that DRM erodes the value of content and drives otherwise lawful people to break the law out of frustration. “Why do I have to pay $10 to listen to the same song on 4 different devices? Why can’t I move my song from my iPod to my cell phone? I’m going to pay what to watch a movie on my PSP?” I believe that as DRM technologies become more efficient, the backlash will intensify and the reality of digital distribution at the edge will demonstrate the ultimate futility of centralized lock-and-key asset protection. 

Services that provide access to pirated copies unrestricted by DRM will become easier to use, more decentralized, and far more effective. If I have to pay a high price for access to an asset from the center of the network that is less valuable (less portable, less re-mixable, less resalable, etc.), I’ll just get my asset from the edge of the network where it is much more valuable (and typically free). The temptation to acquire from the edge will be just too great a temptation for all but the most well-heeled law-abiding consumers.  

I also believe that this is a good thing because the use of DRM to protect innovation is a false argument. I don’t know of one up and coming filmmaker or recording artist that would stop doing what they were doing if DRM went away tomorrow. What DRM ultimately provides today is not incentive for new artists, but rather margin protection for the small number of companies that dominate the sale/licensing of audio and video assets today.  DRM seems a logical requirement within a centralized broadcast asset distribution system in which “innovation” is driven from the top by those with the requisite financial resources.  But this is not what is happening today.

The analogy that they draw to the dress sale can be taken a step further. The dress is made by a manufacturer and delivered as finished product to the retailer for consumer purchase. Fritz seems to imply that unless you attach an electronic homing device to each article everyone would just walk out the door with a free dress. This is simply not the case. Most people would pay for the dress, security protected or not. Very few are actually arguing that content should be free in all cases, what they are typically saying is that DRM erodes the value of the content for the average consumer and does nothing to solve the underlying issue of piracy. Fritz’s most ludicrous comment:

“With regard to your comment that many DRM technologies can be circumvented by commercial pirates, you are correct, but DRM is not intended to prevent commercial piracy. It is intended to insure that most consumers will keep the deal they make with movie distributors. Like the lock on your door, they are not a guarantee against theft, but they ‘keep honest people honest.’”

I don’t think consumers are upset about DRM because they can’t sell their copy of the video to each of their friends and rip off the artists. They’re unhappy because content with DRM protections is less malleable that the non-DRM counterpart. Content malleability is irrelevant to a broadcaster. Content malleability is crucial to a consumer; i.e. they want the freedom to wear the dress wherever they want and modify the dress however they see fit, or even resell the dress once modified. Edge consumers want to be able to add (or subtract value) from items they purchase, not just sit there an passively consume. 

There is some seductive logic in some of what Fritz says about the need for financial incentive around innovation. It’s the same argument I hear on the pho list regarding patent protection.  And I don’t believe that all music and video should be free. Some should carry a price, or advertising or some other method of monetization because it is that valuable. However, the problem is in the context of innovation, and this is where Wendy and Fritz are just talking past each other. Fritz talks about defending the rights of content creators before defending the rights of re-mixers. Fritz is making the argument from a seat firmly planted in the world of the dominant broadcaster where innovation is in the domain of those that must be compensated for their great effort. The problem is that the world of the broadcaster is fading. It’s being replaced by the world of the re-mixer. Fritz and his constituents just don’t know it yet. 

The manufacturer no longer has the monopoly on innovation. Innovation is now everybody’s right. What should concern the RIAA and MPAA is that these are NOT future members. The re-mixer isn’t generally motivated by money, s/he’s motivated by reputation. And this is the crux of the issue. The RIAA and MPAA stand at the defense of corporations looking to protect revenue streams, not innovation. (I don’t know about you, but the very concept that these centralized bureaucracies should be or are the source of artistic innovation is somewhat comical.) The fact is innovation is rising from the bottom much faster than it is percolating down from the top. This imbalance is accelerating. 

But I have the sneaking feeling that the discussion is essentially irrelevant. This argument is not going to be won on the strength of any idealogical position. It is going to be won with cash. Because the reason why DRM will fail is not because everyone decides that it sucks; it will fail because those few brave labels and studios (or individual artists and filmmakers) that eschew DRM will quickly realize that they are actually making more money without DRM in place. Top line revenue might not grow as fast (at least initially), but bottom line profits will actually increase and the individual artist will likely take a greater share of the ultimate pie. DRM will die because it ultimately kills margins faster than it can possible protect them. But the one casualty you won’t see on this battlefield is innovation. 

Comments

[Mike Machado]

Agree with much of your rendering of the state of the market Alex.

I think of YouTube and what's emerging as repackagers more than re-mixers. The major media companies have been packagers and repackagers of media for decades.

It's just that the packaging opportunities are changing faster today and acceptance of the new package forms is strong and beneficial for both consumers and producers. Folks who get that will succeed in this market. Folks who want to keep things just the way they were will end up like other out of date media format suppliers.

[Alex Rowland]

Nathan, I think that is precisely right. The RIAA and MPAA like to couch these arguments in terms of how they are defending the little guy. The reality is that the little guy is largely sidelined from the argument. A marketplace in which most innovation is rewarded by reputation (thereby directly benefiting the little guy) stands in start contrast to the one in place today. But which is better? Which will result in faster innovation? My money is on the re-mixers…

[nathan]

I think you're definitely right when you say, "The re-mixer isn’t generally motivated by money, s/he’s motivated by reputation."

And perhaps that's part of the problem here, we have two different economic structures colliding here: one based on monetary profit, the other based on repuation profit.