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Can interoperability save DRM? Part I - May 1, 2007

The status quo for digital rights management is increasingly untenable.

In video, the use of conflicting and proprietary DRM systems by different digital services is fragmenting the market, undermining scalability for content owners and threatening to hand market power to anyone (Apple?) who can claim the inside track with consumers.

In audio, Apple has already gained market power through the use of proprietary DRM but now faces a political backlash in Europe that could lead to the regulation of digital services.

From the perspective of the overall industry, neither of those outcomes is desirable. The question is whether either can be avoided.

So far, two basic strategic responses to the problem have emerged: elimination of DRM and standardizing technical and contractual interoperability across many different DRMs.

Let’s examine each in turn.

Having seen the political writing on the wall in Europe, Apple impresario Steve Jobs has now embraced the elimination of DRM on music, preferring to take his chances with competitors rather than the new Authority for the Regulation of Technical Measures created by the new French copyright law.

In his open letter to the industry, Thoughts on Music (a largely self-serving exercise but nonetheless…) Jobs argued that the use of DRM has had little impact on music piracy, and that maintaining it on digital downloads made little sense when CDs do not carry DRM and are easily ripped and “shared” over the Internet.

Better to let competition flourish among online services and MP3 players and let the market deal with the pirates. And the better to get the EU off his back.

Competition among online services would also help keep download prices low, of course, just as the labels are pushing hard for price increases, the better to sell iPods. But Jobs also has a point.

Free and open competition could achieve many of the same ends that DRM seeks to achieve, and least for music, at a lower cost to all and without the interoperability problem.

But even Jobs is not suggesting eliminating DRM on video. Video “is different,” according to Jobs, who happens to be the largest individual shareholder of the Walt Disney Co., because it has always carried DRM, and, one suspects, because Apple has not yet achieved the market power in video that it has in music and it would be impolitic for Jobs to suggest eliminating DRM on movies while still trying to land studio deals.

It would also be harder to do with video as a practical matter. Movie distribution is governed by a host of rights and contractual arrangements across different release windows and territories that would all be affected by the elimination of DRM in any one of them.

Even if there were the will to try, it would take years to unwind the decades’ of legal and business entanglements.

Next up, can interoperability be standardized?

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