The Three Most Deadly Letters at CES and MacWorld: DRM

Posted by Rob Enderle, Principal Analyst, Enderle Group

Last week was CES and there were a number of amazing products. These carried the promise of "convergence" or the idea that the best of what was available in the consumer electronics world would merge with the best of what if available in the high tech world and birth an amazing new customer experience.

Following CES Apple had their own version of CES where some related products were announced and, leading up to this show as well; we looked forward to the advantages of 'convergence".

What we often got is the word "can't" applied to the things we really wanted to legally do. If we wanted to put our DVD into a storage device and manage them like we do our music files, well there are a number of illegal ways to do that but no real legal ways today. If we wanted to take music we purchased from iTunes and listen to it on the leading home player the Sonos we can't do that at all. If we wanted to take music we legally downloaded using a Microsoft "Plays for Sure" service and play it in every room in the house at the same time for a party, well we can't do that either even if we use all Microsoft offerings.

Clearly there are a number of increasingly illegal ways to do some of this stuff which points to the fact this isn't a technology problem. What it is a DRM problem and DRM stands for Damn Retched Media. Actually it really stands for Digital Rights Management but no matter how you look at it these three letters represent one of the strongest anti-consumer efforts that has ever existed.

DRM: Hell by Any Other Name

The concept behind DRM isn't really all that bad. It was designed to protect the rights of content owners from intellectual property pirates by keeping from doing illegal things like putting movies on the web. What seemed to have been forgotten was the goal was to hurt the thieves not the legitimate customers but it is clear the exact opposite is true. Piracy, by most measures, is vastly more wide spread then it was before DRM was introduced in fact, by my read, it appears that all DRM did was increase the profitability of some pirates by making their goods more valuable.

In secondary efforts the media organizations have gone after children for sharing music files with friends and in one high profile case are going after a working mother as a result of some child, according to her not her own, gaining access to her laptop while she wasn't in the room. Somehow an organization of thugs chasing after mothers and children wouldn't seem to be the image that I would want associated with my chosen career but that is increasingly happened with the media companies because DRM simply isn't working as intended.

The worst event, and it happened towards the end of the year, was the introduction of a root kit onto Sony BMG disks. This rootkit opened legal customers up to a whole new class of viruses, violated their privacy, and caused their PCs to slow or crash. And Sony BMG did all of this to their legal customers not to Pirates who undoubtedly had access to disks without this dreaded rootkit. This rootkit was supposed to function as an enhanced form of DRM creating even greater restrictions, which it did, but these restrictions once again only seemed to apply to legal customers no those getting access to the music illegally.

DRM Promotes Piracy

Behavior modification is difficult and I know this from personal experience. As a child my stepmother had a way to deal with lying that was probably very effective. If you were caught you got a tablespoon of raw Tabasco Sauce. In my own case I drank a lot of Tabasco Sauce, unfortunately every time I got it I was telling the truth which did not lead to a particularly warm relationship with my stepmother.

By continually punishing legal buyers of media with increasingly restrictive DRM components on their media it is my belief that the media organizations are effectively training their legal buyers to behave illegally. iTunes downloads have slowed dramatically and the other legal music services continue to struggle to make profitability. DVD sales have slowed as well and it is my contention that it is the hostile acts of the media industry that is actually driving these trends.

If I grow to dislike and distrust the companies I buy from, Sony BMG being the strongest example, but still want to listen or watch what they offer isn't it more likely that I'll refuse to buy from them and seek alternative sources? There are legal sources for this media on cable and radio, and illegal sources on the internet, that bypass the retail channel and get me what I want, without unwanted restrictions.

Think about it, if your local car dealer put a gadget in every car he sold that forced you do drive no more then 45 miles an hour, reported every move you made, and made sure you couldn't go on long drives over the weekend wouldn't you buy from someone else or look for someone to take the offending "gadget" out of your car?

DRM: Shifting Profit Away From the Artists

If you think about it what DRM actually does is shift profit away from the artists and put it in the hands of those that can figure out ways, legally and illegally, to get around the DRM. This is increasingly where the value will aggregate as you will have to benefit from the efforts of one of these intermediaries before you can get to the media. Take Apple, which arguably does the best job of providing a seamless experience (providing you are using all of their products). Apple's profits are up sharply largely due to a massive increase in iPod sales. Now compare this to the languishing media industry which appears to be drifting towards unprofitability and you'd have to be blind to miss where the margins are going.

Apple assures the experience and provides a way to get enjoyment either despite or without DRM. Sony, their competitor, who embraced DRM to the extreme, has been roundly thrashed by Apple in the market.

Despite the whining by the media industry that piracy is the cause of their problems it appears to me that they have only to look in the mirror to find the real cause and, personally, I think if they addressed that cause and focused back on providing strong value they would see revenue and profit improvements.

If the media industry wants to be brain dead stupid it is up to us to protect ourselves and not suffer along with them. In short it is time to fight back.

Fighting Back

Here is my advice. If the product you want to buy has restrictions on it preventing you from doing what you want to do, don't buy it. Rather then purchasing your music on iTunes or any other on-line service, go to a music Starbucks and buy it there. There is no DRM on their disks and you can move that music to any device you own. Rather then buying a DVD (which I stopped doing some time ago) get a PVR with a DVD recorder. Once recorded these movies are also more portable and flexible. You can also try one of the subscription services, these have DRM but you get access to all of the music and movies which can then be moved to a larger variety of platforms, if you aren't happy, cancel the service and you won't be stuck with anything you are disappointed with.

In the end my hope is the media industry will change focus and go after the criminals rather than turning us all into ex-customers and eliminating much of their own profit. But if that is the way they want to go, I think it is our duty to make the path as difficult as possible.

Rob Enderle is the president and principal analyst of the Enderle Group and focuses on emerging personal technology for both the corporate and consumer markets. Rob sits on nine industry advisory councils, has a passion for online gaming, and still builds many of the PCs he uses.