DRM Doesn't Enable Business Models; Blind Fear Disables Business Models

from the get-over-it dept

A bunch of folks have asked if I had any comment on analyst Michael Gartenberg post over at Engadget claiming that DRM has been demonized too far, and for all the "bad" things about DRM, most people really don't mind it, and we should be happy that it "enables new business models." I've discussed this before, but not in a while, so it seems worth revisiting.

First, it's a lie that DRM "enables new business models." Gartenberg doesn't realize it, but he admits it in his post, when he suggests that DRM made all-you-can-eat subscription models possible, while immediately countering that point by admitting the real factors are elsewhere:
Take subscription services for example. Sure, I'd love a service that would allow me to download unlimited content in high bitrate MP3 format for a reasonable fee every month. Except economics and greed will never let that happen.
Notice what he says here. The DRM isn't what enabled the business model. It's fear of how people will use such a service that does. It's fear that people will actually use what's been given to them -- leading to the claim of "economics and greed" stopping such a service from ever coming about. But, that makes no sense. People already have access to pretty much every song ever recorded with no DRM at all. Claiming that they need DRM to enable such a service makes no sense. It's already there -- just not legally. So what does the DRM stop in such a service? Absolutely nothing. If the fear is that someone takes a song and shares it online... too late. It's already happened. The only thing that DRM does in that situation is put up a restriction on a legitimate, paying customer. That makes no economic sense at all.

And that's my real problem with DRM. It cannot enable a new business model economically. That's because it's only purpose is to limit behavior. There are no business models that are based solely on limiting behavior. It may be the case that some companies may be too afraid to implement a business model without this faux "protection," but that's entirely different than saying DRM enables the business model. DRM takes an economic resource and artificially restricts it. It takes away options, it does not enable them. DRM hasn't been "demonized." It's a pointless solution that prevents no unauthorized sharing and only serves to hinder the activities of legitimate customers.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    icon
    The Buzz Saw (profile), Sep 25th, 2009 @ 7:40pm

    DRM is stupid.

    It is hilarious seeing ads for DRM talking about "interoperability" and how much the media works on a variety of devices. Um... couldn't the media do that just fine (much better, in fact) BEFORE you put the DRM on it?

     

    reply to this | link to this | view in thread ]

  2.  
    identicon
    Anonymous Coward, Sep 25th, 2009 @ 7:43pm

    This is almost like saying, "if you don't give away free big screen televisions people will be afraid to buy them. As a result the government should subsidize them." No, the government owes no one such a subsidy just like they owe no one a monopoly on anything.

    Sure, if you don't give me a monopoly on computers I may refuse to sell them (I'll do something else) but that's no excuse to give ME a monopoly. Other people will sell them without me.

     

    reply to this | link to this | view in thread ]

  3.  
    identicon
    Anonymous Coward, Sep 25th, 2009 @ 7:47pm

    Re:

    Basically this whole excuse of, "If I don't get my way and if you don't give me EXACTLY what I want, I won't work" or "If you don't give me exactly what I want I won't sell books" or whatever is no excuse to give lobbyists what they want. Imagine if your child said, "If you don't give me a million dollars I won't go to school" or "if you don't raise my allowance I won't do my chores" or something of that nature. It's absolute nonsense, so why should lobbyists get to cry about, "I won't do this if you don't give me a monopoly" or a monopoly rent or subsidies, etc... and have more credibility?

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    Anonymous Coward, Sep 25th, 2009 @ 7:59pm

    Heightened expectations caused by cheap content. Good or bad?

    Having access to everything content-wise under an all-you-can-eat subscription model doesn't make you appreciate any particular artist, song, producer, or label any more. In fact, it usually turns it into something closer to an ongoing comparison between works, which in it's most interesting manifestations, can lead to a sort of contempt, and wondering "Why again is this artist so good?" and "I just don't see the inspiration here". Perceptions and flavors in general change quite dramatically.

    Think of it like spending a weekend plodding through Vimeo or Flickr and then going to a week of snobby art shows on 5th Ave. Because you've been looking at Vimeo or Flickr for a while, you probably won't buy anything at the art show, because you, as a customer, probably have been more inspired from something at Flickr or Vimeo. In reality, you'd probably be happier owning a print from Flickr or a DVD from Vimeo than the appetizers and wine on 5th Ave anyway.

    DRM, and it's "all-you-can-eat subscriptions" enables gorging, which really isn't healthy anyway. Next thing you know, they'll start adding prizes, cashback rewards, airline miles, or even MSG to get you to keep coming back.

     

    reply to this | link to this | view in thread ]

  5.  
    identicon
    Anonymous Coward, Sep 25th, 2009 @ 8:29pm

    Re: Heightened expectations caused by cheap content. Good or bad?

    Heightened expectations caused by cheap content. Good or bad?

    I--I'm not sure if this is even a serious question.

     

    reply to this | link to this | view in thread ]

  6.  
    identicon
    Anonymous Coward, Sep 25th, 2009 @ 8:31pm

    Re: Heightened expectations caused by cheap content. Good or bad?

    With your logic lets just take money away from the one percent richest people in America and allocate it to the poor. Goring and being rich isn't healthy anyways so why not the government be Robinhood?

     

    reply to this | link to this | view in thread ]

  7.  
    identicon
    Anonymous Coward, Sep 25th, 2009 @ 8:35pm

    DRM enables new business models? Bullsh*t! Nothing that limits enables anything.
    The only thing enabling new business models here is the internet itself.

     

    reply to this | link to this | view in thread ]

  8.  
    identicon
    Anonymous Coward, Sep 25th, 2009 @ 10:18pm

    "Except economics and greed will never let that happen. "

    The only greed (actually selfishness) is the notion that you think society somehow owes you a monopoly (ie: patent or copyright) on anything. It does not.

     

    reply to this | link to this | view in thread ]

  9.  
    identicon
    Anonymous Coward, Sep 25th, 2009 @ 11:30pm

    DRM = Digital RENTAL Media

    Anything with DRM is a RENTAL!

    You will NEVER own it!

     

    reply to this | link to this | view in thread ]

  10.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 12:22am

    DRM is a fantastic idea!

    DRM could have created markets and new forms to extract money from people but that is a pipedream, is like when we are children and don't understand the world and created fantastic explanations on how things work and grow up to be ashamed to talk about those fantastic ideas once you get it LoL

    Well I guess some are living in a fantastic bubble world to think DRM worked or will work if there is a thing people proved a thousand times already is that if they need it they will get it. Not even physical DRM work see MAME - Multiple Arcade Machine Emulator, those guy's hack the hell of security features to dump the microchips and then go on to analyze and rebuild all the circuit on software to make it work, and they do it without expectations with the funny thing being a vibrant market for accessories sprung up.

    A classic case of forced openness was when IBM decided to open the PC design for everyone because Apple was beating them at every corner. If IBM didn't did that maybe we would have taken more time to find ourselves with the vibrant market we have today for accessories and other things for PC's, it created a standard that everybody could use and not just one group of people and allowed IBM some space and to carve a market albeit all the new competition, with the alternative being the ejection from the market by other players and there is the AT&T being mandate to be sliced, which sprung a revolution in modern communications, if the monopoly wasn't broken up we still wouldn't have modems that were illegal when AT&T owned the phone inside your house.

     

    reply to this | link to this | view in thread ]

  11.  
    identicon
    JJ, Sep 26th, 2009 @ 6:06am

    Interesting post about business models.

     

    reply to this | link to this | view in thread ]

  12.  
    icon
    Ben Robinson (profile), Sep 26th, 2009 @ 6:52am

    Emusic

    Back in the good old days when emusic was cool, they offered an all you can eat monthly subscription with unrestricted MP3s. It worked just fine, OK some users would "strip mine" the service by using bots to download all the songs, but those users would never be good customers whatever you did. At that time emusic distributed the royalties by putting 50% of the subscription fees into a pool that was then distributed to the labels weighted by number of downloads. What spoiled everything and turned emusic into the much more limited service it is today is the labels insistence on per download royalties. This is one of the major limiting factors for modern inovative services, they can't offer unlimited download because the labels stick to their outdated "per unit" royalty models rather than recognising that music downloads are a service that should be licensed on a percentage basis like radio.

     

    reply to this | link to this | view in thread ]

  13.  
    identicon
    harknell, Sep 26th, 2009 @ 7:49am

    The Easy Route fear

    I think some of the fear of the companies involved stems from their belief that--yes, it is possible for someone to download any song they want free illegally right now, but it's not "easy". You need to know how to use the software or know where to look, plus you have to wade through tons of crap to get a good version of a song. As some have already pointed out, the companies don't actually want to move to a model where you can get any song you want, they still want the "you pay per download/listen/think about the song" model. By allowing any service to have an easy system of listening to any song you want goes in the wrong direction for them. So I suspect the DRM is actually designed to make those services unappealing so that the bulk of people still buy physical media. It's a mindset that obviously loses money, but it's based on a single minded desire to only do business in one way.

     

    reply to this | link to this | view in thread ]

  14.  
    identicon
    LoL, Sep 26th, 2009 @ 8:45am

    Is more easy then people think.

    People would be surprise at how easy it is to learn how to use simple tools available to every body today.

    All major browsers have plugins to download things from youtube, daylymotion, vimeo and other services with just one click.

    Example:
    Video DownloadHelper 4.6.2

    Not counting online tools like "keep it!", app based solutions(just type "youtube downloader" on your preferred search engine and see it for yourself), emails, friends, IM transfers. People don't even need P2P and would be difficult to prove those tools are illegal, besides I know people completely ignorant about computers and every one of them knows exactly how to get movies and music from the internet you can call it specific learning, just go to a site like vimeo or youtube and type "how to [the thing you want to learn]" and see how things go. There is endless selection of tutorials and how to's.
    here an example

     

    reply to this | link to this | view in thread ]

  15.  
    identicon
    mike, Sep 26th, 2009 @ 9:39am

    there is a reason the entertainment industry (movies and music both) is in the toilet; neither of them had enough forsite to use the internet profitably from the onset. That lack of innovation is the root of the problem.

    music for example.... for years and years joe sixpack had the abillity to record music and distribute it on tape with out so much as a whimper from the record execs. now all of a sudden the same behavior, but on the internet, is deamonized. Just because someone thought of sharing music via the net with out consulting them the world is ending.

    the movie industry is trying new (more truthfully old) ideas like 3D to put the buts in the seats to combat the internet sharing. they are figuring if the can offer an experiance u cannot replicate at home then u will come the the theater. i applaude this effort not because i like it but rather because it leaves the end user alone and doesnt deamonize their customers

    the end result is the entertainment industry got caught with their pants down over the entire internet, and instead of dealing with it and being creative, adaptive business people they went crying home to mommy and are turning against their customer base.

    there is a reason myself and many of the rest of you havent bought a CD in years.

     

    reply to this | link to this | view in thread ]

  16.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 10:53am

    "The only greed (actually selfishness) is the notion that you think society somehow owes you a monopoly (ie: patent or copyright) on anything. It does not."
    -----------

    FIXED:

    The only greed (actually selfishness) is the notion that you think artists somehow owe you free stuff (ie: music or films). They do not.


    "there is a reason myself and many of the rest of you havent bought a CD in years."
    ----------

    Indeed. And that reason is...drum roll...because you're freeloaders.

    First you helped yourself to things that didn't belong to you and then when the industry reacted to your rampant pilfering, you adopted their reaction as the original motive for your theft (linguistically speaking of course!). Circular reasoning is fun, fun, fun!

     

    reply to this | link to this | view in thread ]

  17.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 10:57am

    Re:

    But shills are more fun, fun, fun.

     

    reply to this | link to this | view in thread ]

  18.  
    identicon
    Gordon, Sep 26th, 2009 @ 11:25am

    Re: Re: Heightened expectations caused by cheap content. Good or bad?

    @ post 6.

    "With your logic lets just take money away from the one percent richest people in America and allocate it to the poor."

    Don't they do this already, only....in reverse?

     

    reply to this | link to this | view in thread ]

  19.  
    identicon
    Gordon, Sep 26th, 2009 @ 11:35am

    Re:

    I was wondering how long it would take you to reply to this post....TOOL

     

    reply to this | link to this | view in thread ]

  20.  
    identicon
    LoL, Sep 26th, 2009 @ 11:54am

    Freeloaders

    We have to deter freeloaders or they will ruin web browsers reloading pages for free all day. Enough is enough

    LoL

     

    reply to this | link to this | view in thread ]

  21.  
    icon
    Richard (profile), Sep 26th, 2009 @ 12:18pm

    Re:

    "there is a reason myself and many of the rest of you havent bought a CD in years."
    ----------

    Indeed. And that reason is...drum roll...because you're freeloaders.


    Please withdraw this unfounded allegation.

    The organisers and most commenters on this site don't "freeload" as you put it.

    There is a difference between pointing out that infringing filesharing is unstoppable and advocating it or doing it yourself.

    There is also a difference between celebrating artists who are able to make money whilst offering their recorded offering for free and suggesting that people should copy the out put of those who don't make such an offer.

    Not buying the out put of the RIAA doesn't mean that you are doing anything illegal - it just means you get your music elsewhere.

     

    reply to this | link to this | view in thread ]

  22.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 2:25pm

    Re: Re: Heightened expectations caused by cheap content. Good or bad?

    Your somewhat incorrect in your interpretation.

    Money should be a reward for good, hard work and effort applied withing the bounds of the current marketplace and also should take into consideration the ongoing expansion of culture.

    Unfortunately, the Patent and Copyright Systems in place today have a poor definition of what the meaning of "culture" "public domain" and why established laws don't properly apply the commoner's definition of the word.

    Thusly we have issues with Patent and Copyright which manifest themselves on this poor definition with a "solution" called DRM.

     

    reply to this | link to this | view in thread ]

  23.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 2:28pm

    Re:

    Exactly. However, the question persists on what is trying to be protected. Is it the actual media itself, or the concepts of such a culture that seemed to exist within the media?

     

    reply to this | link to this | view in thread ]

  24.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 3:16pm

    Re:

    Incorrect. What has occurred is exactly as the handlers requested. Do you think that corporate execs of music and media remain both deaf and blind to their surroundings and don't visit this website themselves?

    I think highly of the execs of these companies because they are empowered, and can make an informed decision. But do you really think they lack the heart to keep lawsuits against single moms and college students from going forward?

    Get real.
    It's an another, outside force who desire these precedents to be proven within our legal framework, and not on the basis of the unity and spirit of the Free American being.


    Totally offbase, and really debated posting this because then everyone may think I'm a fruitcake or something. But here we go:
    I have a message for someone Michael Jackson had an opportunity to look in the eyes. It's someone with power, but not the power you generally think of. Someone with a deep blood-red power, and they desire to be purple, and desire to make it purple but they can't because it's red. It's red thru and thru. They lack blue, and are constantly seeking blue energy so they can be purple to fight their own internal items. But the red part of them holds a deep-seated hatred against our Free Democratic System. Michael Jackson was Blue, and his departure left someone feeling low. But it was this person that pushed Michael Jackson to whiten his skin in his effort to regain trust. I'm told that they said "Michael was the bluest blue they've ever known."


    Yikes. I'm actually glad if you skipped past that blockquote. Application of the Scientific Method would say that it actually makes me sound like an idiot, like we should break out the tarot cards or something.

    Has Michael been buried yet? I don't mean to sound cynical, but both Billy Mays and Ted Kennedy have been buried.

    Perhaps Michael Jackson's death was untimely and interfered with their schedule.

    If you've made it this far, check out this interesting read:
    http://www.pittsburghsummit.gov/mediacenter/129639.htm

     

    reply to this | link to this | view in thread ]

  25.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 3:56pm

    Speaking on behalf of Generation Y

    So, I'm trying to determine what the answer to
    http://www.pittsburghsummit.gov/mediacenter/129639.htm is.


    Well, first off, it seems that you, as managers, to get off your God Damned lard ass and start producing stuff other than hot air and regulations. You need to start listening to those damned yappers that call at 5:15 and want to talk about what the hell... They have your number do you listen to them?

    And you bankers, who invest in things that don't produce hot air, I am super angry. Your difficulty to understand the inevitable really, really pisses me off. I saw this two years ago, and you didn't think there was a problem? What the hell planet do you live on? Doing things like Risk Analysis is a good starting point. I included my risk analysis when I felt inclined to contact you.

    And to you who hold an O position, like you Steve Ballmer. I really want to kick your ass for taking a co-worker's iPhone and stomping it on the ground. Who the hell are you? You're like a 10 year old ketchup bottle on a shelf, waiting for the bomb to drop. Fucking retire already. You have $20B in the bank. Go get your fat ass a home in Medina where you can feel safe and everyone can scan your license plates as they look for the undocumented state-run liquor store a few blocks from Bill's place. (Oh yeah, I know. Next to the Exxon station. Nice people there.)

    Anyways, to anyone else, that holds an O position, (Because C is so passe these days) this is your time, baby.

    BRING MANUFACTURING BACK HOME.

     

    reply to this | link to this | view in thread ]

  26.  
    icon
    Allen (profile), Sep 26th, 2009 @ 9:16pm

    If they had recognized and taken the opportunity early enough DRM would have been a way to artificially preserve scarcity at least for at least a while longer.

    Is DRM good? Bad? The question was relevant over a decade ago. It's not even worth debating now. The opportunity was missed a long time ago.

     

    reply to this | link to this | view in thread ]

  27.  
    icon
    wvhillbilly (profile), Sep 26th, 2009 @ 9:20pm

    Re: Greed Fixed: (Anonymous coward)

    So you sue the pants off of your customers ($2 million+ for downloading a few songs) and wonder why your business is going down the toilet.

    Go figure.

     

    reply to this | link to this | view in thread ]

  28.  
    icon
    GJ (profile), Sep 26th, 2009 @ 9:55pm

    Re:

    "there is a reason myself and many of the rest of you havent bought a CD in years."
    ----------
    Indeed. And that reason is...drum roll...because you're freeloaders.

    Um, no. First of all, Anonymous Coward, the main reason that I hardly ever buy CDs is that there's very little music produced that is worth "having".

    I will buy classical CDs, because I enjoy different renditions of good music, and it's easier to buy than to look for it online.

    Meanwhile, there is a lot of music that appeals to me, that I cannot find commercially. Most of this is stuff that's 30 years old, and I can find it shared from people who have digitized their records. Am I a freeloader because of that? Perhaps I am, but it is not by choice. I would purchase if it were commercially available.

    I am also eagerly awaiting a commercially produced DVD of spamalot, which I will be buying the moment it comes out, and until that time, I will revive my memory of attending this musical with the poor quality recordings that I can find online.

    So far, new copyright laws do not extend to administering electro shock on your way out of theatre (yet), so I am of the opinion that what I am doing is not particularly damaging to anyone: I would love to attend another performance, but am unable to do so for financial reasons (air fare to cross three time zones seems somewhat excessive).

    I also break the law in other ways, because I need to remove the region codes off the DVDs that I've bought abroad. Sometimes it's just easier to download AVIs (or whatever), so I can easily burn a copy.

    Not being able to play the legal DVDs that I have legally bought is extremely annoying, and region DVDs are an extremely mild form of DRM; easily circumvented with a chinese DVD player (which costs more than your North American bought DVD player), but not with the DVD player in my laptop, or with the one in the car (minivan: I don't watch movies when I'm driving. I'm too busy looking out for red light cameras).

    I would never have felt the need to research how to rip a DVD if I could easily play (different language) DVDs in the car for my kid and if I could easily create a backup of it to protect the original from scratches.

    I would never have felt the need to go online and search for music that I grew up with, if I had been able to purchase this music in a store.

    I'm not sure how you define "freeloader", or where you get the idea that I am using circular reasoning for what I do. Nor do I have the idea that I am ethically stealing anything. I am well aware of the fact that I am breaking the law. But I stand firm in my conviction that I am not stealing anything.

    The law, in this case, is an ass.

    --GJ--

     

    reply to this | link to this | view in thread ]

  29.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 11:34pm

    Re: Speaking on behalf of Generation Y

    No, no, no!

    You got the joke wrong. Steve Ballmer isn't like "a 10 year old ketchup bottle on a shelf waiting for the bomb to drop"


    Get it right:

    He's a 10 year old Heinz(tm) Ketchup bottle in a radioactive bunker, waiting for the bomb to drop so he can be spread on a weiner.

     

    reply to this | link to this | view in thread ]

  30.  
    identicon
    Anonymous Coward, Sep 26th, 2009 @ 11:51pm

    Hark, do I hear a Bob Dylan song coming on?

    Sounds like them times, well, them thar may be a-changin'.

     

    reply to this | link to this | view in thread ]

  31.  
    identicon
    Johnny Dylan, Sep 27th, 2009 @ 12:10am

    Re: Hark, do I hear a Bob Dylan song coming on?

    I like Bob Dylan, but man, you're discounting multiple things, and I've oft thought such things may be applied to other ideas like "No One Was Ever Fired For Buying IBM"

    Does anyone have an estimate of how many people were fired for buying Windows Vista?

     

    reply to this | link to this | view in thread ]

  32.  
    identicon
    Barb F., Sep 27th, 2009 @ 12:13am

    just had to say this is way too funny.

     

    reply to this | link to this | view in thread ]

  33.  
    identicon
    Anonymous Coward, Sep 27th, 2009 @ 12:23am

    Re: Re: Hark, do I hear a Bob Dylan song coming on?

    Well, I entered your query into Teh Google and it says, "No Results Found"

    However, it also presented itself as "Googlle" so I am not quite sure how good that vista thing is.

    Screencap for those interested:
    http://img43.imageshack.us/img43/9687/googllecom.jpg

     

    reply to this | link to this | view in thread ]

  34.  
    identicon
    Hank, Sep 27th, 2009 @ 12:33am

    Re: Re: Re: Hark, do I hear a Bob Dylan song coming on?

    Ummm. So it doesn't work that way?

     

    reply to this | link to this | view in thread ]

  35.  
    identicon
    Joe, Sep 27th, 2009 @ 12:39am

    Re: Re: Re: Re: Hark, do I hear a Bob Dylan song coming on?

    Not unless your into big brown buttcakes, man.

    Oh, don't click on link, as clicking on it may disturb you unless you like big brown buttcakes.

     

    reply to this | link to this | view in thread ]

  36.  
    identicon
    LoL, Sep 27th, 2009 @ 2:51am

    Industry is roadkill

    Let's all mourn for an instant the passage of the industry after being hit by progress and move on LOL!

     

    reply to this | link to this | view in thread ]

  37.  
    icon
    Kyote (profile), Sep 27th, 2009 @ 10:29am

    Finally I registered

    I've been trolling here for a week or two and finally decided I liked Techdirt enough to register.

    I agree, DRM isn't an effective business enabling model. It's just another attempt, failed attempt, that is, to try to keep from changing with the times. The old ways may have been very profitable for them but every business has a turning point.

    Back when Napster first hit the scenes. Instead of hooting and hollering, they should have taken the opportunity to change. By doing what they did, it just got the word out about P2P sharing that much quicker. But opportunity always exists, it just doesn't have the same possible returns.

    The way things were done has had and continues to have a negative effect. I for 1 have not bought a single music cd since the original Napster was shut down. I get my music on the radio, via the net, so I don't have to deal with static.

    Netflix had the right idea where movies were concerned. Instead of making renting movies obsolete, it's grown like mad. Now they are beginning to stream movies instantly over the net.

    In pre-net days you could easily take your jambox and tune in your favorite radio station. Then pop in a blank tape and record to get a lot of good songs. And those with the inclination could edit those tapes to string their favorites together. Now it's just easier and you get what you want instead of waiting for it to be played.

    But now artists(at the urging of RIAA to be sure) are trying to go after radio now.

    http://articles.latimes.com/2009/feb/25/business/fi-music25

    I'll be happy when this is all over and they finally change with the times. I guess we just have to wait for the older moguls to die off before that will happen though.

    Anyway, that's my $.02 worth, though looking back it looks more like a buck and a half...

     

    reply to this | link to this | view in thread ]

  38.  
    icon
    BullJustin (profile), Sep 27th, 2009 @ 2:24pm

    Slightly different take on something

    There are no business models that are based solely on limiting behavior.

    Gotta disagree with you here. Any business model where the focus of the product is high quality can and will be successful using a limiting business model. Apple and Harley Davidson have both gotten much larger by creating business models based on restriction. Both companies were languishing in the competitive market until they began to limit what could be done with their product.

    On the other hand, most businesses stop focusing on product quality and begins to focus on product quantity once they find the product's "natural" bottlenecks. When a company is the first one to find the bottleneck, they learn how to exploit it and make money from it. Other companies can try to break in but once one or more companies have established themselves at the impasse, economies of scale take over and prevent further competition.

    This is the natural progression for a business, and it works as long as the business can find and exploit the bottleneck. When an industry is young (or recently disrupted) lots of companies are searching for the bottleneck. Some even manage to make some money along the way. Once that new bottleneck is found then all the young upstarts become entrenched.

    Look at record labels for and example. Originally people bought into the record label business model because it enabled them to get more and varied music at a fraction of the cost of going around the country and finding it yourself. As a young business model this opened new avenues for the consumer.

    Then the record companies realized their biggest money maker was the distribution of music, not the music itself. It stopped finding good musicians and began to find marketable musicians. It slowly contracted the flow of music from the anything goes kind of recording studios you found around the US in the early 20th century to the few major labels we have today.

    Now the internet has disrupted their very successful "restriction of music availability" based business model. Many people are scrambling, looking for the next bottleneck where they can focus their energies. Even the innovative models of today will become the big, lethargic, slow-movers of tomorrow as long as they focus solely on quantity and not quality.

    But hey, quantity is where the money is.

     

    reply to this | link to this | view in thread ]

  39.  
    identicon
    Alyssa Myers, Sep 27th, 2009 @ 2:50pm

    Re: DRM is stupid.

    Yes, absolutely. DRM is about limitations not enabling interoperability. The real question is how long the various media industries will keep trying DRM before they get the message? Or will society get worn down and just accept it?

     

    reply to this | link to this | view in thread ]

  40.  
    identicon
    Anonymous Coward, Sep 27th, 2009 @ 3:55pm

    Re: record straight...

    first off i Never said i have stolen anything. I simply said i havent purchased a CD in years. Studio CDs a virus spewing, rootkit installing garbage that should be a crime to sell to the unsuspecting public, but thats an argument for a different day.

    you assumed that I particpate in illeagle downloading just because i no longer buy music. shame on you, while i will conceed that there is a large chuck of the internet population that does indeed steal music, to assume anyone who doesnt buy CDs is stealling is pretty low. You should go have a beer with ur record exec buddies.

    there are plenty of ways people can get music leagley over the net, however my point was the industies lack of knowledge, underhanded leagle/political tactics, and outright contempt for their own customers that is the root cause of all their current financial problems

     

    reply to this | link to this | view in thread ]

  41.  
    identicon
    ..., Sep 27th, 2009 @ 7:37pm

    Re: Slightly different take on something

    "Apple and Harley Davidson have both gotten much larger by creating business models based on restriction."

    How does Harley Davidson limit what can be done with their product?

    "Both companies were languishing in the competitive market until they began to limit what could be done with their product."

    As I recall, Harley Davidson was languishing because AMF was bleeding it dry. Things changed after the buyout in 81.

     

    reply to this | link to this | view in thread ]

  42.  
    identicon
    ERH, Sep 27th, 2009 @ 8:32pm

    DRM Facilitating Business Models

    Actually, I find fallacies in this article. A busines model is a construct to take advantage of opportunity in the marketplace. The argument that DRM cannot act as a profit-gathering marketplace construct because places limits on something currently available is incorrect. In fact, the very act of limiting something and promoting that limitation is one of the strengths of marketing and positioning - it creates value where none existed previously in the eyes of consumers.

    Rather I think the issue is that anyone reading Techdirt is quite likely not to be the proper demographic for DRM business model. We are tech savvy enough to, if we choose, download whatever we like in the very same manner that is being sold in the DRM model - albeit (and here's the catch) "illegally".

    Even for those of us who deplore the fundamental cultural shift that occurred with the massive lawsuits of the 90s admit that the big corporations won, and it is now illegal for people to share copyrighted files with one another - except through services that use a DRM model. There's a demand, but no legitimate supply, and legitimacy is a commodity worth $$.

    Consumers purchasing through DRM are purchasing security. That's more important to some of us than to others - it may even be a niche market of "law-abiding" internet citizens, but they do exist. With the population of internet users being so vast, if only 2% accept DRM, that's a profitable business. My guess is that it's likely a lot more.

     

    reply to this | link to this | view in thread ]

  43.  
    identicon
    LoL, Sep 28th, 2009 @ 1:47am

    DRM breed discontent

    DRM doesn't create stable markets. It does create an unnatural scarcity that only can endure while there are no options. What it does do is buy time to try and carve a niche market. There is no DRM that endured and there is a reason why it doesn't, there is the human factor and the emotional factor that people in business tend to overlook.

    A thing that breeds discontent and that feeling of being cheated is important because it leads anger and that leads to the market(people) to start searching for alternatives which in the end puts the one that uses the DRM as his only method of maintaining a market on the other side of an angry mob not a fun place for a business to be.

    DRM is not a solution is a band aid the eventually goes of, it doesn't create value it dilutes the value in the eyes of consumers.

     

    reply to this | link to this | view in thread ]

  44.  
    identicon
    LoL, Sep 28th, 2009 @ 1:55am

    DRM breed discontent

    When people "buy" something they expect some things to be true.

    - Everyone expects that once something is bought the rights of the other side that sold that thing ends.

    - Everyone expects to be able to use, transform and fit what they bought into their life styles.

    - Everyone assumes they will be able to have those things long after the seller is gone.

    DRM Fail in all those expectations and will not be acceptable for people until they can do exactly that which in almost a hundred years so far it didn't and that is why also IP laws are bond to be brought down to their knee's and only fool's will jump at that bandwagon, because once it start creeping up into the general peoples expectations you can bet they will find a way around it and it could lead to real world violence.

     

    reply to this | link to this | view in thread ]

  45.  
    identicon
    LoL, Sep 28th, 2009 @ 2:52am

    DRM and digital picket fences

    A digital picket fence is called DDOS(Distribute Denial of Service)

    And it could be done just informing people in forums. Everyone can participate and anger will be the fuel. On the technical side all major browser have the ability to reload a webpage in certain intervals Opera have it embedded directly, Firefox has a plugin and IE to have plugins to do it people don't even need to use the "ping" command.

    How long will it take to people to figure that out and start using it when:

    - Like in the recent Amazon case people who purchased a legal copy of a book had that book deleted from their e-readers.
    - Servers for authentication let people out in the cold for things they paid for like music streams, online playlist with play music that they paid money for or movies.

    As business put up online stores getting people angry is not a good idea at all and it will open up new forms of interpretation for behavior. Right now people think DDOS is only for hackers and it is a bad thing, but that could change and people will start to think why it is that bad when people can protest in real life but not on the digital, another question would be if networks would be allowed to throttle such a behavior. It does open a lot of interesting questions. Would people doing it be target like it did happen in the beginning when people fought for the right to protest? How it would be regulated? How people would converge to a number of acceptable rules? Would it lead to an arms race between business and society? would unions use it to enforce their own real pickets on the digital arena?

    This is gold for those who like puzzles LoL

     

    reply to this | link to this | view in thread ]

  46.  
    identicon
    Ess, Sep 28th, 2009 @ 5:14am

    To the get over it department

    It is rare that we find anyone now-a-days who is as insightful and articulate as Mr. Masnick. This is one of the best written pieces I've ever read on the subject of DRM. I especially liked how you did not elaborate on the "faux protection". I have always been a fan of staying mute on the subject of DRM because the protection is so easily foiled (and there are many legitimate reasons to foil it). We wouldn't want the technology to advance any, but if one were to speak of it, you said what should be said. Somehow even with DRM free content I've managed to avoid the temptation to become a super-node, hard as it was with a laptop.

    In realty, the personal computer and the world wide web is the ultimate expression of freedom, and DRM is the antithesis of it, and by virtue of that the modern world. It's a transitory concession of the lumbering dinosaur who hasn't fully realized they have only two choices, adapt or die; there is no monopoly on creativity. However the lovely part about competition is that we now see people giving away so many of their legal rights, if not actual product, and making money doing so. We get more content, from more people, on a more diverse set of subjects, more regularly then at any point ever in all of human history, and each one of them may get a smaller piece of the pie sometimes but some of them wouldn't have had any piece before. It's certainly not the artists who loose out anyway as with the reduced costs of personal computer production, internet advertising, and virtually free distribution they no longer need to make tens of millions of dollars off of a three minute track to break even. I can't speak for everyone but I've purchased more downloadable content in the last 5 years then I could ever conceive of buying in another form. Where would I even keep a physical copy?

    If you really want to make the big bucks design non-orwellian software to filter out the noise; harder than it sounds being that noise is purely subjective. And God said, in the techie bible somewhere, "Go forth my children and create!"

    Tick tock.

     

    reply to this | link to this | view in thread ]

  47.  
    icon
    Ess (profile), Sep 28th, 2009 @ 5:29am

    Re: Slightly different take on something

    "Apple and Harley Davidson have both gotten much larger by creating business models based on restriction."

    I believe that is a spurious conclusion. They have succeeded in the short term in spite of those policies by restricting so much that they create an artificial monopoly that cannot last. They prolong the life of this monopoly by pretending it doesn't exist and adopting exceptional foresight and quality control; market saturation is a century away if it's even possible.

    -The rest is spot on as they say except that when there is quantity you have to distinguish yourself from you competition usually with quality (or adopt ruthless practices and incur anti-trust violations).

     

    reply to this | link to this | view in thread ]

  48.  
    icon
    R. Miles (profile), Sep 28th, 2009 @ 7:39am

    Re: DRM Facilitating Business Models

    ...places limits on something currently available is incorrect. In fact, the very act of limiting something ...it creates value...
    Guess what, genius. I'm one of those consumers and I've yet to find any value in a purchase in which DRM limits my use.

    Let me give you an example. I purchased Adobe's software suite which required me to "activate" it upon installation. Great, no problem, been there many times.

    But then I bought a laptop and re-installed the software, noting the desktop copy was removed. I went to register the product again, and imagine my surprise (sarcasm) that my legally purchased software was locked, FROM USE, because the code was already registered.

    That's right, this is a pure example of a DRM limitation placed upon my legally purchased product and actually *removed* the value from it.

    With the piss poor customer service, it took *three days* to re-activate my software after providing DNA to these asses I was the rightful owner.

    This doesn't create value. It takes it away, so much so, this will be the *last* purchase I do from Adobe ever again if such draconian restrictions apply.

    I fully understand these programmers need funds to continue improving (laughable) their products, but to do so at the frustration of paying customers is the *wrong* way to do it.

    So you'll excuse me if I tell you to take your definition of value and shove it along with the mindset of these other idiots who are more out for protection, rather than truly adding value to warrant a purchase to begin with.

     

    reply to this | link to this | view in thread ]

  49.  
    identicon
    ERH, Sep 28th, 2009 @ 8:20am

    RE: Guest What Genius

    My my, sounds like I touched a nerve.

    For the record, I'm copyleft and was not saying DRM was morally valid. I was simply pointing out that DRM can make people money by selling security and legitimacy to the uneducated. Whether or not it is moral or sustainable... or pisses people off who aren't the niche market/target audience... the fact is, if it makes $$, it's an acceptable business model for someone making $$. If the opportunity won't exist tomorrow, that's a problem for people to worry about tomorrow. Not today.

     

    reply to this | link to this | view in thread ]

  50.  
    icon
    BullJustin (profile), Sep 29th, 2009 @ 8:34am

    Re: Re: Slightly different take on something

    HD limits what can be done with their product by limiting how much product they put out in the marketplace. They create an artificial scarcity and thereby control the main supply bottleneck.

    Not only was AMF bleeding it dry but they were also having a hard time competing with the likes of Kawasaki, Honda, Yamaha, and even Suzuki. All of these were building higher quality machines at a lower price, and Americans were buying them. Coupled with HD's "breakdown" image, even brand loyalists were leaving. It wasn't until the corporate decision to cut back on the number of units produced and focus on a high quality product that HD regained the brand loyalty. Now they command a premium for the brand (or perceived value) and the quality (or physical value).

     

    reply to this | link to this | view in thread ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This