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.

Filed Under: business models, drm, economics, subscriptions

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  1. icon
    BullJustin (profile), 27 Sep 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.

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