Five Stages of DRM Failure

by on October 18, 2006 · 14 comments

We’ve all heard that the five stages of grief are denial, anger, bargaining, depression, and acceptance. It seems to me that Hollywood is going through a similar process with respect to the slow-motion train wreck that is digital rights management. When I started writing about DRM policy a couple of years ago, we were somewhere between the denial (“sure, CSS got cracked in a matter of months, but MovieLink and CinemaNow will save us!”) and anger (“If we tighten the screws a little bit more, those damn consumers will pay up!”) stages. Now, we’re starting to see signs that they’ve moved to the bargaining stage. Techdirt notes an article that suggests MPAA CTO Brad Hunt at least recognizes that they’ve got a problem:

During a question and answer session after the talk, Hunt conceded that many people already are frustrated at having to buy multiple copies of the same content to use on different commercial devices. “I understand that if we frustrate the consumer, they will simply pirate the content,” he said. “The issue we face today is that consumers are buying content that uses specific DRM and that, in turn, is gradually creating a world of separate DRM systems.” Hunt said the MPAA recognized the need to create an interoperability DRM solution (or, a DRM ecosystem as he described it) and said that “the consumer, if he or she has already purchased licensed material, should certainly be able to transfer that content to any other new or old device.”

So they’re in the bargaining stage: “OK, consumers hate the current crop of DRM, but if we roll out a kinder, gentler DRM with better interoperability, then consumers will jump on board!” The problem, of course, is that the lack of interoperability in the current generation of DRM formats isn’t a fluke. As I’ve argued before, interoperable DRM is a contradiction in terms. DRM technologies will always be plagued by compatibility problems, because they’re designed to restrict compatibility to approved devices.

Still, recognizing that you have a problem is the first step toward fixing it. It will probably take Hollywood a few more years to realize that all DRM is bad–that companies promoting “open” DRM schemes are selling snake-oil–but at least they’re taking the problem seriously. It’s only a matter of time before they move onto the stages of depression and, finally, acceptance. Then, maybe they’ll finally start tackling the difficult job of building online video systems that cater to the needs of their paying customers rather than treating them like criminals.

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Tim Lee / Timothy B. Lee (Contributor, 2004-2009) is an adjunct scholar at the Cato Institute. He is currently a PhD student and a member of the Center for Information Technology Policy at Princeton University. He contributes regularly to a variety of online publications, including Ars Technica, Techdirt, Cato @ Liberty, and The Angry Blog. He has been a Mac bigot since 1984, a Unix, vi, and Perl bigot since 1998, and a sworn enemy of HTML-formatted email for as long as certain companies have thought that was a good idea. You can reach him by email at leex1008@umn.edu.

  • http://www.blogger.com/profile/14019452 Steve R.

    An overlooked aspect to the whole DRM debate is the dollar cost to the content industry. I suppose this could be considered a form of denial. The deployment of DRM represents a significant investment in time and money. From watching this saga unfold, it appears to me based on the various news articles that I have read, that the introduction of HDDVD content has been delayed by approximately eight years. That represents eight years of lost sales.

    Besides the issue of the expense of researching and developing a DRM technologies, the media content companies have been sparing with each other over the preferred format. Had these companies simply adopted an open standard they could be selling product now and making money now.

    I will acknowledge that they may not be making as much money per unit sale, but they would have had, by now, probably eight years of worth of sales that would have added to the bottom line.

    One other aspect to the revenue stream concept. Media content looses significant value over time as the consumer looses interest. A DVD that sold in 2000 might have brought in $30.00 new. Today, as an old product, that DVD might only sell for $15.00. If it was really bad you may get it from the Wal-Mart discount bin for $5.00. Releasing that DVD as a DRM crippled HDDVD today would not “restore” its year 2000 value. Had the industry simply agreed to an open HDDVD standard in the year 2000 they may have been able to sell that HDDVD for $35.00. Because, HDDVD was kept off the market by the content industry itself, they lost these potential sales at a time when the content had “hot” value because it was new and in demand.

  • http://www.blogger.com/profile/14019452 Steve R.

    An overlooked aspect to the whole DRM debate is the dollar cost to the
    content industry. I suppose this could be considered a form of
    denial. The deployment of DRM represents a significant
    investment in time and money. From watching this saga unfold, it
    appears to me based on the various news articles that I have read, that
    the introduction of HDDVD content has been delayed by approximately
    eight years. That represents eight years of lost sales.



    Besides the issue of the expense of researching and developing a DRM
    technologies, the media content companies have been sparing with each
    other over the preferred format. Had these companies simply adopted an
    open standard they could be selling product now and making money
    now.



    I will acknowledge that they may not be making as much money per unit
    sale, but they would have had, by now, probably eight years of worth of
    sales that would have added to the bottom line.



    One other aspect to the revenue stream concept. Media content looses
    significant value over time as the consumer looses interest. A DVD that
    sold in 2000 might have brought in $30.00 new. Today, as an old
    product, that DVD might only sell for $15.00. If it was really bad you
    may get it from the Wal-Mart discount bin for $5.00. Releasing that DVD
    as a DRM crippled HDDVD today would not “restore” its year 2000
    value. Had the industry simply agreed to an open HDDVD standard in the
    year 2000 they may have been able to sell that HDDVD for $35.00.
    Because, HDDVD was kept off the market by the content industry itself,
    they lost these potential sales at a time when the content had
    “hot” value because it was new and in demand.


  • Philipp

    I have drawn the ‘five stages’ analogy for myself and indeed the industry seems to enter a new stage, as you succinctly pointed out with regard to DRM.

    Similarly, the industry now admits that P2P might be the place where music fans hang out and that it might be good for marketing after all (WSJ).

    But there are others in the industry that are still at an earlier stage:

    I just heard from a friend who’s in a band signed with one of the majors that they blame weak summer record sales on the Soccer World Cup here in Germany. Due to the event, many concerts had to be canceled, which as a result depressed record sales. I guess you always find an external reason when you are looking for one – be it P2P or soccer.

  • Philipp

    I have drawn the ‘five stages’ analogy for myself and indeed the industry seems to enter a new stage, as you succinctly pointed out with regard to DRM.

    Similarly, the industry now admits that P2P might be the place where music fans hang out and that it might be good for marketing after all (WSJ).

    But there are others in the industry that are still at an earlier stage:

    I just heard from a friend who’s in a band signed with one of the majors that they blame weak summer record sales on the Soccer World Cup here in Germany. Due to the event, many concerts had to be canceled, which as a result depressed record sales. I guess you always find an external reason when you are looking for one – be it P2P or soccer.

  • http://weblog.ipcentral.info/ Noel Le

    Tim, would you characterize yourself as being STUCK BETWEEN THE DENIAL AND ANGER PHASES!

    Earlier I characterized your views as follows. Let me know if you disagree.

    I asked you to explain why DRM is a fallacy, and then pointed out that your dislike for DRM leads you argue for repealing a law, doing away with an industry sector, entirely changing the business model for artists/musicians and making proposals you know would increase piracy.

    Addes to this is your implicit view that patent and copyright reform efforts are a waste of time. One of the tenets of your writing is that the industry and consumers are hurtig, whereas the American digital economy is the top in the world. Plus you always bring up MP3.com, as if the industry has failed to innovate without it.

  • http://weblog.ipcentral.info/ Noel Le

    Tim, would you characterize yourself as being STUCK BETWEEN THE DENIAL AND ANGER PHASES!

    Earlier I characterized your views as follows. Let me know if you disagree.

    I asked you to explain why DRM is a fallacy, and then pointed out that your dislike for DRM leads you argue for repealing a law, doing away with an industry sector, entirely changing the business model for artists/musicians and making proposals you know would increase piracy.

    Addes to this is your implicit view that patent and copyright reform efforts are a waste of time. One of the tenets of your writing is that the industry and consumers are hurtig, whereas the American digital economy is the top in the world. Plus you always bring up MP3.com, as if the industry has failed to innovate without it.

  • http://www.techliberation.com/ Tim Lee

    Noel, honestly, I’m not sure what you’re trying to say. I do dislike DRM, I do advocate the repeal of the DMCA, and I do think that incumbent music publishers are going to be in decline for the next decade or two. I don’t think that patent or copyright reform is a waste of time. In addition to the Boucher reform, I would also advocate reducing the length of copyright terms and changing patent law to disallow software patents. I’m not optimistic that those reforms will be enacted in the near future, but I certainly don’t think they’d be a waste of time.

    I’m not sure how any of this implies that I’m in denial about anything. You say I think “industry and consumers are hurting.” My point isn’t that nothing good is happening in the high-tech sector–obviously lots of good things are happening. But my contention is that more good things would happen if we had copyright policies that supported entrepreneurship rather than stifling it. I certainly do get angry sometimes at the fact that bad copyright policies have slowed the rate of progress in digital technologies.

    Do you disagree with my observation that public criticism of DRM among major tech and content execs has become more common over the last couple of years?

  • http://weblog.ipcentral.info/ Noel Le

    Hmmm. I believe that the tech and content execs who criticize DRM are those left out of the lucrative business loops that have arisen around it. To some extent this is good because it will force them to adopt businesses without DRM. But this is far from saying that DRM is bad overall, just because some companies didn’t hire visionary busiess development groups.

    My point above is that at some point, as a policy commentator, you have to consider what exists in the current business, tech, legal landscape.

  • http://www.techliberation.com/ Tim Lee

    My point above is that at some point, as a policy commentator, you have to consider what exists in the current business, tech, legal landscape.

    I don’t really know what you mean. I’ve written extensively about the current business, tech, and legal landscape. You’re certainly welcome to disagree with my analysis, but I certainly don’t “have to” accept the legal or business status quo simply because it happens to be the status quo.

  • http://www.techliberation.com/ Tim Lee

    Noel, honestly, I’m not sure what you’re trying to say. I do dislike DRM, I do advocate the repeal of the DMCA, and I do think that incumbent music publishers are going to be in decline for the next decade or two. I don’t think that patent or copyright reform is a waste of time. In addition to the Boucher reform, I would also advocate reducing the length of copyright terms and changing patent law to disallow software patents. I’m not optimistic that those reforms will be enacted in the near future, but I certainly don’t think they’d be a waste of time.

    I’m not sure how any of this implies that I’m in denial about anything. You say I think “industry and consumers are hurting.” My point isn’t that nothing good is happening in the high-tech sector–obviously lots of good things are happening. But my contention is that more good things would happen if we had copyright policies that supported entrepreneurship rather than stifling it. I certainly do get angry sometimes at the fact that bad copyright policies have slowed the rate of progress in digital technologies.

    Do you disagree with my observation that public criticism of DRM among major tech and content execs has become more common over the last couple of years?

  • http://weblog.ipcentral.info/ Noel Le

    You’ve written extensively about business, tech and legal issues, but you want to change everything with a broad swoop. Are you working in a vacuum. Perhaps you should consider that your analysis is a bit odd-mark, that the business activiies you advocate are not tenable, and besides all these things you want to shut down or repeal, innovation will go on.

  • http://weblog.ipcentral.info/ Noel Le

    Hmmm. I believe that the tech and content execs who criticize DRM are those left out of the lucrative business loops that have arisen around it. To some extent this is good because it will force them to adopt businesses without DRM. But this is far from saying that DRM is bad overall, just because some companies didn’t hire visionary busiess development groups.

    My point above is that at some point, as a policy commentator, you have to consider what exists in the current business, tech, legal landscape.

  • http://www.techliberation.com/ Tim Lee

    My point above is that at some point, as a policy commentator, you have to consider what exists in the current business, tech, legal landscape.

    I don’t really know what you mean. I’ve written extensively about the current business, tech, and legal landscape. You’re certainly welcome to disagree with my analysis, but I certainly don’t “have to” accept the legal or business status quo simply because it happens to be the status quo.

  • http://weblog.ipcentral.info/ Noel Le

    You’ve written extensively about business, tech and legal issues, but you want to change everything with a broad swoop. Are you working in a vacuum. Perhaps you should consider that your analysis is a bit odd-mark, that the business activiies you advocate are not tenable, and besides all these things you want to shut down or repeal, innovation will go on.

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