My DRM Agnosticism & Indifference toward Media Format Compatibility

by on November 16, 2006 · 50 comments

Tim, Steve and others go after me below in an interesting exchange on compatibility and standards. I thought I’d start a new post on this to highlight this exchange and let people really sink their fangs into me since I’m taking the provocative position (at least for this board) that everyone is blowing these compatibility and DRM issues a bit out of proportion. Specifically, in my response to Tim’s “DRM Train Wreck” post below, in which he bemoaned the lack of file compatibility in the digital music world, I argued:

“Could it not be the case that THE LACK OF compatibility between players and file formats actually encourages MORE innovation and competition in some ways? I fully know, for example, that it is impossible for me to play my Xbox games on my PlayStation console or a Nintendo console. Would we be better off if perfect compatibility existed among all the games and consoles? Would 3 major gaming platforms exist at all if we could simply play all game titles on just one of those boxes? I doubt it. I think it would be more likely that only one console would prevail and the other two would disappear. And I think that would leave us worse off as a result.

Same goes for music players, in my opinion. I fully know that I can’t play all my WMA files on an Apple Ipod. But that keeps me (and millions of others) buying non-Apple players. As a result, there’s a fairly diverse and growing market of Apple competitors. Would all those competitors be viable if we could all just play our digital music on an Ipod? Again, I wonder.”

Tim responded that he “[didn't] understand why incompatibility would cause more competition.” And Steve, one of our most frequent and thoughtful commentators here on the TLF, responded that I am “overlooking a critical point concerning incompatibility” regarding “unintentional” vs. “intentional” variations thereof.


To the contrary. I certainly understand this distinction and live with it every day in my own life. I’m suffering through the “unintentional incompatibility” hell of the HD-DVD vs. Blu-Ray wars right now as I’m currently only able to watch HD-DVD movies via my Xbox 360 sidecar player. And I suffer through “intentional incompatibility” when I try to move various types of movie, music and photo files between my computer, music player, PlayStation Portable, cell phone and other devices.

But you know what… it’s the same thing that I’ve been living through for the last three decades, as in:

for Music: albums>>8-tracks>>cassettes,>>CD>>mini-disc>>MP3/WMA, etc..

and

for Movies: Betamax>>VHS>>laserdisc>>DVD>>HD-DVD/Blu-Ray>>movie downloads, etc..

and

for Video Games: Atari>>Intellivision>>CollecoVision>>Nintendo (all of ‘em)>>Sega Genesis & Sega Dreamcast, PlayStation 1, 2 and 3, and Xbox and Xbox 360, PlayStation Portable, Nintendo Gameboy, and PCs. (and I’m sure I missed a few!)

And despite the fact that this is sometimes costly and a pain in the ass, the gadgets just keep getting better and the content just keeps getting more diverse. So whether it’s all “intentional” or “unintentional compatibility,” I like the end result: a lot of innovation on both the content and gadget side of things.

Now before everyone on this board goes medieval on my ass for saying this let me just make a few things clear:

(1) First, I am not in favor of the DMCA’s anti-circumvention provisions. I believe consumers should be at liberty to evade certain control measures so long as they do not engage in widespread illegal distribution of the content after they do so.

(2) I would never deny that companies sometimes make bone-headed moves by “crippling” their products to death with certain types of overly proprietary / closed standards or restrictive copy / use controls. Sony, for example, has been playing this game seemingly forever. (I still have a stupid mini-disc player in my car!)

(3) Did I mention I am not in favor of the DMCA?

OK, so can we talk about this rationally now?

Sometimes media format compatibility breeds vibrantly competitive secondary markets. Our current generation CD and DVD formats have spawned a huge market of independently-produced players, for example. (Of course, there WERE standards fights that preceded these formats, and new formats got introduced, but rejected, along the way. Think mini-disc and DIVX.) And, as Tim noted before, the PC market provides a good example of this too.

Other times, however, incompatibility can breed competition and innovation. I still have not heard anyone here explain to me how we’d actually have more video game console competition if you could play all your games on just one console. I think the intentional incompatibility among gaming consoles has been a primary factor in keep the console platform market vibrantly competitive and kept everyone on their toes, constantly innovating to stay alive. (The birth of two wonderful new consoles this week is a pretty good sign of this.) And there’s all sorts of incompatibility at work in the cell phone marketplace, but things have worked out quite nicely there in terms of innovation, expanding options, and price competition.

I guess what I’m saying is that I see no need for a “rush to compatibility or interoperability.” I kinda like messy standard wars, competing proprietary media formats, and yes, even all these silly DRM variations we see on the market today. Believe me, there are times when all this stuff makes me pound my head on my desk and scream bloody murder to the heavens. (My kids think I’m nuts with all the screaming I do at my computer screen).

Nonetheless, I do not see the net result of this entire process in the same gloom-and-doom terms as others here. I would characterize my position is one of extreme technological agnosticism. I am DRM agnostic. I am format agnostic. I am standard agnostic. In general, I’m just completely agnostic about this whole “open vs. closed” thing, whether it’s for platforms, file formats, code, software, or whatever. Let the market be and let’s see how it all shakes out. And yes, let all this happen without the DMCA hanging overhead.

OK, I got that off my chest. And I now fully expect that everyone will scorch my ass for daring to suggest that compatibility is not always sacrosanct and that DRM is not always the devil.

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

    Adam, I don’t think we really disagree very much. I absolutely agree that incompatibility is sometimes necessary for progress. Certainly the transition from records to cassettes to CDs and the transition from VHS to DVD couldn’t have happened without rendering some older devices obsolete. Likewise, I think it’s entirely possible that gaming consoles are more innovative because their designers have the freedom to design the absolute best hardware they can without worrying about whether it will be consistent with competitors’ products. Negotiating standards and ensuring backwards compatibility can consume valuable engineering resources that could be better spent pushing the technological envelope.

    So I agree that we shouldn’t take compatibility problems as evidence that there’s necessarily anything wrong with the market.

    My only quibble is to go back to the point Steve made: The console and DVD format wars are examples where incompatibility is driven by technological considerations: you can’t make a better mousetrap without inconveniencing the people who owned the previous mousetrap. With gaming consoles, incompatibility might be an unfortunate but unavoidable side effect of technological progress. You can’t make an omelette without breaking some eggs, and maybe you can’t make a great console without breaking backwards compatibility.

    In contrast, incompatibility isn’t an unintended side-effect of DRM–it’s the whole point of the technology. There isn’t any offsetting benefit to the consumer.

    I agree with you that we’re not in a doom-and-gloom scenario, although maybe I don’t emphasize that as strongly as I should. There’s still healthy progress going on in the consumer electronics industry, and I don’t think that will change any time soon. I just think this progress has occurred despite, not because of, the DMCA.

    And obviously we agree on the bottom line from a policy perspective: the government needs to get out of the way and let the market work. I predict that DRM will end up on the ash heap of history, but I’m willing to wait and see what consumers, speaking through the market, decide.

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

    Adam, I don’t think we really disagree very much. I absolutely agree that incompatibility is sometimes necessary for progress. Certainly the transition from records to cassettes to CDs and the transition from VHS to DVD couldn’t have happened without rendering some older devices obsolete. Likewise, I think it’s entirely possible that gaming consoles are more innovative because their designers have the freedom to design the absolute best hardware they can without worrying about whether it will be consistent with competitors’ products. Negotiating standards and ensuring backwards compatibility can consume valuable engineering resources that could be better spent pushing the technological envelope.

    So I agree that we shouldn’t take compatibility problems as evidence that there’s necessarily anything wrong with the market.

    My only quibble is to go back to the point Steve made: The console and DVD format wars are examples where incompatibility is driven by technological considerations: you can’t make a better mousetrap without inconveniencing the people who owned the previous mousetrap. With gaming consoles, incompatibility might be an unfortunate but unavoidable side effect of technological progress. You can’t make an omelette without breaking some eggs, and maybe you can’t make a great console without breaking backwards compatibility.

    In contrast, incompatibility isn’t an unintended side-effect of DRM–it’s the whole point of the technology. There isn’t any offsetting benefit to the consumer.

    I agree with you that we’re not in a doom-and-gloom scenario, although maybe I don’t emphasize that as strongly as I should. There’s still healthy progress going on in the consumer electronics industry, and I don’t think that will change any time soon. I just think this progress has occurred despite, not because of, the DMCA.

    And obviously we agree on the bottom line from a policy perspective: the government needs to get out of the way and let the market work. I predict that DRM will end up on the ash heap of history, but I’m willing to wait and see what consumers, speaking through the market, decide.

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

    There’s still healthy progress going on in the consumer electronics industry, and I don’t think that will change any time soon. I just think this progress has occurred despite, not because of, the DMCA.

    Tim, again you express your lack of confidence in the market. Somehow, consumers flaunting their spending power to by DRM-enabled systems is not market activity to you.

    So, what would the digital entertainment industry look like without DRM Tim? Who would bother making the iPod.

    If any business exec would read even a handful of your DRM writings, they’d see a very lucrative market for DRM-free music players-services. But either you’re more visionary than most entrepreneurs and business development professionals, or they don’t see much opportunity in the market for what you propose.

    I’ve said this before. Tim, Your view against DRM is pretty much a natural rights-liberty perspective. When you try to argue it through business or technological perspectives, the argument is simply a stretched effort.

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

    There’s still healthy progress going on in the consumer electronics industry, and I don’t think that will change any time soon. I just think this progress has occurred despite, not because of, the DMCA.

    Tim, again you express your lack of confidence in the market. Somehow, consumers flaunting their spending power to by DRM-enabled systems is not market activity to you.

    So, what would the digital entertainment industry look like without DRM Tim? Who would bother making the iPod.

    If any business exec would read even a handful of your DRM writings, they’d see a very lucrative market for DRM-free music players-services. But either you’re more visionary than most entrepreneurs and business development professionals, or they don’t see much opportunity in the market for what you propose.

    I’ve said this before. Tim, Your view against DRM is pretty much a natural rights-liberty perspective. When you try to argue it through business or technological perspectives, the argument is simply a stretched effort.

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

    Adam: Excellent explanation. My comments, for example, are “colored” by my perception that we have descended into corporatism. We have a government of and for the corporations. Much of today’s regulatory environment is about protecting corporate interests not about a level competitive playing field.

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

    Adam: Excellent explanation. My comments, for example, are “colored” by my perception that we have descended into corporatism. We have a government of and for the corporations. Much of today’s regulatory environment is about protecting corporate interests not about a level competitive playing field.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Adam: Regarding your comment that “I still have not heard anyone here explain to me how we’d actually have more video game console competition if you could play all your games on just one console.” … Let me try.

    Like Tim, I’m not always certain that the resources needed to create interoperability are always, at the margin, worth investing it in rather than other things. Let’s take the MP3 player example rather than the video game one, because here we don’t have any costs of providing interoperability. The argument is as follows: right now, so long as people can rip CDs to MP3s or pirate them in MP3 format, any player can play any song. This means that hardware manufacturers know that ALL they have to do is compete on features and price. Hence lower barriers to entry and more competition. This is one of the reasons that MP3 players have progressed so well.

    Now let’s take a world in which, magically, there’s no more internet piracy, all CDs are magically DRM’d, and iTunes has retained its dominance online. Now hardware manufacturers can only compete if their product is SO MUCH BETTER than an ipod that it justifies consumers rebuying their entire library all over again.

    The same logic applies more or less directly to consoles: if there were no legal or artificially technical barriers in place to interoperability, hardware companies could compete purely on hardware features rather than historical lock-in. Hence, lower barriers to entry and more competition.

    The counterargument is Noel Le’s hyper-Schumpeterianism. Noel Le’s theory–shared by a depressing number of people–is that market power and lock-in isn’t just an unfortunate consequence of market processes, but is in fact desirable and necessary for all competition, and in fact, the higher the barriers to entry, the more competition we’ll get because of how valuable getting that monopoly will be. This is the view that Levine and Boldrin rail against in their book, and rightly so, because it’s insane: it comes down to “nobody will compete unless they believe they can get a temporary monopoly.” This is exactly the argument that free-marketers have critiqued so strongly back when it was used to defend feudal guild privileges, when it was used to defend tariffs and subsidies, when it was used by Galbraithians to defend favoring industry concentration, etc. etc. throughout history. IT WAS AND REMAINS A LIE.

    As Boldrin and Levine show so well, monopoly doesn’t breed competition (and innovation), COMPETITION breeds competition (and innovation). It is a complete inversion of free market principles to claim that we ought to enhance legal barriers to entry IN ORDER to get competition. The wonderful thing about people is that they innovate precisely IN ORDER to successfully compete, and the more cutthroat the marketplace, the more innovation we see.

    The absurdity of Noel’s position can best be seen in his claim that absent DRM, “who would bother making the ipod?” Well, gosh, Apple would and did, for one. The iPod was introduced (and I bought one!) 1.5 years before the iTunes store; if you think most iPod users fill them up with iTunes DRM’d tracks, you are insane. Apparently 1.5 billion tracks have been sold; 67 million iPods have been. That translates to, oh, about 23 tracks per iPod. How many people do you know that have 23 tracks in their iPods, Noel? I have a few thousand, and none of them are DRMd.

    Schumpeterianism was wrong when Schumpeter expounded it and it’s even more wrong now. Apologies for the passionate tone, but this is important.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Adam: Regarding your comment that “I still have not heard anyone here explain to me how we’d actually have more video game console competition if you could play all your games on just one console.” … Let me try.

    Like Tim, I’m not always certain that the resources needed to create interoperability are always, at the margin, worth investing it in rather than other things. Let’s take the MP3 player example rather than the video game one, because here we don’t have any costs of providing interoperability. The argument is as follows: right now, so long as people can rip CDs to MP3s or pirate them in MP3 format, any player can play any song. This means that hardware manufacturers know that ALL they have to do is compete on features and price. Hence lower barriers to entry and more competition. This is one of the reasons that MP3 players have progressed so well.

    Now let’s take a world in which, magically, there’s no more internet piracy, all CDs are magically DRM’d, and iTunes has retained its dominance online. Now hardware manufacturers can only compete if their product is SO MUCH BETTER than an ipod that it justifies consumers rebuying their entire library all over again.

    The same logic applies more or less directly to consoles: if there were no legal or artificially technical barriers in place to interoperability, hardware companies could compete purely on hardware features rather than historical lock-in. Hence, lower barriers to entry and more competition.

    The counterargument is Noel Le’s hyper-Schumpeterianism. Noel Le’s theory–shared by a depressing number of people–is that market power and lock-in isn’t just an unfortunate consequence of market processes, but is in fact desirable and necessary for all competition, and in fact, the higher the barriers to entry, the more competition we’ll get because of how valuable getting that monopoly will be. This is the view that Levine and Boldrin rail against in their book, and rightly so, because it’s insane: it comes down to “nobody will compete unless they believe they can get a temporary monopoly.” This is exactly the argument that free-marketers have critiqued so strongly back when it was used to defend feudal guild privileges, when it was used to defend tariffs and subsidies, when it was used by Galbraithians to defend favoring industry concentration, etc. etc. throughout history. IT WAS AND REMAINS A LIE.

    As Boldrin and Levine show so well, monopoly doesn’t breed competition (and innovation), COMPETITION breeds competition (and innovation). It is a complete inversion of free market principles to claim that we ought to enhance legal barriers to entry IN ORDER to get competition. The wonderful thing about people is that they innovate precisely IN ORDER to successfully compete, and the more cutthroat the marketplace, the more innovation we see.

    The absurdity of Noel’s position can best be seen in his claim that absent DRM, “who would bother making the ipod?” Well, gosh, Apple would and did, for one. The iPod was introduced (and I bought one!) 1.5 years before the iTunes store; if you think most iPod users fill them up with iTunes DRM’d tracks, you are insane. Apparently 1.5 billion tracks have been sold; 67 million iPods have been. That translates to, oh, about 23 tracks per iPod. How many people do you know that have 23 tracks in their iPods, Noel? I have a few thousand, and none of them are DRMd.

    Schumpeterianism was wrong when Schumpeter expounded it and it’s even more wrong now. Apologies for the passionate tone, but this is important.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Also: because this keeps coming up, I’d like to point out that arguments for the social importance of DRM or IP based on how much current businesses rely on them are simply non-sequiturs. Of course if we give people extra legal rights, they will use them, and structure their businesses around them, and quite possibly come to rely upon them. That says absolutely nothing about what would happen in their absence. ADM relies on our artificially jacked-up sugar prices to sell their corn syrup; that doesn’t mean agricultural protectionism is a good thing.

    I can’t decide whether to laugh or cry when I see people like Noel Le passionately defending legal restrictions on commerce by saying we’re criticizing the decisions “the market” has made. No, we’re criticizing the way these LEGAL RULES have DISTORTED the free market.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Also: because this keeps coming up, I’d like to point out that arguments for the social importance of DRM or IP based on how much current businesses rely on them are simply non-sequiturs. Of course if we give people extra legal rights, they will use them, and structure their businesses around them, and quite possibly come to rely upon them. That says absolutely nothing about what would happen in their absence. ADM relies on our artificially jacked-up sugar prices to sell their corn syrup; that doesn’t mean agricultural protectionism is a good thing.

    I can’t decide whether to laugh or cry when I see people like Noel Le passionately defending legal restrictions on commerce by saying we’re criticizing the decisions “the market” has made. No, we’re criticizing the way these LEGAL RULES have DISTORTED the free market.

  • http://www.pff.org Noel Le

    X why is there no market for your views then. Why doesnt someone tap a DRM free service-player business. its a very simple question Tim evades time and again. DRM makes sense to consumers and producers but evidently not those who think technology should be guided by ideology.

  • http://www.pff.org Noel Le

    X why is there no market for your views then. Why doesnt someone tap a DRM free service-player business. its a very simple question Tim evades time and again. DRM makes sense to consumers and producers but evidently not those who think technology should be guided by ideology.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Noel, you do realize that every successful player has been “DRM-free” in the sense that they all play unprotected MP3s, right?

    And you also realize that eMusic, which sells DRM-free tracks, is now the 2nd-most successful online store, right?

    And you ALSO realize that the most popular form of music, the plain ol’ CD, which sells something like 400-500 million units per year in the US–which translates to around 4-5 billion tracks–is ALSO DRM-free, right?

    Because gosh, it seems like if you did recognize these simple facts, you’d also realize the absurdity of your own question. Consumers don’t like DRM. They put up with it when they have to–when the songs they want are available no other way, or when other conveniences (online procurement) outweigh the bothers. Record labels are obsessed with DRM because DRM gives them the illusion of control, and because arguments in favor of giving up control are very counter-intuitive and go against the industry’s corporate culture and individual incentives.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Noel, you do realize that every successful player has been “DRM-free” in the sense that they all play unprotected MP3s, right?

    And you also realize that eMusic, which sells DRM-free tracks, is now the 2nd-most successful online store, right?

    And you ALSO realize that the most popular form of music, the plain ol’ CD, which sells something like 400-500 million units per year in the US–which translates to around 4-5 billion tracks–is ALSO DRM-free, right?

    Because gosh, it seems like if you did recognize these simple facts, you’d also realize the absurdity of your own question. Consumers don’t like DRM. They put up with it when they have to–when the songs they want are available no other way, or when other conveniences (online procurement) outweigh the bothers. Record labels are obsessed with DRM because DRM gives them the illusion of control, and because arguments in favor of giving up control are very counter-intuitive and go against the industry’s corporate culture and individual incentives.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    In case my previous comment was too subtle, let me restate: every premise in your argument, Noel, is false. Consumers overwhelmingly choose, whether through CDs or through internet piracy (~1 billion tracks -per month-), DRM-free music.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    In case my previous comment was too subtle, let me restate: every premise in your argument, Noel, is false. Consumers overwhelmingly choose, whether through CDs or through internet piracy (~1 billion tracks -per month-), DRM-free music.

  • http://www.pff.org Noel Le

    Also, X, what industries do Boldrin and Levin talk about. The fact that they attempt a universal theory of innovation is why even IP skeptics in academia dismiss them.

  • http://www.pff.org Noel Le

    Also, X, what industries do Boldrin and Levin talk about. The fact that they attempt a universal theory of innovation is why even IP skeptics in academia dismiss them.

  • Chris Brand

    The console argument is interesting. I thought that one of the main reasons that the latest round of consoles have taken so long to get into stores was because of the time it takes to develop the games for them (there being no point releasing a console without games to play on it).

    So if the games were somehow compatible with all consoles, it would be much easier to release a new console, simply because there would already be vast numbers of games out there that you could play on it.

    Of course, it’s the imcompatibilities that actually make new consoles attractive, which certainly isn’t the case with music formats.

  • Chris Brand

    The console argument is interesting. I thought that one of the main reasons that the latest round of consoles have taken so long to get into stores was because of the time it takes to develop the games for them (there being no point releasing a console without games to play on it).

    So if the games were somehow compatible with all consoles, it would be much easier to release a new console, simply because there would already be vast numbers of games out there that you could play on it.

    Of course, it’s the imcompatibilities that actually make new consoles attractive, which certainly isn’t the case with music formats.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Chris: it’s not the incompatibilities *per se* that make them attractive; it’s the features of each–and writing software that takes advantage of all the featuresets takes time, effort, and money. If a PS3 could play all the games of every MS and Nintendo console, it would suddenly become much more attractive. Unfortunately, this is a hard technical problem. Still more unfortunately, IPRs and exclusivity agreements get in the way of even trying. But it is very important to separate conceptually the FEATURES, which are good, and the barriers that these place in the way of interoperability, which are bad but somewhat inevitable.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Chris: it’s not the incompatibilities *per se* that make them attractive; it’s the features of each–and writing software that takes advantage of all the featuresets takes time, effort, and money. If a PS3 could play all the games of every MS and Nintendo console, it would suddenly become much more attractive. Unfortunately, this is a hard technical problem. Still more unfortunately, IPRs and exclusivity agreements get in the way of even trying. But it is very important to separate conceptually the FEATURES, which are good, and the barriers that these place in the way of interoperability, which are bad but somewhat inevitable.

  • http://www.pff.org Noel Le

    X so what is the problem if successful players and services dont leverage DRM. Whats wrong with the market. Why are you unhappy with DRM. Also talk about market share and revenue rather than market ranks and dont generalize from a small market segment to explain the whole market.

  • http://www.pff.org Noel Le

    X so what is the problem if successful players and services dont leverage DRM. Whats wrong with the market. Why are you unhappy with DRM. Also talk about market share and revenue rather than market ranks and dont generalize from a small market segment to explain the whole market.

  • Charles

    Noel,
    http://www.audiolunchbox.com is an example of a service that offers drm-free music (and also one of their selling points). They also offer an alternative to the classical big-label-rights-appropriation model that has been in play so far. They leave artists their rights. All they do is distribute their music.

    I think the market of completely legal drm-free music download is coming. The market has inertia, but I see it changing. Slowly.

  • Charles

    Noel,
    http://www.audiolunchbox.com is an example of a service that offers drm-free music (and also one of their selling points). They also offer an alternative to the classical big-label-rights-appropriation model that has been in play so far. They leave artists their rights. All they do is distribute their music.

    I think the market of completely legal drm-free music download is coming. The market has inertia, but I see it changing. Slowly.

  • http://weblog.ipcentral.info Patrick Ross

    Adam, enjoyable post as always. I do find it sad, however, that you feel your only hope for a rational discussion on IP on this board is to twice denounce the DMCA.

  • http://weblog.ipcentral.info Patrick Ross

    Adam, enjoyable post as always. I do find it sad, however, that you feel your only hope for a rational discussion on IP on this board is to twice denounce the DMCA.

  • eric

    “DRM makes sense to consumers and producers but evidently not those who think technology should be guided by ideology.”

    X hit the nail on the head in his response. Consumers cannot be said to be embracing DRM as something that makes sense to them. Most people in most situations are choosing non-DRM music. No one answered my post in the other thread, but X. makes the same point, only more thoroughly. Forget piracy. Even legal music purchases are mostly non-DRM. If we’re looking to the marketplace for answers, the marketplace is speaking.

    I submit that as downloading from ITMS and its DRM-laden competitors increases and CD sales decline, interoperability will become proportionately more important to the consumer and they will become ever more convinced that DRM does not make sense. How they will express that resistance, I don’t know. Time will tell. Perhaps the CD will simply refuse to die, in spite of the increasing number of obituaries being written for it.

  • eric

    “DRM makes sense to consumers and producers but evidently not those who think technology should be guided by ideology.”

    X hit the nail on the head in his response. Consumers cannot be said to be embracing DRM as something that makes sense to them. Most people in most situations are choosing non-DRM music. No one answered my post in the other thread, but X. makes the same point, only more thoroughly. Forget piracy. Even legal music purchases are mostly non-DRM. If we’re looking to the marketplace for answers, the marketplace is speaking.

    I submit that as downloading from ITMS and its DRM-laden competitors increases and CD sales decline, interoperability will become proportionately more important to the consumer and they will become ever more convinced that DRM does not make sense. How they will express that resistance, I don’t know. Time will tell. Perhaps the CD will simply refuse to die, in spite of the increasing number of obituaries being written for it.

  • http://techliberation.com Braden

    A couple of X.Trapnel’s comments are overstated:

    1. “Consumers overwhelmingly choose, whether through CDs or through internet piracy (~1 billion tracks -per month-), DRM-free music.”

    Regarding internet piracy, consumers aren’t choosing DRM-free music, they are choosing FREE music. It’s hard to compete with free.

    2. “[i]t comes down to “nobody will compete unless they believe they can get a temporary monopoly.” This is exactly the argument that free-marketers have critiqued so strongly back when it was used to defend feudal guild privileges, when it was used to defend tariffs and subsidies, when it was used by Galbraithians to defend favoring industry concentration, etc. etc. throughout history.”

    The examples cited are of free marketers arguing against government regulatory actions that created obvious market preferences for particular industries like textiles, agriculture, etc. These were economic regulations, as opposed to property rights.

    More importantly, these were PROHIBITIVE arrangements. There is no way that a market can work around a tariff unless the market creates a substitute. So instead of sugar we have high fructose syrup in many of our foods. There’s a difference between the market for sugar and the market for music. You can still get music in different formats, and it’s still music. It still sounds the same to most ears on most audio devices, at least at 128k+ bit rates.

    At least in this regard, I believe X.Trapnel’s fear of hyper-Schumpeterian monopolies about the DRM is overblown. And any externalities associated with the DMCA (call it an assignment of a DRM property right to the content creator) and a lack of interoperability might be mitigated by Coasian bargains among competitors (licenses) and the exemptions that exist in the DMCA.

  • http://techliberation.com Braden

    A couple of X.Trapnel’s comments are overstated:

    1. “Consumers overwhelmingly choose, whether through CDs or through internet piracy (~1 billion tracks -per month-), DRM-free music.”

    Regarding internet piracy, consumers aren’t choosing DRM-free music, they are choosing FREE music. It’s hard to compete with free.

    2. “[i]t comes down to “nobody will compete unless they believe they can get a temporary monopoly.” This is exactly the argument that free-marketers have critiqued so strongly back when it was used to defend feudal guild privileges, when it was used to defend tariffs and subsidies, when it was used by Galbraithians to defend favoring industry concentration, etc. etc. throughout history.”

    The examples cited are of free marketers arguing against government regulatory actions that created obvious market preferences for particular industries like textiles, agriculture, etc. These were economic regulations, as opposed to property rights.

    More importantly, these were PROHIBITIVE arrangements. There is no way that a market can work around a tariff unless the market creates a substitute. So instead of sugar we have high fructose syrup in many of our foods. There’s a difference between the market for sugar and the market for music. You can still get music in different formats, and it’s still music. It still sounds the same to most ears on most audio devices, at least at 128k+ bit rates.

    At least in this regard, I believe X.Trapnel’s fear of hyper-Schumpeterian monopolies about the DRM is overblown. And any externalities associated with the DMCA (call it an assignment of a DRM property right to the content creator) and a lack of interoperability might be mitigated by Coasian bargains among competitors (licenses) and the exemptions that exist in the DMCA.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Very quick response:

    1. It’s impossible to do an exact apples-to-apples comparison, because the labels are refusing to release DRM-free music, generally. So we don’t have the chance to compare 50 Cent’s track on iTunes with Fairplay vs. 50 Cent’s track on eMusic with no DRM. It’s hard to compete with free, but it’s ALSO hard to compete with big-name labels backed with massive advertising and exposure; it’s rather astounding the eMusic is doing as well as it is. So I agree that my piracy comparison is *slightly* unfair, because of the ‘free’, but people compete with free all the time (private schools, bottled water, cable television, etc., etc.). The point about music CDs does hold, and is even stronger because here the comparison is unfair the other way–most people don’t WANT whole albums.

    Just be serious: are you really claiming that people LIKE DRM? At the moment, most aren’t bothered *much* by it, because it doesn’t interfere with their iPod use, and the iPod is still, by far, the best music player out there. But suppose in 5 years someone finally, definitively, kicks the iPod’s butt and creates a player far superior on every dimension. All of a sudden there are going to be some very, very unhappy customers who realize that All Their Songs Are Belong To Apple.

    2. This is pure question-begging, except perhaps for the caveat about ‘obvious’. IPRs aren’t LIKE other property rights; you already HAVE a property right in the object that instantiates the idea/creative expression/whatever. IPRs are PRECISELY prohibitive arrangements that grant market power–if they weren’t, nobody would WANT one. Just like tariffs, their effect is limited just to the extent that people can substitute around them–Kim Harrison instead of Laurel Hamilton for vampire-romance, 50 Cent instead of Eminem, one patented process (or OSS) versus another. My claim was: IPRs, and the DMCA through DRM, restrict competition. It’s not a refutation of my claim to say that market processes will mitigate these effects; that’s like saying tariffs on sugar aren’t bad because we get corn syrup to compete. What markets are doing is trying to route around the damage; that doesn’t mean the damage isn’t there.

  • http://booksdofurnisharoom.blogspot.com X. Trapnel

    Very quick response:

    1. It’s impossible to do an exact apples-to-apples comparison, because the labels are refusing to release DRM-free music, generally. So we don’t have the chance to compare 50 Cent’s track on iTunes with Fairplay vs. 50 Cent’s track on eMusic with no DRM. It’s hard to compete with free, but it’s ALSO hard to compete with big-name labels backed with massive advertising and exposure; it’s rather astounding the eMusic is doing as well as it is. So I agree that my piracy comparison is *slightly* unfair, because of the ‘free’, but people compete with free all the time (private schools, bottled water, cable television, etc., etc.). The point about music CDs does hold, and is even stronger because here the comparison is unfair the other way–most people don’t WANT whole albums.

    Just be serious: are you really claiming that people LIKE DRM? At the moment, most aren’t bothered *much* by it, because it doesn’t interfere with their iPod use, and the iPod is still, by far, the best music player out there. But suppose in 5 years someone finally, definitively, kicks the iPod’s butt and creates a player far superior on every dimension. All of a sudden there are going to be some very, very unhappy customers who realize that All Their Songs Are Belong To Apple.

    2. This is pure question-begging, except perhaps for the caveat about ‘obvious’. IPRs aren’t LIKE other property rights; you already HAVE a property right in the object that instantiates the idea/creative expression/whatever. IPRs are PRECISELY prohibitive arrangements that grant market power–if they weren’t, nobody would WANT one. Just like tariffs, their effect is limited just to the extent that people can substitute around them–Kim Harrison instead of Laurel Hamilton for vampire-romance, 50 Cent instead of Eminem, one patented process (or OSS) versus another. My claim was: IPRs, and the DMCA through DRM, restrict competition. It’s not a refutation of my claim to say that market processes will mitigate these effects; that’s like saying tariffs on sugar aren’t bad because we get corn syrup to compete. What markets are doing is trying to route around the damage; that doesn’t mean the damage isn’t there.

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

    Charles, I welcome a *legal* DRM-free market. That will push DRM firms to lower prices, and provide more value to consumers. Thats fine with me. But let the market sort that out.

    Technology is “ideology neutral,” granted it represents “freedom” or anything else by how the market values it. Lets not assign technology subjective ideological values and bypass the market’s decisions.

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

    Charles, I welcome a *legal* DRM-free market. That will push DRM firms to lower prices, and provide more value to consumers. Thats fine with me. But let the market sort that out.

    Technology is “ideology neutral,” granted it represents “freedom” or anything else by how the market values it. Lets not assign technology subjective ideological values and bypass the market’s decisions.

  • Charles

    Noel:
    I think we agree that legal drm-free music download services are (or at least should be) welcome in this market. In fact, I’d be ready to bet that we both agree that any legal music download service is (again, at least should be) welcome in the market. Large labels have not been so welcoming in the past, but now some are here to stay. The question is whether drm is unevitable and whether the preservation of drm-integrety through the DMCA makes sense.

    1-DRM is not a necessary evolution of the market. The point being made by several here is that consumers choose non-drm options when possible. Many people don’t download songs, but simply buy cds and rip them themselves to use on an ipod, which represents a choice of drm-free digital media.

    2-if DRM integrety was not enforced by the DMCA, some contend here that there would be more competition in the personal digital music player market. Companies would come up with players that can circumvent DRM so you can enjoy music bought legally from any service on any hardware.

    Note that nowhere here have I assigned an ideology to technology. I’m simply stating that DRM is not an option that is favored by consumers and DRM-integrity enforcement through the DMCA probably results in less comptetition. My previous post was to point out that there are companies forming that recognize that most consumers do not want to be pirates, they simply want a convenient solution and so they offer it to them. My personal opinion is that large labels are actually scared of that. Downloading songs without the DMCA reduces their possibility of vendor lock-in and thus effectively puts anyone who can code a website to offer songs for download on the same footing as any of the large labels (at least as far as distribution of music goes). What saves larger labels, now, is the fact that they have running contracts with major artists and hold the rights to a lot of the music people listen to every day. But this has started changing and will slowly change, as Tim said it, not because of the DMCA anti drm-circumvention articles but despite the DMCA.

    Again, I don’t think I’m understanding this situation from an ideological standpoint. I’m simply stating my interpretation of the state of the market and it’s possible evolution to something different.

  • Charles

    Noel:
    I think we agree that legal drm-free music download services are (or at least should be) welcome in this market. In fact, I’d be ready to bet that we both agree that any legal music download service is (again, at least should be) welcome in the market. Large labels have not been so welcoming in the past, but now some are here to stay. The question is whether drm is unevitable and whether the preservation of drm-integrety through the DMCA makes sense.

    1-DRM is not a necessary evolution of the market. The point being made by several here is that consumers choose non-drm options when possible. Many people don’t download songs, but simply buy cds and rip them themselves to use on an ipod, which represents a choice of drm-free digital media.

    2-if DRM integrety was not enforced by the DMCA, some contend here that there would be more competition in the personal digital music player market. Companies would come up with players that can circumvent DRM so you can enjoy music bought legally from any service on any hardware.

    Note that nowhere here have I assigned an ideology to technology. I’m simply stating that DRM is not an option that is favored by consumers and DRM-integrity enforcement through the DMCA probably results in less comptetition. My previous post was to point out that there are companies forming that recognize that most consumers do not want to be pirates, they simply want a convenient solution and so they offer it to them. My personal opinion is that large labels are actually scared of that. Downloading songs without the DMCA reduces their possibility of vendor lock-in and thus effectively puts anyone who can code a website to offer songs for download on the same footing as any of the large labels (at least as far as distribution of music goes). What saves larger labels, now, is the fact that they have running contracts with major artists and hold the rights to a lot of the music people listen to every day. But this has started changing and will slowly change, as Tim said it, not because of the DMCA anti drm-circumvention articles but despite the DMCA.

    Again, I don’t think I’m understanding this situation from an ideological standpoint. I’m simply stating my interpretation of the state of the market and it’s possible evolution to something different.

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

    Charles, we are in fact probably close together on DRM, however I see a DRM-lite market as a balancing not a displaing reaction to the current DRM landscape. The arguments for an inevitable DRM-lite landscape from Tim Lee and X above don’t say how DRM will be deposed, just why it *should.*

    X, to address some of your points. I’ve been busy, so I haven’t been replying in detail.

    The majority of songs played on the iPod are MP3 formats, but Apple captures the value of its MP3 compataibility by excluding Apple DRM schemes. DRM is important to the iPod because of this.

    Also, I believe Braden Cox’s insight on your CD analogy is fundementally right. You even prove the importance of DRM for allowing price discrimmination and scaled offerings by saying that folks don’t want to buy entire CDs. With DRM, producers can offer and price at smaller units of goods (songs rather than CDs). Without DRM, producers can only offer all or nothing.

    …suppose in 5 years someone finally, definitively, kicks the iPod’s butt and creates a player far superior on every dimension. All of a sudden there are going to be some very, very unhappy customers who realize that All Their Songs Are Belong To Apple.

    No, nobody’s songs belong to Apple. How do you gather this X. Even if songs did “belong” to Apple, the party that beats Apple out of the market should address backwards compatibility to lower switching costs for consumers (which is the only near term way I see Apple losing the music player war).

    IPRs are PRECISELY prohibitive arrangements that grant market power–if they weren’t, nobody would WANT one. … IPRs, and the DMCA through DRM, restrict competition.

    Not so fast X:) Parties seek IPRs to obtain market exclusivity, but competitors are restricted from distributing copies of the copyright/patent, not goods that legitimately compete with it. Also, IPRs do not automatically confer market power. Just by obtaining a copyright or patent, a party does not exclude competition for the product or services market. See my citations to Profs Edmund Kitch and Mark Lemley, which address your concerns.

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

    Charles, we are in fact probably close together on DRM, however I see a DRM-lite market as a balancing not a displaing reaction to the current DRM landscape. The arguments for an inevitable DRM-lite landscape from Tim Lee and X above don’t say how DRM will be deposed, just why it *should.*

    X, to address some of your points. I’ve been busy, so I haven’t been replying in detail.

    The majority of songs played on the iPod are MP3 formats, but Apple captures the value of its MP3 compataibility by excluding Apple DRM schemes. DRM is important to the iPod because of this.

    Also, I believe Braden Cox’s insight on your CD analogy is fundementally right. You even prove the importance of DRM for allowing price discrimmination and scaled offerings by saying that folks don’t want to buy entire CDs. With DRM, producers can offer and price at smaller units of goods (songs rather than CDs). Without DRM, producers can only offer all or nothing.

    …suppose in 5 years someone finally, definitively, kicks the iPod’s butt and creates a player far superior on every dimension. All of a sudden there are going to be some very, very unhappy customers who realize that All Their Songs Are Belong To Apple.

    No, nobody’s songs belong to Apple. How do you gather this X. Even if songs did “belong” to Apple, the party that beats Apple out of the market should address backwards compatibility to lower switching costs for consumers (which is the only near term way I see Apple losing the music player war).

    IPRs are PRECISELY prohibitive arrangements that grant market power–if they weren’t, nobody would WANT one. … IPRs, and the DMCA through DRM, restrict competition.

    Not so fast X:) Parties seek IPRs to obtain market exclusivity, but competitors are restricted from distributing copies of the copyright/patent, not goods that legitimately compete with it. Also, IPRs do not automatically confer market power. Just by obtaining a copyright or patent, a party does not exclude competition for the product or services market. See my citations to Profs Edmund Kitch and Mark Lemley, which address your concerns.

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

    The party that beats Apple out of the market should address backwards compatibility.

    Does this mean you’re in favor of allowing companies to circumvent DRM in order to ensure interoperability?

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

    The party that beats Apple out of the market should address backwards compatibility.

    Does this mean you’re in favor of allowing companies to circumvent DRM in order to ensure interoperability?

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

    Tim, that has been my position in every writing you’ve sse me do on reverse engineering and fair use.

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

    Tim, that has been my position in every writing you’ve sse me do on reverse engineering and fair use.

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

    So does that mean you think the Streambox decision was wrongly decided?

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

    So does that mean you think the Streambox decision was wrongly decided?

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

    Tim, I don’t see how Streambox supports your argument, or is inconsistent with mine. Streambox figured out how to achieve interop with RealPlayer’s network connections but it also enabled users to make illegal copies of content from the Real Network server.

    From what I’ve gathered, you can look at legal circumvention this way: 1)does the act of reverse engineering for interop pose infringement. I believe courts are somewhat lax on this prong, they tend to be or rigid on the next, which is, 2)does the interoperable product infringe or defeat the purpose of the DRM scheme. The purpose of DRM can be seen as preventing unauthorized copying. Streambox fell to the second of these, as did BnetD.

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

    Tim, I don’t see how Streambox supports your argument, or is inconsistent with mine. Streambox figured out how to achieve interop with RealPlayer’s network connections but it also enabled users to make illegal copies of content from the Real Network server.

    From what I’ve gathered, you can look at legal circumvention this way: 1)does the act of reverse engineering for interop pose infringement. I believe courts are somewhat lax on this prong, they tend to be or rigid on the next, which is, 2)does the interoperable product infringe or defeat the purpose of the DRM scheme. The purpose of DRM can be seen as preventing unauthorized copying. Streambox fell to the second of these, as did BnetD.

  • Alexander Baez Ubeira

    Let’s hope ricoh’s invention will make the hd-dvd dlue-ray hell cool down

  • Alexander Baez Ubeira

    Let’s hope ricoh’s invention will make the hd-dvd dlue-ray hell cool down

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