drm, digital content, and the consumer experience lessons learned from the music industry...
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DRM, Digital Content, and the Consumer Experience
Lessons Learned from the Music Industry
By Kirk [email protected]
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The future of all media is digital
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Many media companies have resisted the transition
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They fear piracy and changing business models
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Everyone says the same thing
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“We don’t want to make the same mistakes the music industry made”
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But what were those mistakes?
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First, some history
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Not long ago things weren’t so bad
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Consumers loved CDs
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0
250
500
750
1,000
1993
1994
1995
1996
1997
1998
1999
Source: RIAA
CD Sales (in millions)
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Digital content distributionwas not on the agenda
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Historically, consumers bought what they were told
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A funny thing happened on the way to the 21st century
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Consumers are now content creators,
publishers, and distributors
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The recording industry was not prepared for
the 21st century consumer
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As a result, they made some mistakes
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Mistake:Mistaking consumer demand
for piracy
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The music industry has long battled piracy
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This was a new kind of pirate
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Mistake:Failing to offer consumers a
viable legal alternative
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Sony’s “The Store” offered DRM protected songs for
$3.50 each
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Consumers continued to download from
file sharing networks
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Mistake:Declaring war on MP3
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Diamond Rio• MP3 becomes portable.
• A clear sign of things to come.
• The RIAA sues.
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“We filed this lawsuit because unchecked piracy on the Internet threatens the development of a legitimate marketplace that consumers want”
- RIAA Statement on the Diamond Rio lawsuit June 1999
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Actually, consumers wanted portable MP3
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Two years later Apple introduced the iPod
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Mistake:Litigation as a business model
(this only works if you’re a lawyer)
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RIAA Lawsuits
• Dozens of file sharing networks
• 17,587 consumers lawsuits
• 4,553 pre-litigation settlement letters
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20,000+ lawsuits
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0
250
500
750
1,000
2000 2001 2002 2003 2004 2005 2006 2007
CD Sales (in millions)
Source: RIAA
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Litigation won’t stop the future
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Publishers sue Google
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Mistake:Assuming DRM must be
the solution
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DRM Myth vs. Reality
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Myth:DRM prevents piracy
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Reality:DRM has no impact on
piracy
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Reality:Piracy requires just one
physical copy
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Example:Harry Potter and the Media Pirates
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Harry Potter Distribution
Official eBooks
Pirated eBooks
400 million +
0
Unknown
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Are you training digital consumers
to be pirates?
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Myth:DRM enables a marketplace
for digital content
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The marketplace for digital content is enabled by
• The availability of digital content
• A channel for digital distribution (the Internet)
• Widely available and compatible media devices
• Consumer demand
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Myth:DRM free = free
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Reality:Consumers will pay for
DRM free content
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50% of Fictionwise’s gross revenue
is non-DRM sales
Source: IDPF
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Why consumers hate DRM
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Too many locks
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Competing and Incompatible Digital Music Systems
• Apple FairPlay
• Microsoft PlaysForSure
• Microsoft Zune
• Helix
• Sony OpenMG
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Competing and Incompatible eBook Systems
• MobiPocket
• Kindle-MobiPocket
• Microsoft Reader
• Adobe Acrobat
• eBookwise
• eReader
• Sony Reader
• Osoft Thought Reader
• VitalSource
• eBook Technologies
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Too risky
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Sony DRM installs Spyware
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Virgin Digital Disables Music
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Google Disables Videos
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MLB Disables Videos
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Gemstar/Rocket fails.Early adopters lefthigh and dry
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Is it any wonder why consumers hate DRM?
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So, how do we explain iTunes?
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Apple focuses on consumers
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Apple gave the major labels exactly what they asked for
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In exchange the major labels gave up
• Control over pricing
• Control over distribution
• Control over the future of their industry
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“We were just grateful that someone was selling online. The problem is, he [Steve Jobs] became the gatekeeper. We make a lot of money from him, and suddenly you’re wearing golden handcuffs.”
- Doug Morris, CEO, Universal Music Group Wired, December 2007
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Kindle is iTunes for eBooks
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What Consumers Want
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eBook Consumer Preferences
• Reasonable pricing
• Wide selection
• Interoperable, preferably DRM free
Source: IDPF Survey of eBook consumers
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Modern consumers always get what they want
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DMCA did not end circumvention
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Top Search Phrases at Medialoper.com
“How do I remove DRM”
“How do I transfer DVDs to an iPod”
“How do I burn iTunes videos to DVD”
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Why not sell consumers what they want?
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“By standing still, or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find. As a result, of course, consumers won”.
- Edgar Bronfman, CEO, Warner Music Group November 2007
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10 years later the music industry is finally offering
consumers what they want
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All major labels are now selling unprotected MP3s
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Why didn’t someone think of this back in 1997?
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0
225
450
675
900
2003 2004 2005 2006 2007
Digital Music Sales (songs - in millions)
Source: RIAA
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0
250
500
750
1,000
1997 1998 1999 2000 2001 2002
Digital Music Sales
Source: RIAA
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How to avoid making the same mistakes
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Think like a consumer
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Be a consumer
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Respect and trust your customers
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Questions?
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Photo Creditstoo many cds - Tim / frumbert
http://www.flickr.com/photos/frumbert/198714112/
Cassette - Wikipedia ttp://en.wikipedia.org/wiki/Compact_audio_cassette
8 Track - Wikipedia http://en.wikipedia.org/wiki/Stereo_8
45 rpm - Wikipediahttp://en.wikipedia.org/wiki/45_RPM
Internet & Tacos - dro!d http://www.flickr.com/photos/lecates/454787692/
T' Jolly Roger, aye. - Nick Humphries http://www.flickr.com/photos/nickhumphries/1405653435/
Pirate fry, Yaarrrrr! - Lazy_Lightning http://www.flickr.com/photos/drienne/1408143205/
A Year's Work - Jürgen Fauth / muckster http://www.flickr.com/photos/muckster/348090465/
DRM - Noah Hall / rebopper http://www.flickr.com/photos/71715246@N00/521723595/
A lock on my door - Frank Loohuis / Almighty Photography http://www.flickr.com/photos/frankloohuis/1249246740/
Bomberos - Stefan Sonntag / zerega http://www.flickr.com/photos/zerega/1029076197/
Nesting Dolls - Andy Ihnatko / andyi http://www.flickr.com/photos/andyi/482006549/