drm, digital content, and the consumer experience: lessons learned from the music industry
DESCRIPTION
As the market for e-books and mobile content grows, publishers are faced with the all important question of how to protect their content in the digital marketplace. Many publishers are turning to DRM as the solution without fully contemplating or realizing the impact these DRM decisions have on their customers. Over the past decade, the music industry has relied almost exclusively on DRM technologies to protect digital content. Not only has DRM failed to protect content and prevent piracy, it has had the undesirable effect of alienating consumers.TRANSCRIPT
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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/