DRM and ISP Surcharges
Remember the basics:
Ø DRM has been around longer than mainstream digital media. Most commercial videocassettes included DRM in the form of Macrovision, deliberate damage to the recorded signal that initially prevented copying movies because of the damage—and continued to “prevent” it because Congress made Macrovision enforcement legal. One question still, as far as I know, hasn’t been answered: Is an analog signal-enhancement device (not a recorder) that happens to undo Macrovision damage in the analog domain, thus making videocassettes copyable, legal or not?
Ø In this precursor case as in almost every other case of commercial DRM, “management” interferes with fair use. Want to use a ten-second clip from a movie as part of an educational commentary? Plausibly legal—but you can’t do it without breaking DRM, and that violates DMCA (which ignores fair use entirely).
Ø While commercial videocassettes and DVDs have always had DRM, audio compact discs never have. An audio “CD” with DRM is not a Compact Disc: It violates the standards. On the other hand, most early commercial digital music downloads did have DRM, although there have always been download sources that don’t have DRM (eMusic being one example).
Ø Print books don’t have DRM because they’re not digital. A tiny number of print products have attempted to defeat copying through odd color combinations, but the combinations needed to defeat copying also pretty much defeat reading. Many (but not all) commercial ebooks do have DRM.
Ø To the best of my knowledge, nobody has ever demonstrated that DRM helps anybody except the companies that make DRM technology. It’s easy to demonstrate that DRM for commercial media hurts citizens by reducing interoperability and increasing the chance of orphaned, useless purchases. I suppose you could say it helps “consumers” because it makes it more likely you’ll have to buy the same content over and over and over again, so you consume more…
Ø DRM does not prevent illegal copying and commercial piracy. It’s not clear that DRM even slows down true piracy. At best, it operates as a bizarre form of “speed bump”—hurting those who want to behave ethically while doing no particular damage to those who don’t care about ethics and fair play.
Even though far too many citizens go along with DRM at iTunes and elsewhere, there have always been vendors of legal MP3 downloads, mostly from independent labels—and MP3 doesn’t have DRM. There’s a different problem with low-rate MP3 (anything under 195Kbps, and maybe anything under 320Kbps), but it’s a sound problem, not a copyright problem.
Now, DRM for purchased downloadable digital music may fade away. Some notes along the path that got us here…
That’s from Nicholas Carr’s Rough type (www.roughtype. com) on December 6, 2006 (as I said, this goes back a ways). He notes a Wall Street Journal report that EMI started experimenting with DRM-free MP3 via Yahoo! and suggests the business strategy of DRM “may be reaching the end of its natural life.” At the time, iTunes sales seemed to be stalling—and that meant music companies needed alternatives. Alternatives with DRM won’t play on iPods, which limits commercial potential, but MP3s will. More of what Carr said:
But won't selling songs as unprotected MP3s lead to rampant illegal copying? No. Because there's already rampant illegal copying. Most unauthorized copying is done either through online file-sharing networks or by burning CDs for friends. DRM schemes have little effect on either of those. All new songs are immediately available on file-sharing networks, DRM or not… People buy through iTunes because they either don't want to engage in illegal trading or can't be bothered with the geeky aspects of illegal trading. It's not because iTunes has removed the option of illegal trading. As for burning CDs to share, that remains easy even with DRM-protected songs.
No, DRM is about controlling the business model for selling online music. And if it looks like there won't be much additional sales growth through iTunes, then music companies are going to start selling unprotected MP3s. In an iPod world, they have little choice.
Actually, the marketplace for non-iPod portable audio devices is still large. Even if iPods take up 70% of the space, there are, I would venture to say, tens of millions of Sansa, Creative and other MP3 players out there, some of which handle Microsoft’s DRM system but most of which (I’m asserting) are used almost entirely for DRM-free music. My own Sansa doesn’t have any downloads, legal or illegal—but I’m a lot more likely to download legal MP3s than I would ever be to download crippled tracks. (There are also a lot of “portable digital music players” not included in this discussion, quite possibly more than iPods and competitors combined: Smart phones that are also MP3 players, notebook computers and PDAs.)
Ed Felten’s commentary, posted January 29, 2007 on Freedom to tinker (www.freedom-to-tinker.com), offers an interesting take on why big record companies might be slow to undo DRM: Because they’ve pushed a “logical” case that boxes them in. Noting that they were, in fact, slow—it took more than a year after EMI’s first experiments before the last of the Big Four agreed to offer MP3—here’s some of what Felten has to say:
The record industry has worked for years to frame the DRM issue, with considerable success. Mainstream thinking about DRM is now so mired in the industry’s framing that the industry itself will have a hard time explaining and justifying its new course….
[Noting that a New York Times news story talked about “releasing music on the Internet with no copying restrictions]: But of course the industry won’t sell music “with no copying restrictions” or “unrestricted”. The mother of all copying restrictions—copyright law—will still apply and will still restrict what people can do with the music files…
Why did the Times (and many commentators) mistake MP3 for “unrestricted”? Because the industry has created a conventional wisdom that (1) MP3 = lawless copying, (2) copyright is a dead letter unless backed by DRM, and (3) DRM successfully reduces copying. If you believe these things, then the fact that copyright still applies to MP3s is not even worth mentioning.
The industry will find these views particularly inconvenient when it is ready to sell MP3s. Having long argued that customers can’t be trusted with MP3s, the industry will have to ask the same customers to use MP3s responsibly. Having argued that DRM is necessary to its business—to the point of asking Congress for DRM mandates—it will now have to ask artists and investors to accept DRM-free sales…
Were those issues part of the reason for the slow move to MP3? Perhaps. Would a little hypocrisy stop recording companies from changing course if it appeared likely to be more profitable? Not likely.
That’s the title of a February 7, 2007 essay by Steve Jobs (www.apple.com/hotnews/thoughtsonmusic/). It’s an interesting piece, responding to calls for Apple to open iTunes’ DRM system “so that music purchased from iTunes can be played on digital devices purchased from other companies, and protected music purchased from other online music stores can play on iPods.”
Jobs points out that iPods can play DRM-free music, e.g. AAC and MP3. But, he says, Apple is at the mercy of the “big four” when it comes to distribution:
When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices.
Poor little Apple apparently had no leverage in the matter—or did it? Jobs brags of “landmark usage rights” it negotiated and calls them unprecedented—but it’s worth noting that these provisions support an “unlimited number of iPods” and precisely zero competitive portable players.
Jobs describes ways DRM works and the need for secrecy—and how Apple “repairs” FairPlay. That discussion includes one blatantly false statement if eMusic is something other than a myth: “So far we have met our commitments to the music companies to protect their music, and we have given users the most liberal usage rights available in the industry for legally downloaded music.” Jobs apparently doesn’t consider eMusic and others that sell MP3s to be part of “the industry.” When you control definitions, almost any statement can be true.
Then comes the meat: Jobs explores “three different alternatives for the future.” First is competing proprietary DRM systems—and this discussion does seem to imply that, for Jobs, “the industry” consists of Apple, Microsoft and Sony, excluding download vendors that don’t use DRM. Jobs is not unhappy with that state: “Customers are being well served with a continuing stream of innovative products and a wide variety of choices.”
The second option is to license FairPlay DRM, much as the DRM in DVDs is licensed to hundreds of manufacturers.
On the surface, this seems like a good idea since it might offer customers increased choice now and in the future. And Apple might benefit by charging a small licensing fee for its FairPlay DRM. However, when we look a bit deeper, problems begin to emerge. The most serious problem is that licensing a DRM involves disclosing some of its secrets to many people in many companies, and history tells us that inevitably these secrets will leak…
Apple has concluded that if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies…
Aha. So Apple, that great lover of the open, competitive marketplace, would love to license FairPlay to, say, Sandisk and others—but it can’t, you see. It’s not as though Apple engaged in other closed, proprietary hardware/software systems…
Here’s the good part—and a sign that change was on the way:
The third alternative is to abolish DRMs entirely. Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big four music companies would license Apple their music without the requirement that it be protected with a DRM, we would switch to selling only DRM-free music on our iTunes store. Every iPod ever made will play this DRM-free music.
Why would the big four music companies agree to let Apple and others distribute their music without using DRM systems to protect it? The simplest answer is because DRMs haven’t worked, and may never work, to halt music piracy. Though the big four music companies require that all their music sold online be protected with DRMs, these same music companies continue to sell billions of CDs a year which contain completely unprotected music. That’s right! No DRM system was ever developed for the CD, so all the music distributed on CDs can be easily uploaded to the Internet, then (illegally) downloaded and played on any computer or player.
In 2006, under 2 billion DRM-protected songs were sold worldwide by online stores, while over 20 billion songs were sold completely DRM-free and unprotected on CDs by the music companies themselves. The music companies sell the vast majority of their music DRM-free, and show no signs of changing this behavior, since the overwhelming majority of their revenues depend on selling CDs which must play in CD players that support no DRM system….
Sure, it’s a self-serving document, particularly the second section. Sure, Jobs defines “industry” narrowly so as to exclude the thousands of independent labels (making up a quarter of the music marketplace) who have been working with eMusic and others to make MP3 downloads, legal and lacking DRM, available. But it’s still a shot across the bow of RIAA (essentially the big four). And it suggests that Jobs knew the handwriting was on the wall.
“Jarrett” posted this long missive (originally intended for Rhino) that turned up on The consumerist on March 20, 2007. Portions:
I thought I was the music industry's dream consumer.
As a 40 year old male with a long-standing passion for "all things music," I've spent a bundle on my collection…
So here I sit circa 2007 with a house filled with over 1000 vinyl records and around 800 CDs. If you figure about $12 per recording as an…average, that's somewhere around $20,000. Not a bad chunk of change for the music business, I say.
Last week while I was busy importing my CD's into iTunes so I could listen to them on my iPod…I hopped on the internet. iTunes was busy importing a Luna CD, one of my favorite bands, so I decided to see what they were up to… I found a blog site describing a posthumous, internet-only release of a collection of covers the band had recorded throughout their career. While I already had many of the songs…I couldn't resist tracking down this compilation. As I read further on the blog site I encountered a link to a .zip file containing the entire collection ripped as 128kbps mp3's.
While I must admit being tempted to simply click away and download the collection, I thought to myself, "Well, if I buy the music it's only $10, and this way I will get high quality .WAV files. Besides, it's not like Luna were getting rich off of their careers, they could use the money..."
So I headed to Rhino's online store, purchased the music, and downloaded the files.
A little later that evening, I tried to move the .WMA files into iTunes, when I received an error message telling me that iTunes could not import them because they were copy protected. I downloaded the files again (which took another 12 minutes) and again, the same message.
So I called Rhino customer support and after an 8 minute wait spoke with a representative. She informed me that the files were indeed copy protected so that I could only play them on specific music players, most notably not iTunes.
"You don't understand," I said, "These files were not copied or pirated, I actually purchased them."
"Well" she responded, "You didn't actually purchase the files, you really purchased a license to listen to the music, and the license is very specific about how they can be played or listened to."
Now I was baffled. "Records never came with any such restrictions," I said.
She replied, "Well they were supposed to, but we weren't able to enforce those licenses back then, and now we can"
She later went on to explain that I could burn the songs to a CD and listen to them in a regular CD player, but I would need an additional Windows based music player to listen to them on my computer. But either way, she suggested there was no way the files could be played on my iPod.
[Omitted: A remarkable tale of frustration in trying to burn the songs to a CD, including Rhino’s advice to disable firewalls!]
There I sat, a loyal music fan who has shelled out actual money to a business that is supposed to be having financial problems, and the best they can do is tell me to wander the streets of Seattle looking for different internet providers who might allow me to download the music that I have already paid for, music that I have spent the better part of three house trying to listen to, and which is still unusable?
How on earth have things come to this?!?!?!
Honestly, if this is the best you can do, your business is in really, really serious trouble.
I mean, could you imagine the consumer response if Coke could only be consumed from specific Coke-approved equipment, and then only in the specific ways that the folks at Coke wanted the product to be consumed. "drinking Coke with fast food is no problem, but we must warn you that your license forbids the mixing of Coke with any alcoholic beverages..."
In the end, I never was able to get the music to play on anything—my computer, on a CD or on my iPod. I invested $10, several hours of my time, and my reward was, well, nothing.
I'd like to say I was outraged, but in the end I must admit to feeling remarkably sad and deflated over the whole process. See, the thing is, I was raised on music. I was saved by music. I (used to) live for music. Lester Bangs wasn't my idol, he was my soul mate (in a matter of speaking)…
Since I've resigned myself not to waste any more time with the music business, I suppose I'll have to resort to purchasing used CD's & records, or having my friends occasionally make me a copy of one of their newer CD's.
Call it piracy. Call it whatever you want. But at least I tried. I gave you several chances and you failed miserably at every level.
Note the customer “service” representative’s comment (emphasis added): Someone at Rhino believes that CDs aren’t supposed to be covered by first-sale rights. By my lights, buying a used CD is absolutely not piracy. On the other hand, I have to disagree with The Consumerist’s lead line for this essay:
Does DRM drive even honest well-meaning people to piracy? Yes, of course it does.
To distraction? Yes. To piracy? I suppose if you’re a “consumerist”—if your whole life revolves around consumption—then maybe. Otherwise—well, I note that the writer lists casual infringement (not commercial piracy or even infringing P2P downloading) as the last way he’s likely to get music.
EMI may have experimented earlier, but on April 2, 2007, it announced the big move. EMI would continue to sell DRM-locked music on iTunes with current mediocre sound quality (128K AAC) at current prices—but would start offering unprotected AAC tracks, at twice the bitrate (256K) for a little more money ($1.29 per track). Album purchases would move to “premium” sound quality and DRM-free status—and, in a surprisingly consumer-friendly move, people who already owned DRM-locked tracks from EMI would be able to upgrade to better-sounding unprotected tracks for the difference in price ($0.30 per track).
EMI was adding similar provisions to its other outlets. The press release referred to the earlier experiment, where a few popular tracks were made available for sale in MP3 form.
One discussion of the move included information about just how many people were buying from iTunes in early 2007, when the common wisdom seemed to be that we all got all our music digitally: “Forrester found that only 3% of U.S. online households buy anything from iTunes, and one-third of iTunes buyers make 80% of the purchases.”
Ed Felten commented on the move in an April 3, 2007 Freedom to tinker post. Excerpts:
This is a huge step forward for EMI and the industry. Given the consumer demand for DRM-free music, and the inability of DRM to stop infringement, it was only a matter of time before the industry made this move. But there was considerable reluctance to take the first step, partly because a generation of industry executives had backed DRM-based strategies. The industry orthodoxy has been that DRM (a) reduces infringement a lot, and (b) doesn’t lower customer demand much. But EMI must disbelieve at least one of these two propositions; if not, its new strategy is irrational. (If removing DRM increases piracy a lot but doesn’t create many new customers, then it will cost EMI money.) Now that EMI has broken the ice, the migration to DRM-free music can proceed, to the ultimate benefit of record companies and law-abiding customers alike.
Still, it’s interesting how EMI and Apple decided to do this. The simple step would have been to sell only DRM-free music, at the familiar $0.99 price point, or perhaps at a higher price point. Instead, the companies chose to offer two versions, and to bundle DRM-freedom with higher fidelity, with a differentiated price 30% above the still-available original.
Why bundle higher fidelity with DRM-freedom? It seems unlikely that the customers who want higher fidelity are the same ones who want DRM-freedom… Given the importance of the DRM issue to the industry, you’d think they would want good data on customer preferences, such as how many customers will pay thirty cents more to get DRM-freedom. By bundling DRM-freedom with another feature, the new offering will obscure that experiment…
One effect of selling DRM-free music will be to increase the market for complementary products that make other (lawful) uses of music. Examples include non-Apple music players, jukebox software, collaborative recommendation systems, and so on… (Complements will multiply and improve, which over time will make DRM-free music even more attractive to consumers. This process will take some time, so the full benefits of the new strategy to EMI won’t be evident immediately…
The growth of complements will also increase other companies’ incentives to sell DRM-free music. And each company that switches to DRM-free sales will only intensify this effect, boosting complements more and making DRM-free sales even more attractive to the remaining holdout companies. Expect a kind of tipping effect among the major record companies. This may not happen immediately, but over time it seems pretty much inevitable…
This all sounds right (not an unusual observation when quoting Ed Felten)—and, in the long run, it probably was right. EMI is one of the smallest of the big four; maybe it makes sense that EMI would be the first to move (ever so slightly) away from DRM.
That’s the title on Tom Peters’ May 20, 2007 post at ALA TechSource (www.techsource.ala.org). He notes EMI’s earlier move (which became fully effective in May) and another move from another source:
Last week Amazon.com announced that later this year it will launch a downloadable digital music service that will feature DRM-free music playable on any device. EMI, the fourth largest music company in the U.S. market and one that has been struggling financially of late, has decided to shoot the rapids and sign a deal with Amazon to supply nearly its entire catalog only in DRM-free format.
This one-two punch from Apple (whose iTunes store is the current leader in downloadable digital music) and Amazon (the current leader in online CD sales) may knockout and retire DRM.
If DRM is cruisin' for a bruisin' the question becomes: How will it fall?...
Peters expresses the hope that all other forms of DRM will disappear.
Sarah Houghton-Jan published “Imagine no restrictions: Digital rights management” in the June 1, 2007 School Library Journal (www.schoollibraryjournal.com/ article/CA6448189.html?q=imagine+no+restrictions). It’s a good brief introduction to DRM, how it affects libraries, and how library staff can deal with DRM-related patron questions. Excerpts:
As an example, let’s take a piece of music, “Imagine” by John Lennon. Lennon’s estate and his record company own the original creative content of that song. The rights owners want to be compensated for that content, rather than give it away for free. So the rights owners sell a physical package, like CDs, which contain “Imagine” as a file. The CDs may be labeled with warnings about copyright law, but the files themselves, the CDAs (CD Audio), contain no DRM. The rights owners also sell a digital version of “Imagine” as a file via the online retailer iTunes. This file is not a simple sound file (as on the CD), but rather another file type, in this case, AAC (advanced audio coding). Along with the song, this file type carries a snippet of DRM code. Therein lies the inequity. If you buy a physical version of a song or movie, you are warned about the law, but generally trusted to follow it. If you buy a digital version, however, the DRM code forces compliance.
There’s an editing error in the next paragraph, I think, saying “DRM makes it illegal for the owner of that CD to use that content on more than one device.” That’s not true for CDs—and not even true for Apple’s FairPlay and some other DRM systems.
Houghton-Jan offers three main reasons libraries should care about DRM: Device compatibility (any user should be able to use library content), DRM roadblocks (DRM can get in the way of using content quite apart from device incompatibility) and archival issues (DRM-laden content has a tendency to “disappear” over time). Her discussions are excellent. She calls for libraries to be part of the solution and to demand DRM-free content from all vendors. She also offers recommendations for library staff to use when discussing DRM with patrons. Among them:
Ø Explain that DRM is not something the library has imposed on the content, but something we have to agree to in order to provide any downloadable content at all.
Ø Emphasize which econtent collections are compatible with all devices and operating systems.
Ø Explain why certain content is not compatible…
Ø Encourage users to write to your econtent vendors and to Microsoft and Apple, asking to remove DRM on the content they offer or, at the very least, for a universally compatible DRM scheme that will work with their devices (read: iPods)…
Why “and music”? Because there have been no steps away from DRM for DVDs or Blu-ray.
A few milestones (mostly from Ars Technica, arstechnica.com):
Ø June 20, 2007: EMI says “DRM-free music is noticeably more popular than DRMed music”—e.g., Dark Side of the Moon has been selling more than three times as well since going DRM-free.
Ø August 9, 2007: Universal Music Group—largest of the Big Four—announced a test run for DRM-free sales on Amazon and elsewhere, but not iTunes. Tracks would be the usual $0.99 and bitrate would be up to the service, as high as 256K MP3 in some cases.
Ø September 25, 2007: Amazon launched its music download store with more than two million songs, all MP3 (thus DRM-free), including EMI, Universal and 20,000 independent labels. Most tracks are 256K and sell for $0.99, but the most popular songs cost a little less.
Ø October 15, 2007: Apple announced plans to drop “iTunes Plus” prices (the higher bitrate unprotected versions) to $0.99, matching the DRM price, and to add some independent music labels.
Ø November 9, 2007: A digital music service in the UK, 7 Digital, announced that 80% of its sales were of DRM-free content.
Ø December 2, 2007: Deutsche Grammophon, one of the most respected classical labels (and a subsidiary of Universal), announced a plan to drop DRM—and sell 320K MP3 files on its own store. (320K is the highest bitrate supported for MP3.)
Ø December 27, 2007: Warner Music announced that it would offer its complete catalog in DRM-free MP3 form on Amazon.
Ø January 10, 2008: The last shoe fell. Amazon announced that Sony BMG would make its songs and albums available in MP3 form through Amazon.
What’s notable at this point: Pretty much everybody—all four of the big companies and thousands of independent labels—was (is) willing to sell unprotected music via Amazon, but only EMI signed up to do so via iTunes. That situation has nothing to do with copyright and a whole lot to do with who did and didn’t have leverage in Apple’s dealings with record labels.
It’s fair to say that, while DRM for music isn’t entirely dead, it’s on life support for purchased (as opposed to rented) music—and that’s a good thing for almost everyone involved, probably including musicians and publishing companies. Elsewhere? Unclear.
Here’s the twist: Some folks are suggesting a “music surcharge” for broadband accounts. The Electronic Frontier Foundation floated this idea in 2003—as a voluntary $5 surcharge that would guarantee you wouldn’t be sued by the RIAA. EFF continues to support the idea and now Jim Griffin, a “digital strategy consultant,” is working with some of the big record companies to push a similar idea.
Theoretically, it’s not a terrible idea. A “voluntary collective license” could encourage ethical downloaders and reward musicians. But it’s not that simple. For example:
Ø Would money go to a broad range of artists and publishers, or would file sampling result in the big four and a few already-wealthy artists getting essentially all of the fees?
Ø What would “voluntary” mean? Would broadband users have the choice of buying broadband with unlimited P2P or without?
You can find EFF’s enthusiastic whitepaper on the subject at www.eff.org/wp/better-way-forward-voluntary-collective-licensing-music-file-sharing. Ed Felten seems to like the idea as well. You’ll find his recent posts—and a lot of comments—on April 2, 2008 and April 25, 2008 at www.freedom-to-tinker.com. Rethan Salam describes it in an April 25, 2008 story at Slate: “The music industry’s extortion scheme.” (www.slate.com/id/2189888) Michael Arrington of TechCrunch doesn’t like the idea either—partly because he assumes it won’t really be voluntary. Frankly, neither do I. (Oddly, although it appears Salam doesn’t think it will be voluntary, he likes the idea because “something like the music tax simply has to happen.” Salam wants a real music tax levied by the Federal government on all broadband subscribers—with revenue going directly to musicians.)
Salam concludes, “What’s not to like?” Well, sez I, for one: I don’t wish to be billed $60 a year (as a starting point—it certainly won’t go down) to get music I don’t want. I don’t buy that a “massive Nielsen-style sample” will actually mean that a broad range of musicians will be rewarded; the “long tail” doesn’t work well in a sampling system where sampling is less than 100%.
Felten objects to the “extortion” label in Salam’s title by saying “if this is extortion, then all of copyright is extortion.” But that’s nonsense. Copyright doesn’t require me or anyone else to buy a certain amount of goods whether I want them or not. Quite a few commenters on Felten’s post had the same problem: They saw that this license wasn’t likely to be all that voluntary and that $5 was likely to be just a starting point.
The idea has been around for a long time. A truly voluntary scheme might have its merits. I’ll admit to being skeptical about this one. It looks like a guaranteed free ride for companies that seem more interested in suing their customers than in finding music that we actually want to listen to—and will pay for.
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