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DRM, Digital Content, and
    the Consumer Experience
More Lessons Learned from the Music Industry
                By Kirk Biglione
               kirkb@medialoper.com
                twitter: @kirkbiglione


                   #tocdrm
The future of all media
     is still digital
Media companies are
challenged by the transition
Everyone says the same thing
“We don’t want to make
 the same mistakes the
 music industry made”
But what were those
     mistakes?
First, some history
Back in the 90’s
things were great
Consumers loved CDs
CD Sales (in millions)
    1,000



      750



      500



      250



        0
               93



                    94



                         95




                                     96



                                                97



                                                       98



                                                            99
               19



                    19



                         19




                                   19



                                              19



                                                       19



                                                            19
Source: RIAA
Digital content distribution
  was not on the agenda
Historically, consumers
bought what they were told
A funny thing happened on the
   way to the 21st century
Consumers are now
     content creators,
publishers, and distributors
The recording industry was
     not prepared for
the 21st century consumer
As a result, they made
   some mistakes
Mistake:
Mistaking consumer demand
         for piracy
The music industry has long
battled piracy
A new kind
 of pirate
Modern pirates are
 media samplers,
 tastemakers, and
    marketers
Digital Music Sales

        1,000


          750


          500


          250


               0
                   1997   1998    1999        2000     2001   2002

Source: RIAA
Speaking of
consumer demand
Ever try to buy a
Thomas Pynchon ebook?
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
Forget the iPod moment
What about a
CD moment?
Mistake:
Declaring war on digital
Diamond Rio
• MP3 becomes portable.
• A clear sign of things to come.
• The RIAA sues.
“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
Actually, consumers wanted
        digital music
Two years later Apple
 introduced the iPod
Lesson:
Digital is inevitable
Mistake:
Litigation as a business model
  (this only works if you’re a lawyer)
RIAA Lawsuits
•   Dozens of file sharing networks

•   17,587 consumers lawsuits

•   4,553 pre-litigation settlement letters
A 12 year old girl
A family without a computer
A dead person
CD Sales (in millions)
      1,000



       750



       500



       250



         0
               2000   2001   2002    2003      2004     2005   2006   2007

Source: RIAA
Lesson:
Litigation won’t stop
      the future
Mistake:
Assuming DRM must be
     the answer
DRM
Myth vs. Reality
Myth:
DRM prevents piracy
Reality:
Piracy requires just one
     physical copy
Example:
Harry Potter and
the Media Pirates
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
Harry Potter Distribution

       Print        400 million +


   Official eBooks        0


   Pirated eBooks    Unknown
Are you training
digital consumers
  to be pirates?
Myth:
DRM free = free
Reality:
Consumers will pay for
 DRM-free content
Myth:
DRM keeps honest
consumers honest
Reality:
DRM often turns honest
consumers into hackers
Myth:
DRM enables a marketplace
   for digital content
Reality:
      DRM shapes the
marketplace for digital content
Case Study:
Microsoft PlaysForSure
Widely Licensed
•   Archos          •   Nokia
•   Cingular        •   Palm
•   Cowon           •   Pioneer
•   Creative Labs   •   Philips
•   Denon           •   Roku
•   Digitrex        •   RCA
•   D-Link          •   Samsung
•   Ericsson        •   SanDisk
•   Insignia        •   Sonos
•   iriver          •   Sony
•   Kyocera         •   Toshiba
•   Motorola
Source: wikipedia
Content Providers
•   AOL MusicNow             •   Wal-Mart Music
                                 Downloads
•   Musicmatch Jukebox
•   Yahoo! Music Unlimited   •   Ruckus Network

•   Spiralfrog               •   PassAlong Networks

•   MTV URGE                 •   Rhapsody

•   MSN Music                •   iMesh

•   Musicmatch Jukebox       •   BearShare



    Source: wikipedia
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
By any metric
  PlaysForSure
was the “standard”
 DRM for music
iTunes didn’t stand a chance
And then...
PFS Content Providers
•   AOL MusicNow (closed)         •   Wal-Mart Music Downloads
                                      (switched to MP3)
•   Musicmatch Jukebox (closed)

•   Yahoo! Music Unlimited        •   Ruckus Network (closed)
    (closed)                      •   PassAlong Networks (closed)

•   Spiralfrog (closed)           •   Rhapsody (switched to MP3)

•   MTV URGE (closed)             •   iMesh (switched to MP3)

•   MSN Music (closed)            •   BearShare (switched to MP3)

•   Musicmatch Jukebox (closed)

Source: wikipedia
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
How did this happen?

•   Consumer lust: iPod was THE mp3 player

•   iPods and iTunes provided superior consumer
    experience

•   iPods weren’t PlaysForSure compatible
“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
Case Study:
Adobe Content Server
Widely Licensed
•   Aluratek, Inc.   •   Hanlin

•   Astak            •   IREX Technologies

•   Barnes & Noble   •   Lbook

•   BeBook           •   Neolux

•   Bookeen          •   Onyx

•   COOL-ER          •   Sony Reader

•   Elonex           •   Many to more come...
Content Providers
•   Barnes & Noble   •   Sony

•   Books on Board   •   Waterstone’s

•   eBooks.com       •   & Many more...

•   Fictionwise

•   Harlequin

•   Kobo
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
Kindle doesn’t stand
      a chance
Oh, there’s one more thing
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
Meet
ePub vs. ePub
How will this story end?
Amazon follows the
 Apple Playbook
And extends it
Kindle Everywhere
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
What Consumers Want
Anyway,
Anyhow,
Anywhere
I Choose
eBook Consumer Preferences
       •   Reasonable pricing

       •   Wide selection

       •   Interoperable, preferably DRM-free

Source: IDPF Survey of eBook consumers
Modern consumers always
  get what they want
DMCA did not end
 circumvention
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”
Why not sell consumers
  what they want?
“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
Questions?
Photo Credits
             too 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 - Wikipedia
          http://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/

                      Orwell & DRM
    http://www.flickr.com/photos/jbonnain/523672080/

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/

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