The End of DRM
The past few months have been traumatic for the global entertainment giants. The music industry is going through an upheaval. The Cartel of Big Four recording companies — EMI, Sony-Bertelsmann (Sony BMG), Universal, and Warner — has grown old and brittle. The oligarchs have seen their revenues shrink as their business models are being challenged by a new kid on the block — Apple. They have tried to fight the change tooth and nail. Even jailing users. Now one of the giants, EMI, has decided to join in making the change. What EMI has done today, the others will do tomorrow. And next, Hollywood’s movie moguls will feel the pain as platforms like YouTube and Joost start pulling the carpet from under their feet.
The dynamic of choice is too powerful to ignore.
Changing of the tides
In March, Viacom sued Google for a cool billion dollars for copyright infringement on YouTube. Meanwhile, NBC Universal and News Corp. announced that they were going to launch their own online video-distribution platform instead of continuing to use YouTube. Their deal did not provide the profit or content control as expected. Upping the ante, Apple constructed a tidal wave deal with EMI to sell DRM-free, high-quality 256 kbps music and music videos through iTunes. Millions of songs will be added to the five million titles that already make up iTunes’ music catalog – purchasable, copyable and playable on any digital device without legal restriction. Phenomenal churning of the tide, I would say — upsetting entertainment industry executives who decried the move by EMI as “thoughtless”, “perplexing” and “pro-piracy”. Others like David Pakman, CEO of eMusic, argued that the move by EMI to support DRM-free digital sales would not contribute significantly to piracy.
The album is history
Apple’s recent announcement of a new feature on iTunes “Complete My Album” gives the recording companies hope that their old business model of selling a full album may yet get resuscitated online. Nice try, but the idea may be too tired for the online consumer already moving in a different direction. Music consumers don’t want to pay for an album when they like just a song. But Apple has nothing to lose by trying the album model — it is just adding new products onto its digital shelf without removing any of those items that are selling like hotcakes today.
Sounds like open source software
Just as open source software users in small and medium businesses (SMBs), small home offices (SOHOs) and large businesses are choosing individual open source software packages such as Open Office, Firefox, Evolution instead of buying huge suites of proprietary software products - the death of the album signals the same purchasing preference which enabled iTunes to sell 2 billion songs for 99 cents apiece. The dynamic of choice — of not being forced to pay for products you don’t want — is too powerful to ignore.
Fair use and packaging choice
Fair use and product selection are two of the most important drivers revolutionizing the business model in digital entertainment. These same drivers form the motivation for the success of open source software as well. Avoiding the stifling End User Licensing Agreements (EULAs) that restrict today’s use and deployment of proprietary software is the open source software equivalent of fair use. Reducing vendor lock-in and avoiding expensive, over-engineered suites (”albums”) of software are the open source software equivalents of more flexible and affordable product selection. Freedom and flexibility are what users want, whether in the world of entertainment or in the world of software. Proprietary software vendors are in no better shape than the entertainment moguls to fight against the basic human values of flexibility and freedom. The providers of software and entertainment that create new business models to fulfill these needs will lead the next generation of successes. Maybe even Apple will begin to see its software business in the same light as its new iTunes model.