DRM, Digital Content, and
    the Consumer Experience
More Lessons Learned from the Music Industry
                By Kirk...
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



                ...
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
                   1...
Speaking of
consumer demand
Ever try to buy a
Thomas Pynchon ebook?
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 ...
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 lette...
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   20...
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
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 La...
Content Providers
•   AOL MusicNow             •   Wal-Mart Music
                                 Downloads
•   Musicmatc...
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
                                     ...
How did this happen?

•   Consumer lust: iPod was THE mp3 player

•   iPods and iTunes provided superior consumer
    expe...
“We were just grateful that someone was
selling online. The problem is, he [Steve
Jobs] became the gatekeeper. We make a
l...
Case Study:
Adobe Content Server
Widely Licensed
•   Aluratek, Inc.   •   Hanlin

•   Astak            •   IREX Technologies

•   Barnes & Noble   •   Lboo...
Content Providers
•   Barnes & Noble   •   Sony

•   Books on Board   •   Waterstone’s

•   eBooks.com       •   & Many mo...
Kindle doesn’t stand
      a chance
Oh, there’s one more thing
Meet
ePub vs. ePub
How will this story end?
Amazon follows the
 Apple Playbook
And extends it
Kindle Everywhere
What Consumers Want
Anyway,
Anyhow,
Anywhere
I Choose
eBook Consumer Preferences
       •   Reasonable pricing

       •   Wide selection

       •   Interoperable, preferably ...
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...
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
wan...
Questions?
Photo Credits
             too many cds - Tim / frumbert
   http://www.flickr.com/photos/frumbert/198714112/

             ...
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)
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)
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)
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)
DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)
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DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)

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As the market for e-books and mobile content grows, publishers are turning to DRM to protect content without fully contemplating the impact these DRM decisions have on their customers and the marketplace for digital content.

This session will examine the mistakes made by the music industry and lessons that publishers can learn from those mistakes.

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DRM, Digital Content, and the Consumer Experience: More Lessons Learned from the Music Industry (2010 Edition)

  1. DRM, Digital Content, and the Consumer Experience More Lessons Learned from the Music Industry By Kirk Biglione kirkb@medialoper.com twitter: @kirkbiglione #tocdrm
  2. The future of all media is still digital
  3. Media companies are challenged by the transition
  4. Everyone says the same thing
  5. “We don’t want to make the same mistakes the music industry made”
  6. But what were those mistakes?
  7. First, some history
  8. Back in the 90’s things were great
  9. Consumers loved CDs
  10. 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
  11. Digital content distribution was not on the agenda
  12. Historically, consumers bought what they were told
  13. A funny thing happened on the way to the 21st century
  14. Consumers are now content creators, publishers, and distributors
  15. The recording industry was not prepared for the 21st century consumer
  16. As a result, they made some mistakes
  17. Mistake: Mistaking consumer demand for piracy
  18. The music industry has long battled piracy
  19. A new kind of pirate
  20. Modern pirates are media samplers, tastemakers, and marketers
  21. Digital Music Sales 1,000 750 500 250 0 1997 1998 1999 2000 2001 2002 Source: RIAA
  22. Speaking of consumer demand
  23. Ever try to buy a Thomas Pynchon ebook?
  24. Forget the iPod moment
  25. What about a CD moment?
  26. Mistake: Declaring war on digital
  27. Diamond Rio • MP3 becomes portable. • A clear sign of things to come. • The RIAA sues.
  28. “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
  29. Actually, consumers wanted digital music
  30. Two years later Apple introduced the iPod
  31. Lesson: Digital is inevitable
  32. Mistake: Litigation as a business model (this only works if you’re a lawyer)
  33. RIAA Lawsuits • Dozens of file sharing networks • 17,587 consumers lawsuits • 4,553 pre-litigation settlement letters
  34. A 12 year old girl
  35. A family without a computer
  36. A dead person
  37. CD Sales (in millions) 1,000 750 500 250 0 2000 2001 2002 2003 2004 2005 2006 2007 Source: RIAA
  38. Lesson: Litigation won’t stop the future
  39. Mistake: Assuming DRM must be the answer
  40. DRM Myth vs. Reality
  41. Myth: DRM prevents piracy
  42. Reality: Piracy requires just one physical copy
  43. Example: Harry Potter and the Media Pirates
  44. Harry Potter Distribution Print 400 million + Official eBooks 0 Pirated eBooks Unknown
  45. Are you training digital consumers to be pirates?
  46. Myth: DRM free = free
  47. Reality: Consumers will pay for DRM-free content
  48. Myth: DRM keeps honest consumers honest
  49. Reality: DRM often turns honest consumers into hackers
  50. Myth: DRM enables a marketplace for digital content
  51. Reality: DRM shapes the marketplace for digital content
  52. Case Study: Microsoft PlaysForSure
  53. 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
  54. 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
  55. By any metric PlaysForSure was the “standard” DRM for music
  56. iTunes didn’t stand a chance
  57. And then...
  58. 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
  59. How did this happen? • Consumer lust: iPod was THE mp3 player • iPods and iTunes provided superior consumer experience • iPods weren’t PlaysForSure compatible
  60. “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
  61. Case Study: Adobe Content Server
  62. Widely Licensed • Aluratek, Inc. • Hanlin • Astak • IREX Technologies • Barnes & Noble • Lbook • BeBook • Neolux • Bookeen • Onyx • COOL-ER • Sony Reader • Elonex • Many to more come...
  63. Content Providers • Barnes & Noble • Sony • Books on Board • Waterstone’s • eBooks.com • & Many more... • Fictionwise • Harlequin • Kobo
  64. Kindle doesn’t stand a chance
  65. Oh, there’s one more thing
  66. Meet ePub vs. ePub
  67. How will this story end?
  68. Amazon follows the Apple Playbook
  69. And extends it
  70. Kindle Everywhere
  71. What Consumers Want
  72. Anyway, Anyhow, Anywhere I Choose
  73. eBook Consumer Preferences • Reasonable pricing • Wide selection • Interoperable, preferably DRM-free Source: IDPF Survey of eBook consumers
  74. Modern consumers always get what they want
  75. DMCA did not end circumvention
  76. 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”
  77. Why not sell consumers what they want?
  78. “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
  79. Questions?
  80. 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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