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.

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?

27. Forget the iPod moment

28. What about a
CD moment?

29. Mistake:
Declaring war on digital

30. Diamond Rio
• MP3 becomes portable.
• A clear sign of things to come.
• The RIAA sues.

31. “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

32. Actually, consumers wanted
digital music

33. Two years later Apple
introduced the iPod

34. Lesson:
Digital is inevitable

35. Mistake:
Litigation as a business model
(this only works if you’re a lawyer)

36. RIAA Lawsuits
• Dozens of file sharing networks
• 17,587 consumers lawsuits
• 4,553 pre-litigation settlement letters

37. A 12 year old girl

38. A family without a computer

39. A dead person

40. CD Sales (in millions)
1,000
750
500
250
0
2000 2001 2002 2003 2004 2005 2006 2007
Source: RIAA

41. Lesson:
Litigation won’t stop
the future

42. Mistake:
Assuming DRM must be
the answer

43. DRM
Myth vs. Reality

44. Myth:
DRM prevents piracy

45. Reality:
Piracy requires just one
physical copy

46. Example:
Harry Potter and
the Media Pirates

49. Harry Potter Distribution
Print 400 million +
Official eBooks 0
Pirated eBooks Unknown

50. Are you training
digital consumers
to be pirates?

51. Myth:
DRM free = free

52. Reality:
Consumers will pay for
DRM-free content

53. Myth:
DRM keeps honest
consumers honest

54. Reality:
DRM often turns honest
consumers into hackers

55. Myth:
DRM enables a marketplace
for digital content

56. Reality:
DRM shapes the
marketplace for digital content

57. Case Study:
Microsoft PlaysForSure

58. 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

59. 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

61. By any metric
PlaysForSure
was the “standard”
DRM for music

62. iTunes didn’t stand a chance

63. And then...

64. 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

66. How did this happen?
• Consumer lust: iPod was THE mp3 player
• iPods and iTunes provided superior consumer
experience
• iPods weren’t PlaysForSure compatible

67. “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

68. Case Study:
Adobe Content Server

69. Widely Licensed
• Aluratek, Inc. • Hanlin
• Astak • IREX Technologies
• Barnes & Noble • Lbook
• BeBook • Neolux
• Bookeen • Onyx
• COOL-ER • Sony Reader
• Elonex • Many to more come...

70. Content Providers
• Barnes & Noble • Sony
• Books on Board • Waterstone’s
• eBooks.com • & Many more...
• Fictionwise
• Harlequin
• Kobo

73. Kindle doesn’t stand
a chance

74. Oh, there’s one more thing

76. Meet
ePub vs. ePub

77. How will this story end?

78. Amazon follows the
Apple Playbook

79. And extends it

80. Kindle Everywhere

84. What Consumers Want

85. Anyway,
Anyhow,
Anywhere
I Choose

86. eBook Consumer Preferences
• Reasonable pricing
• Wide selection
• Interoperable, preferably DRM-free
Source: IDPF Survey of eBook consumers

87. Modern consumers always
get what they want

88. DMCA did not end
circumvention

89. 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”

90. Why not sell consumers
what they want?

91. “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

92. Questions?

93. 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/