Rights, DRM, and Piracy


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Skott Klebe

Digital Rights Management technology is surely one of the most controversial topics in every discussion about digital media. Proponents of DRM argue that DRM is necessary to deter piracy, while opponents argue that it doesn't deter piracy, or that piracy actually promotes sales. In this wide-ranging talk, we cut through ideology to review some of the best scholarly research on the impact of piracy, and consider how this data can inform the underlying strategy that motivates DRM.

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  • Call that DAT Hell, after the format that was so closely prescribed by entertainment industry advocates and actual legislators that no one ever wanted to use it.At the other extreme, rightsholders in media industry warn darkly of a future without copyright,In which everyone takes each others content.
  • Call that Cat Video Hell, in which no one can afford to make great content and no one gets paid.
  • These days, the technology is a combination of software, and increasingly, hardware.The earliest detailed speculation about DRM I’ve read is in a book called “An Unhurried View of Copyright” by Benjamin Kaplan, published in the mid-60’s, in which he also speculates that digital copying will reduce the value of content and dismantle the distribution networks of traditional publishing.However, the fledgling DRM industry cracks out of its shell, so to speak, in the mid 90’s, with companies like Intertrust and Xerox leading the way.So how does it work?
  • A DRM archtiecture generally has two parts. The first is a strategy for protecting the media.This is an example – you have a wrapper that encrypts the package, some kind of permissions tag that says what you can do with the content,And the content itself.
  • In the US and many other industrialized nations, DMCA and other implementations of WIPO treaties have driven out technologies that are intended to remove DRM from protected media. This simply means that these tools have moved to hosting in countries that haven’t implemented similar legal protections.SOPA/PIPA were intended to force US companies to take specific measures to make it harder to find things like cracking tools. However, I believe that these laws would still not have prevented distribution, and would against simply have moved it into technologies and jurisdictions outside the law’s reach.So DRM protection is not and never will be perfect. Is that the goal, though?
  • And as you can see, trade publishing, at least, has to see a lot of parallels to the recording industry.I’m cherry-picking here a little.
  • There are differences, though, and they’re pretty stark. As we swung into the information age, music and movies were most commonly distributed on digital media – CD’s & DVD’s.The PC industry ensured that CD and DVD readers and burners were present in virtually every computer sold.The minimum file size for music – the song – is a few hundred K to a few meg, while DVD movies run multiple gigabytes. In the US, at least, effective bandwidth for movie downloads was hard to come by until the last few years.Books quite different - there was no mass market availability of book data until the last few years. Ink on paper in codex format is comparatively difficult to scan and digitize, so good conversions were rare, compared to music and movies.Minimal download sizes, as well.I think it’s very significant that the early popular online music services were illegal ones – Napster, KazAa, Grokster, and so on. Let’s take a look at that.
  • I’m focusing on modalities that developed significant traction – The Rhapsody music streaming service, for instance, has had a long and interesting life, going back to 1998. I can’t find any evidence that it was ever a major player, though.I’m trying here to highlight significant introductions or new models. Grokster persisted until at least 2006. Other P2P software, like LimeWire, continues to function in pirate versions.Books have been different – as I mentioned above, some versions of Harry Potter books have been available on BitTorrent for years. But e-reading use didn’t take off until the Kindle hardware brought reader devices in to the mainstream, long after millions of people around the world had already experienced Napster and its cousins.So ereader use has taken off hand in hand with strong legitimate content providers tightly integrated, and with DRM available and, for the most part, in use.With ereaders, for the first time, there has been from the beginning a content acquisition path that is not only legitimate, but more convenient than the illegitimate alternatives
  • Non-zero financial cost means that an additional step in a process can have the same effect as a higher price. Depending on the level of interest in the content, and the availability of alternatives, an extra step – particularly the first step - can have the same effect as a substantial price disadvantage.Having to read a book on your PC was a substantial disadvantage over having the paper in your hand.
  • Another way to look at it is that a piece of content has a certain amount of value to the reader.Everything that gets between the user and the content reduces that value.As the user gains experience with the technology, the learning effort penalty goes away, and the effort penalty goes down, and the net value increases. When you have this kind of relationship – positive net value even for first use, and increasing with practice – you’ve got a pretty good solution.
  • Naturally, in this model the no-DRM case looks even more valuable, because any use limit penalty is absent.You can certainly mount a strong argument for this case.
  • You can fail to deliver in any number of ways. Content that isn’t valuable enough to overcome your adoption penalties.Adoption penalties – price, difficulty to learn, difficulty to use, or the severity of your usage limits.
  • Let’s compare the Kindle case to a pirate parallel.
  • Once you get good at it, though, you might find that every other penalty falls away, as well.In this worst case, you would expect to find piracy dominating actual commerce. Once the stigma of infringing acquisition goes away-As might happen when a piracy model becomes ubiquitous, or when the producer of the digital good is viewed as an opponent rather than a supplier.The RIAA data might be the best evidence we have of a dominating piracy model.I mean that in every sense you might take it.[Assuming a reaction]And that’s part of the problem – so much of the discussion around DRM and piracy is so charged with emotional advocacy – on all sides – that our decision process boils down to figuring out which side we want to be on. I don’t think that publishing is best served that way.
  • How can we make more informed decisions?The one things we all wish for is better data. We’d love to have the World Association of Unauthorized eBook Downloaders give us their annual statistics, not to mention their weekly Top 100, but That seems – unlikely to happen.Researchers in the meantime propose models that relate variables that they can measure to the activity that they want to measure. Let’s look at what’s out there.
  • ArunSundarajan has done some very interesting research into the theory of pricing in the presence of piracy and DRM. In a series of papers over the last ten years or so, he’s worked on Models for pricing content with DRM in the presence of piracy.
  • This last point is important.I read a paper by Hammond that found that piracy substantially reduced music sales overall, but slightly increased sales for the most popular artists. It was misreported by TorrentFreak as showing that piracy caused only sales benefits. That version of the story was reported in many places.
  • Again, until the World Unauthorized Downloaders’ Association begins to report volumes on a regular basis, we have no systematic knowledge of file sharing activity.Academics have used a variety of approaches to
  • By even handed, I mean that the papers described appear to say what the surveyors said that they did.Reading papers in this field gives you a real impression of how challenging it is to do field research in this kind of field.With that, I offer my own experiment.
  • Here’s another Google Trends graph, showing the last 90 days of activity for four different queries, all looking for torrents by different musical artists.Three of them are Eminem, Adele, and Jay-Z. Jay-Z, a hip hop artist who is one of the most powerful people in entertainment and one of the most Successful of all time, doesn’t have enough activity to appear.Adele, of course, had one of the biggest selling albums everEminem, another of the biggest stars in music today. The fourth act, more frequently queried for torrents than any of these?Mumford and Sons. Heard of them? They’re huge on the college charts, if not on top 40. It appears that torrent interest isn’t tightly correlated to general album popularity!If we extend the time range back a bit…
  • Here’s the same four queries, going back before Eminem’s last two albums.We still see that recent burst of interest in Mumford and Sons.We see some activity for Adele, in the period of time in which her album sold most of its twenty-some million copies.But look over here at Eminem! This highest peak here is for his album, Recovery, which has by now sold … three million copies.I don’t mean to imply that this graph proves that Eminem lost tons of sales to piracy. I have no idea what the base rate of Eminem purchasing tendency might be.Perhaps without the possibly network effects of piracy, Eminem would have sold only two million albums. Perhaps, but I want to see strong proof from someone arguing that way.I do think that this shows that there’s hugely different interest in piracy across different fan bases. I’ll bet the overlap of the Adele and Eminem fan bases is relatively small.So look at this graph, and decide whether rightsholders should be worried about piracy. Is that even the right question?
  • We’re always asking about whether. I don’t see how there’s one right answer.I always like to dig below the simple, often ideological answers that you see in the popular press.To do that, you have to ask different questions.
  • DRM limits reduce the value of the product, so you want to make sure that you understand that effect.A pointed example is the text-to-voice permission offered by some ebook DRM, including Acrobat. For some classes of users, this setting is all but irrelevant; for the blind, turning off the permission takes the gross value of the book to zero!DRM doesn’t help maintain print pricing levels. The higher the price, the more valuable the cracked version becomes.
  • Is the posting site a business or a fan?Is the posting a fan appreciation? Respond appropriately.There’s no point in sending a cease and desist to The Pirate Bay. Industry associations may be more or less able to address a case; some authors have had fruitful engagements with bloggers who post pirate versions of their works.
  • Rights, DRM, and Piracy

    1. 1. DRM,Piracy,and Rights:What we can know,What we can do Skott Klebe Copyright Evangelist Copyright Clearance Center @skottk
    2. 2. DAT Hell
    3. 3. CatVideo Hell Photo by admill
    4. 4. Digital RightsManagement?
    5. 5. DRMTechnical measures intended tocontrol or prevent unauthorized uses of digital content• Envisioned since the ‟60‟s• Commercial implementations since „90‟s
    6. 6. DRM-Protected Media • Unique ID Wrapper • Encryption • Can play Permissions • Can transfer • Music Content • Text • Video
    7. 7. Digital Media Device Plug-ins Data Applications Operating Device System Drivers Hardware
    8. 8. CSS(Content Scrambling Apple FairPlay Amazon Kindle System) Softlock BlueRay That game you like That one where you HD-DVD Sony Playstation drew around the edge of the CD with a Sharpie That Sony thing with the vyou Adobe eBook rootkit that you couldn‟t uninstall
    9. 9. Legal Protections• Under copyright law, generally illegal to remove or disable technical measures that control use of copyright protected works o WIPO treaties o US copyright law – DMCA• Cracking tools still widely available o Always will be
    10. 10. RM-protected copy
    11. 11. download harry potter book harry potter book release Half-Blood Deathly Kindle Prince Hallows
    12. 12. download harry potter book pottermore harry potter book release Half-Blood Deathly Prince Hallows
    13. 13. Why DRM?
    14. 14. 25000 The Music Industry‟s ~$20 Lost Decade20000 Billion15000 ~$7 Billion100005000 0 Data courtesy of Recording Industry Association of America
    15. 15. ParallelsRecord Industry Trade Publishing • Mature industry • Mature industry • Distribution Channels • Distribution Channels • Mass marketing • Mass marketing • Producer-Consumer • Producer-Consumer Relationship? Relationship? • Collector Customers • Collector Customers • Limited pre-digital • Limited pre-digital piracy piracy
    16. 16. Differences Music Movies BooksPrevailing Digital Digital Ink on paperphysical Unprotected ProtectedmediumDigitization Ubiquitous Ubiquitous Scarcetools Time-consuming Low-qualityDownload Size Small Huge Very Small-SmallFirst widely Piracy Piracy Kindleadopted online Nookmodel iBookstore
    17. 17. Music1999 Napster2000 Movies2001 KazAa BitTorrent2002 Grokster Books2003 iTunes Pirate Bay/BitTorrent Pirate Bay/BitTorrent200420052006 iTunes, Amazon2007 Amazon Netflix Streaming Kindle20082009 Nook2010 Spotify iBookstore20112012
    18. 18. The Importance of Being Convenient• Each process step has a cost o Equivalent to a non-zero financial cost!• iTunes competed on convenience o Integrated device stack o Breaking the album o Kindle et al. aim for the iTunes model• Inconvenient alternatives fail
    19. 19. Convenience and Success DVD BlueRay Music Apple FairPlay Kindle eBook Apple FairPlay Microsoft WindowsSoftware Activation
    20. 20. AdoptersTime
    21. 21. AdoptersTime
    22. 22. Sale Price Sale Price Learning Use effort effortContent Use limits Value Use effort Use limits Net Value Net Value First WithBook X Use experience
    23. 23. Sale Price Sale Price Learning Use effort effortContent Value Use effort Net Value Net Value First WithBook X Use experience
    24. 24. Failure Modes Sale Price Sale PriceContent Value Use effort Learning effort Use limits Use effort Use limits Net ValueLack of Too Too hard Value Limiting
    25. 25. Learning- Sale Price Usage Use effort Learning effort Learning-Content Cracking Value Use effort Cracking Use limits effort Stigma Net Value Net ValueBook X Kindle Store Pirate .mobi
    26. 26. Learning- Use effort Sale Price Usage Use effort Learning effort Learning- Use effort Cracking Cracking Net Value Use limits effort Stigma Net Value Net Value Pirate .mobi WithKindle Store experience
    27. 27. ModelingDRM and Piracy
    28. 28. DRM, Pricing, Piracy• ArunSundararajan of NYU o Pricing under piracy and DRM• Some key findings: o Maximizing profits under piracy requires differentiated levels of quality and price o Without price differentiation, price as if there were no piracy
    29. 29. Richness v. Profitability Profit Richness/Quality
    30. 30. Further Study• Belleflamme, Peitz 2010 – Digital Piracy: Theory o Surveys research on piracy on many grounds:  Network effects  DRM  Commercial and individual piracy  Pricing• Chen, Png 2003 - Information Goods Pricing and Copyright Enforcement o Examines cost of pursuing infringers
    31. 31. Impact of Piracy• Piracy appears to substitute for purchasing o Leading to lost sales• Many argue increase in purchasing from piracy: o Network effects o “Sampling”• Studies are often quote-mined or misreported in the popular press o Read with care!
    32. 32. Research Approaches• Surveys o Correlating purchasing behavior with P2P• Cross-market comparison o Cities with broadband v. cities without• Related variables o P2P usage correlation with school vacation schedules
    33. 33. Piracy: Good for Business?• One major study found a positive effect o Oberholzer-Gee, Strumpf 2007, Effect of File Sharing on Record Sales• Most studies report no positive effects• Many report substantial harm o 25-50% of the drop in CD sales explained by piracy
    34. 34. Further Study• Assessing The Academic Literature Regarding the Impact of Media Piracy on Sales o Even-handed survey paper o Describes methods and results o Smith and Telang, 2012
    35. 35. An Unscientific Experiment
    36. 36. Asking the right questions
    37. 37. Should I use DRM?• Don‟t oversimplify. o Does DRM make sense for my target market? o What rights do I allow? o Am I able to manage pricing to maximize return?
    38. 38. Should I attack Pirates?• Who are the pirates?• What‟s the motivation?• Can you do anything?• Are you the right party to address it?• What effect is the piracy having?
    39. 39. DRM,Piracy,and Rights:What we can know,What we can do Skott Klebe Copyright Evangelist Copyright Clearance Center @skottk