Thoughts on DRM: Part II

Macrovision and Sandisk’s recent open letters to the entertainment industry are an embarrassment to the technology industry and an insult to consumer’s intelligence.

February 22, 2007

Fred Amoroso, CEO & President of Macrovision has responded to Steve Job’s open letter to the music industry. While I respect Macrovision’s desire to protect its business model, I can’t help but view Amoroso’s open letter to “Steve Jobs and the digital entertainment industry” as an embarrassment.

My first article covering my thoughts on DRM was fairly comprehensive in scope in terms of what DRM is, what the major concerns are and who the major players are. I thought most of the drama had played out for the time being until I read Macrovision’s open letter to the entertainment industry.

Macrovision is a company whose sole purpose is to implement various forms of DRM. They’re responsible for making it difficult to copy media on VHS, DVDs and various other formats. As such, it’s actually quite understandable that they’d be very upset if the entertainment industry would begin to dismiss the notion of DRM as a requirement much less the notion that DRM serves any practical purpose. That is, if a company’s livelihood is at stake, one would expect that company to form an intelligent rebuttal. The key word is “intelligent” rebuttal. By “intelligent”, I mean the rebuttal should lay out the reasons in favor of DRM in such a manner that is convincing to both the record companies and consumers alike. While I think they tried to do just that in theory, they failed miserably in practice.

For a funny interpretation of Amoroso’s letter, read the following blog on the subject:

Amoroso makes 4 “key” points in his letter. My own translation / rebuttal follows.

DRM is broader than just music –
While your thoughts are seemingly directed solely to the music industry, the fact is that DRM also has a broad impact across many different forms of content and across many media devices. Therefore, the discussion should not be limited to just music. It is critical that as all forms of content move from physical to electronic there is an opportunity for DRM to be an important enabler across all content, including movies, games and software, as well as music.

To me, this seems to indicate Amoroso sort of acknowledges that DRM doesn’t make sense with regards to the music industry. He doesn’t come out and actually acknowledge this, but he’s not challenging the merits of the points made in Job’s letter. Remember, Jobs was only speaking about DRM with regards to the music industry (at least for now). Amoroso seems to be attempting to draw attention away from the music industry specifically. Why would he do this? The only reasonable conclusion I can see is that the music industry is the weakest industry to defend the use of DRM for.

DRM increases not decreases consumer value –
I believe that most piracy occurs because the technology available today has not yet been widely deployed to make DRM-protected legitimate content as easily accessible and convenient as unprotected illegitimate content is to consumers. The solution is to accelerate the deployment of convenient DRM-protected distribution channels—not to abandon them. Without a reasonable, consistent and transparent DRM we will only delay consumers in receiving premium content in the home, in the way they want it. For example, DRM is uniquely suitable for metering usage rights, so that consumers who don’t want to own content, such as a movie, can “rent” it. Similarly, consumers who want to consume content on only a single device can pay less than those who want to use it across all of their entertainment areas – vacation homes, cars, different devices and remotely. Abandoning DRM now will unnecessarily doom all consumers to a “one size fits all” situation that will increase costs for many of them.

DRM increases consumer value? Is this some sort of joke? This is where Amoroso is just insulting our intelligence. Let’s be clear about something. DRM is not an effective means of preventing piracy. Recent tests also indicate that DRM is holding back sales and likewise removing DRM results in a boost in sales. has a recent article that illustrates this point along with other points relating to this topic.

With that in mind, Amoroso is trying to make an argument to “accelerate the deployment” of DRM. Unfortunately, the entertainment industry has yet to understand that the only entity benefiting from DRM are companies like Macrovision that manufacture DRM based “solutions”. Congratulations to Macrovision for convincing the entertainment industry to purchase an unnecessary product!

Amoroso points out that DRM is needed for renting content. I agree with that. But, at least with regards to digital music, that’s proven to be a failed concept. Subscription based music has not proven to be a successful business model. Consumers are not embracing it. Instead, Amoroso argues that we’ll be stuck with a “one size fits all” and that costs will increase. Even that isn’t true. You could have DRM for renting and non-DRM for full purchases. The cost of any digital download is controlled by supply and demand, not by DRM vs. non-DRM.

DRM will increase electronic distribution –
Well maintained and reasonably implemented DRM will increase the electronic distribution of content, not decrease it. In this sense, DRM is an important ingredient in the overall success of the emerging digital world and especially cannot be overlooked for content creators and owners in the video industry. Quite simply, if the owners of high-value video entertainment are asked to enter, or stay in a digital world that is free of DRM, without protection for their content, then there will be no reason for them to enter, or to stay if they’ve already entered. The risk will be too great.

No, with regards to music, the amount of “distribution” is constant. DRM is a barrier for consumers to obtain music distribution legally. Instead, most consumers are resorting to illegal channels of distribution. The record labels have been trying to shut down these channels (peer to peer networks) for years without success. The record labels need to compete with piracy by offering a product that consumers want to buy. Consumers want high quality digital audio files to be available without DRM restrictions. Once DRM is removed, there will be an increase in the legal distribution of music files.

DRM needs to be interoperable and open –
I agree with you that there are difficult challenges associated with maintaining the controls of an interoperable DRM system, but it should not stop the industry from pursuing it as a goal. Truly interoperable DRM will hasten the shift to the electronic distribution of content and make it easier for consumers to manage and share content in the home – and it will enable it in an open environment where their content is portable across a number of devices, not held hostage to just one company’s products. DRM supporting open environments will benefit consumer electronics manufacturers by encouraging and enabling them to create ever more innovative and sophisticated devices for consumers that play late running premium content from a number of sources.

Amoroso speaks of “truly interoperable DRM”. This is a fallacy. By definition, there is no such thing, nor can there be. The whole point of DRM is being able to control the use and distribution of content. Even if every vendor used the same form of DRM, the digital content (music files in this case) would still be restricted and likewise not be “truly inoperable”. If the DRM restrictions were too liberal, then the music files could be easily shared. That would obviously defeat the purpose of using DRM in the first place. Likewise, the only way to be “truly interoperable” is to not use DRM. Again, there is no such thing as “truly interoperable DRM” and by definition, there never will be.

Sandisk wants media attention as well…

Sadly, when someone does something original others like to jump on the bandwagon in hopes of getting a little press for themselves. In this case, Eli Harari, CEO of SanDisk, is next in line to embarrass himself.

More analysis of his letter here:

Harari talks about how Sandisk is

“creating solutions rather than conflict” and how they are “building an infrastructure to give consumers fair access to digital content while protecting content creators is vital for the long-term health of the music industry, as well as to our business and to our competitors.”

In short, he’s sucking up to the record labels and preaching the nonsense that they want to here. Look, Harari is “playing ball”, isn’t he a good boy? But, what solution is Harari offering?

“Consumers deserve fair use of the digital entertainment they purchase, with the freedom to enjoy content on any device they own. SanDisk’s approach is to let consumers decide how and where they acquire and play back their music.”

Translation: We don’t want to be controversial. We know our customers prefer to steal music, but as long as we’re selling music players, we don’t care.

“Proprietary systems, in short, aren’t acceptable to consumers. In recent months, there has been a rising chorus of complaints in Europe about the anti-competitive nature of closed formats that tie music purchased from one company to that company’s devices, and tie that company’s devices to its music service.”

Translation: We don’t want consumers to use the leading DRM format because we’re not part of it.

“SanDisk is already offering an alternative with its Sansa line of MP3 players, which connect to many major online music stores, including Rhapsody, Napster, URGE, Yahoo! Music, emusic and Best Buy Digital Music Store. Users purchasing songs from those services can also play them on many non-SanDisk devices.”

Yeah, and all of those music stores combined make up less than 20% of the legal download market. Even still, how is this any better? What problem does this solve? Can those same songs be played on the iPod? No. How about the Zune? No. How about Sony’s players? No. Wow that’s some solution you’ve got going there Harari. Any other pearls of wisdom you have to share?

“What’s more, the decision on using digital rights management (DRM) should rest with the music industry, not with device makers.”

Nice way to pass the buck Harari. There is an obvious problem with DRM. Instead of offering a solution, Harari just passes the buck onto the record companies. Apparently, it’s not appropriate for consumers or device makers to have a discussion on this.

“Time and again, we have seen that open choice prevails. The “walled garden” approach may offer a smoother user experience in the short run, but ultimately restricts user choice. Protecting music doesn’t require confining consumers to a single company’s service or devices. It’s time to tear down the walls.”

Really, could Harari be any more vague and “wishy-washy”? Okay let’s see… He says that open choice prevails. Well, both dropping DRM and using a “universal” DRM would allow choice of vendors. By “walled garden”, I can only assume he’s referring to proprietary forms of DRM like Apple, Sony and Microsoft are using. He talks about protecting music, but fails to acknowledge that DRM does not protect music. Then, he says it’s time to tear down the walls. Great, isn’t that what Jobs was saying in his open letter to the music industry? Clearly, the best way to tear down the walls is to remove DRM entirely.

Sometimes a compromise will do…

From a consumer perspective, we want high quality audio files which are DRM free. Maybe a more reasonable solution is to just offer CD quality audio files in a lossless format such as FLAC or Apple’s Lossless format, etc. There are a couple reasons why this would work.

1. These files would be roughly half the size of ripped CD files, contain the same audio quality. Sure, they would take up more space on your hard drive, maybe 5 times as much space as a 128bit MP3 or AAC file. But, when you think about it, compressed music files were popular 10 years ago because hard drive space was so much smaller and network bandwidth was so much less. 10 years ago, a 4GB hard drive was considered big. Now, 500GB drives are big and 750GB drives are available. With more than 100x storage on the average computer today as compared to 10 years ago, file size is not an issue.

2. Internet bandwidth is much higher now than it was 10 years ago. A much higher percentage of users are on broadband. Today, very few people are still using dial up.

3. Perhaps the most significant issue is that transcoding would not be an issue. Transcoding is the process of expanding a compressed file (perhaps when burning to CD), then recompressing that expanded file (from CD back to .mp3, etc.). When this happens, there is a loss of quality. With today’s DRM schemes, you are typically allowed to burn CDs from your downloaded music files. However, the original music files (in .mp3, .aac, .wma, etc. format) are less than CD quality to begin with. When you uncompress, then recompress those files, the quality degrades. However, if your original music file is already of CD quality, there is no loss in quality by compressing it to a lossless format (FLAC, Apple Lossless, etc.) then uncompressing it again. As such, the manual removal of DRM from a CD quality audio file would be a trivial task as it can be done through conventional means (burning to a CD, use of various audio recording programs, etc.). No complicated key decryption programs would be necessary.

4. CD quality downloads negates format interoperability issues. That is, you can create music files in any format from a high quality original.

The reason such a compromise might work is that the record labels would be able to save face by pretending DRM is stopping piracy. Let’s face it, egos are involved here. Most of the major record labels are still vocally in favor of using DRM. DRM protects music from being copied by the casual user, but it’s still hacked by more technical types. Instead, the casual user resorts to piracy via P2P networks. If the casual user were able to remove DRM themselves, they’d probably be willing to purchase the music legally and remove the DRM themselves if they were getting a superior product. Although DRM would still be an unnecessary hurdle for legitimate customers to deal with, it might be a compromise more people would be willing to tolerate. It might also be a compromise the record labels are willing to consider.

Neither Macrovision nor Sandisk has taken a practical look at the state of DRM. Neither company has dared to be controversial and propose a real solution to the problem. Macrovision took this opportunity to do a little self promotion by asking the industry to adapt its form of DRM across vendors. They even go so far as to say they’ll take over Apple’s FairPlay (DRM) and maintain it, etc. Unfortunately, while caught up in some delusional state, they preach about a “truly interoperable DRM” which by its very definition is a contradiction of terms.

Sandisk also wants a universal DRM across vendors in hopes that they will have a more level playing field. I’m not sure why Sandisk doesn’t realize the same thing would be accomplished by removing DRM entirely. Apparently, they are more concerned about appearing politically correct in the eyes of the record companies instead of actually listening to its customer’s demands. I suppose that’s why they’re #2 and Apple is #1 in this market.

Finally, I have to wonder if DRM would be a non-issue entirely if music files were offered with CD quality audio. DRM would be easier to defeat for the customer. Likewise, there would be less incentive to steal via the P2P networks. At the same time, the record labels would be able to save face by not removing DRM and still pretend it works.

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