November 27, 2005
Lately, I’ve been talking with a technology company has me thinking about just who makes up the DRM landscape. There are three value chain participants that are impacted by DRM technologies
- Media Companies (including new ones like Yahoo)
- Technology Companies
Traditionally, a DRM technology companies focus has been on selling to media companies as this was perceived to be the head of the snake and that was where the power was. The most ‘dangerous’ place to sell was to consumers as they were seen to be the weakest and thus they were neglected – resulting in a bad user experience and a lot of hostility supported by the slashdot crowd and journalists. However, this traditional “top down” paradigm is being challenged mostly due to the democratizing effects of the internet and technologies. Fairplay, the only market success in “modern” DRM (as opposed to simple copy protection) has focused on the needs of the customer above the desires of the labels (non-permanent licensing, high prices).
- Media companies are, to put it mildly, reluctant to implement technologies that give consumers more power than they currently have, excluding piracy of course. Moreover, they play a delicate political game with other media companies and therefore are not inclined to cooperate with them on the implementation of standards, even when it is in their interest. A current example is the battle between Blu-Ray and HD-DVD. Worse examples in the past have involved the media companies battling new standards like MGM vs. Betamax.
- At the other end, Consumers are difficult to sell to for several reasons:
- Hard to ‘capture’ enough at once for critical mass
- Very leery of DRM solutions
- Technology Companies are in a vulnerable position as they are the somewhat reluctant intermediaries – balancing the interests of both groups. Currently the groups perceptions are divergent enough to be a real problem, however, there is some evidence to suggest that media companies are starting to realize they are in jeopardy, and consumers are also showing some indications that they will view digital content as having real value, making them more cooperative than they have been in the past. However, they need to be pushed to the inevitable future lower margins and higher volume, as the antitrust case against the record labels shows.