DRM is Poisonous

I will admit that I used to think DRM was an enabling technology, especially for unlimited music subscriptions. Without DRM, nobody will let you download an unlimited amount of content. Without an unlimited amount of content for a fixed price, music consumption is bogged down with any number of 99 cent buying decisions. An a la carte permanent download (PDL) world is just not how music should be enjoyed.

Unfortunately, users do not want subscriptions to music. They've never really subscribed to music: radio is free (paid by advertising on a fixed and predictable compulsory license rate structure); and LPs, singles and CDs were purchased a la carte giving the customer a sense of physical ownership. Thankfully, now to the rescue of unlimited consumption comes streaming and an always-connected broadband world. Now DRM doesn't matter - services can still provide an "all you can eat" experience without too much worry that the user will walk away with your entire catalog. To limit or turn off consumption, just turn off streaming access.

So back to the thesis of my headline: DRM is poisonous. Not only was customer support for Microsot's DRM expensive, most companies who have tried a DRM music service are now feeling the pain of what it means to migrate, sell, or shut down their DRM services. MTV's Urge, Microsoft's MSN music store, Yahoo!'s Music Unlimited, and Wal-Mart's a la carte store have all had their customers revolt after attempting to shut off DRM re-licensing for PDLs they sold. This is a brand manager's nightmare.

And those are the DRM service that have already closed. What will happen when Napster is sold or shuttered? What will happen with Rhapsody decides to change its business model? What happens when Apple wants to change its delivery method? Yahoo! has announced they will be giving coupons to re-purchased music on Rhapsody to customers whose PDL licenses have been lost. Wal-Mart has decided to keep its DRM license servers up longer. In an already razor thin margin business, dealing with DRM customer service issues, and keeping servers running after a service has been shuttered turns music into a money-losing weight on distributors.

Next up is what happens to the CinemaNow and Movielink movies you have purchased? Movie studios understandably want to protect their content, and in their case, streaming is not yet an option for high resolution HD 720p or 1080p video. Netflix, Hulu and others seem to be able to stream decent video quality, but customers will soon demand higher resolution as they convert over to newer, larger flat-screen and home theater displays.

So I'm converted: DRM is evil.

Hubris from Warner

Warner Threatens To Pull Music from Guitar Hero, Rock Band

This is rich! Warner Music Group CEO Bronfman is complaining that companies are finding ways to successfully monetize his music. He complains that MTV in the '80s, Apple in the 2000s and now Activision are ripping him off - even though his company signed voluntary deals with all three.

Bronfman should be jumping for joy that these companies have found successful ways to promote his artists' material. The labels did not create any of those three companies and would never have been able to. The digital distribution companies the labels helped create have all struggled with anti-consumer restrictions on the content customers avidy want, but go elsewhere to find.

As for Bronfman's assumption that video games will also eat his lunch, I can't think he's more wrong. Guitar Hero and Rock Band are both great games that engage the player with music, but they don't presage an era where all video games are music upsell vehicles. In fact, sales of music-based games are falling fast. Game manufacturers for years have tried to figure out how to include advertising and upsell within their games and none have succeeded until now. But this does not mean that all video games will now succeed as either. Those two games are music-focused. You still aren't going to sell music through shoot 'em up games, or Ms. Pac Man.

The labels need to get out of the way and let visionaries like MTV, Apple, and Activision create distribution channels that consumers actually want to engage with, rather than crushing every new idea because it doesn't fit the labels' failed business model.