No DRM means no music

Jay Kim
25 Apr 2007

The development of a digital infrastructure - which made lossless delivery and transfer of digital content possible for everyone - was behind the explosion of the digital entertainment industry. But the rise of digital music has come with the inevitable and painful piracy issues that threaten to transform music into a commodity - and jeopardise the entire music industry.

Some companies such as SK Telecom in South Korea have already anticipated this phenomenon. It's come up with a feasible solution to monetize digital content via inexpensive subscriptions and by putting a proper digital rights management (DRM) system in place. And it's since proven itself well by positioning its service on the frontier as the best in the world - and endorsed by the music industry.

But DRM has encountered stormy waters, not least in terms of interoperability. Every legitimate player in the market has developed their own DRM standard in the hope of becoming the de facto standard. Even Microsoft - which started the PlaysForSure certification program for media players compatible with Windows Media files - is now competing against its own program with Zune's proprietary DRM.

And if the debate over the usefulness of DRM wasn't messy enough, now even Steve Jobs has raised his voice, declaring that he wants to tear down the DRM wall. And no wonder, when Apple is confronting interoperability issues in the European market and only three percent of the music files stored on iPods are purchased from iTunes (and therefore encrypted with Apple's FairPlay).

But then Apple is a device manufacturer with a vertical infrastructure that includes content. If iTunes sold non-DRM music files, Apple would benefit immensely, but everyone else would suffer. Granted, music label EMI seriously considered dropping DRM requirements for digital download service providers, but in late February wisely stuck with DRM after service providers refused to guarantee revenues with upfront payments.

Jobs' essay is particularly torturous for South Korea, where P2P music provider Soribada is jeopardizing the digital music market with its questionable business model based on a non-DRM policy. Currently, Soribada offers a subscription-based P2P service to end users without any copyright protection mechanisms in place. If you pay KRW3,000 (roughly US$3.00) per month, you have access to an unlimited amount of P2P transactions without any tangible copyright control. This is such a massive and destructive business model that it will demolish all other legitimate music delivery services in the same market, especially those with subscription models.

DRM carries inherent interoperability issues, agreed.But it is also an unavoidable pathway to get to our destination of legal digital music everywhere.Getting rid of this protection mechanism all at once will kill any chance of the digital entertainment industry blossoming. At the same time, the music industry needs to lower the bar to increase the pie size rather than focusing on short-term profit.

Jay Kim is executive vice-president of APAC business for WiderThan and a board member of MEF Asia.

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