In defence of DRM

As I posted yesterday, I think EMI’s plan to drop DRM is a brilliant one, and I think come May iTunes shoppers can send the rest of the industry a very clear message by avoiding all DRMed tracks and going for the better quality, DRM-free ones instead. And don’t forget, EMI’s announcement applies to all digital downloads on all platforms; iTunes is just the first shop to sign up. However, that doesn’t mean DRM deserves to die everywhere – or at least, not yet.

Don’t get me wrong. DRM on songs or albums you’ve bought is stupid, evil, anti-consumer and all the rest of it, especially when CDs are often cheaper and don’t have the same restrictions. But without DRM, subscription services can’t work. I don’t use them, but a lot of people do – and without DRM, they’d lose those services overnight.

Take Napster, for example. Ten quid per month gives you pretty much unlimited music, and if you want you can change your tunes all day every day. Without DRM, that won’t work. Let’s be conservative and say that Napster users would download just 100 DRM-free songs per month. At a tenner per month that means Napster’s revenue per song would be 10p per song, but it’d be paying the music business 60, 70p per track (because DRM-free means Napster would get the same terms as iTunes). Bye-bye Napster.

I still think digital music is massively overpriced – in many cases a digital album is still more expensive than a physical copy, despite the absence of packaging, manufacturing, transport costs and so on, and the flat rate system makes back catalogue stuff even more overpriced – but realistically iTunes’ 99p per track is where the market’s currently at. If that falls to 1p per track then DRM-free subscription services may well become viable, but for now you have two choices: if you’re willing to pay per track you don’t shouldn’t have to deal with DRM (and come May, you won’t have to), but if you’d rather rent than buy DRM is the only way to do it.

13 thoughts on “In defence of DRM

  1. Alex says:

    I’m not sure what to think of this. Obviously, it’s good for the consumer, the extra 30p or whatever will make it worthwhile for DRM-free tracks, but as you say, digital music is still expensive.

    I think its just an attempt for Apple to suck up to consumers, especially the younger generation. Fair enough, Steve Jobs pointed out it hasn’t worked, but this will, in my opinion, make the problem of piracy slightly worse.

    Also, ITV news yesterday pointed out that the tracks will still be in AAC format – not so widely supported on non-Apple mp3 players, so unless other manufacturers decide so support them, non-DRM wont make THAT much of a difference.

  2. Gary says:

    I’d have preferred it if the price stayed the same and the cost of crippled tracks went down, but that was never likely.

    I agree that AAC isn’t as good as MP3, but at least with DRM-free tracks you can legally and easily batch transcode ’em.

  3. Stephen says:

    >I don’t use them, but a lot of people do – and without DRM, they’d lose those services overnight.

    You don’t use them, I don’t use them, does anyone use them?

    Anyway, no-one’s saying DRM is going away for good: even EMI are still selling DRM tunes at a lower price on iTMS. Nothing to stop them continuing to allow Napster DRM crud.

    Bye-bye Napster.

    I suspect this is true no matter what happens.

    I still think the days of pay-per-track are numbered…

    Can’t see it myself.

  4. Gary says:

    does anyone use them?

    Yep. It’s the main selling point of services such as napster.

    Can’t see it myself.

    ISPs said that about pay-per-second internet access and phone companies about pay-per-minute phone calls. These days it’s all bundles. Ultimately even software’s going to go the subs route, I reckon.

  5. Stephen says:

    >Yep. It’s the main selling point of services such as napster.

    I know; my point being, does anyone use Napster? No-one I know does. If Napster hadn’t picked up about 250,000 subscribers from AOL’s abandonment of the music download business, its subscribers would have stayed pretty flat at 500,000 for fiscal 2007, which is probably the level you would expect from constant churn of subscribers: I suspect no-one stays subscribed for very long. It’s the forced purchase issue: you might buy a couple of CDs every month if you didn’t have to, but once you’ve signed up to spend a certain amount of money on music every month, resistance sets in.

    Internet access and phone calls are very different from songs and software: no-one wants to “own” their phonecall once it’s finished. But most people want to own their music. I can see web services successfully using the subscription model because it’s easy to control access, but DRM for software’s been tried and has never worked for long.

  6. Gary says:

    does anyone use Napster? No-one I know does.

    Last figures I saw said 830,000, which isn’t bad. Uni accounts are doing decent numbers and the churn rate’s dropping too. They’re a minor player in Europe certainly, but they’re doing OK in the US.

    once you’ve signed up to spend a certain amount of money on music every month, resistance sets in.

    To an extent, sure, but it’s a model that works fine for movies (Sky channels, DVD by post services etc) and there’s no reason why it can’t work for music. Particularly if the MSP model ever takes off and music subs are just another feature in a particular broadband bundle.

    But most people want to own their music.

    I’m not sure that’s still the case. Sure, fifty quid man wants to own his music and fondle the packaging, but he’s three times older than The Kids. I don’t see the typical Word reader going for a sub service, but I can see a teenager going for it (or the parents of a teenager).

  7. Gary says:

    Incidentally, do you know what one of the most profitable digital music products is? Prepay cards. Apparently people get them and forget to use them.

    I don’t have a point. I just found it interesting :)

  8. Stephen says:

    Prepay phone cards are like that too. Although some phone companies help this along a bit by decreasing the credit by a certain amount every month.

    Actually it can become a bit of a nightmare: if you have millions of unused minutes on the billing platform, some of them more than a year old, at what point do you decide that they won’t ever be used, and thus recognise the income? Bearing in mind that normal accounting practice is not to recognise the income until the minute is actually used and you know what your cost is. It could make a huge difference to your profit, but if you do it too early, you could face an irate customer who finds an old card but can’t use it because it’s been deactivated off the platform. Or worse, your platform can’t turn off old cards…

  9. Gary says:

    True, yeah. I’d imagine the usual way it works is for vouchers to have a time limit of some point. Income hits the books immediately and then the firm makes a guesstimate of what percentage will actually be redeemed during the voucher period. Or something.

  10. Stephen says:

    Well, you can’t actually recognise income until you’ve provided the service. Say we agreed that next month I’d redesign your blog, and for some reason you decided to send me the money now. I can’t recognise that money as income until I’ve done the work, because until then you could ask for the money back and let Ronnie do the work instead. So until the company provides the phone service it has to carry the money it received on the card as a creditor, ie money it owes the customer.

    Only once it’s clear that the services will not be provided, and the customer will not (or cannot, in terms of the agreement) ask for his money back, can it be taken to income. That’s why shopping vouchers and the like often expire after a year.

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