DRM moves to the beat

newsmaker The term "iPod killers" rings sweet to the ears of Michael Bornhäusser, CEO of two European players in the digital music industry.

Not only does he fancy giving iPod maker Apple a run for its money, Bornhäusser believes the companies under his charge--Secure Digital Container (SDC) and Digital World Services (DWS)--have the edge over Microsoft when it comes to putting DRM (digital rights management) on mobile phones.

SDC provides the DRM technology and music player program, partnering carriers such as O2 and T-Mobile. The digital content delivery and e-commerce platform is offered by DWS, which sells 20 million tracks a year and, according to the German Recording Industry Association, has over 60 percent share of the mobile music download market in Germany.

Bornhäusser is currently in talks with carriers in North America and the Asia-Pacific region, where the first partner will be a prominent Australian carrier. He targets to go to market with the digital content delivery platform by the end of the year. China, Hong Kong, India, Singapore and Thailand are other markets he is looking at.

In an interview with ZDNet Asia, Bornhäusser talks about the challenges in facing big names like Microsoft and Apple in the DRM industry, and how he plans to gain a head-start in the mobile phone space.

How are attitudes toward DRM today and what has shaped them?
In the last five years, the music industry lost about 30 percent of their revenues. There was a number of illegal music downloads until 2002, and then the Recording Industry Association of America and IFPI started to sue these file sharers. The other development was that more and more legal offers came to play, where you could purchase music at a reasonable price. A lot of people said they didn't want to get sued and therefore wanted to stay on the legal side… and so the trends turned.

So now we have half the number of peer-to-peer illegal download users in the last three years, and we have an increase in the thousands of percent of the number of legal download users in the market.

The whole industry is working to increase the functionality and increase the quality and convenience for the user to buy legal content--it's a very good improvement from what we have seen in the last couple of years.

Are there DRM standards?
There are no standards in the DRM industry.

Why not?
The big companies that are in the market want to do their own thing. If you have a standard, you lose your advantage… because the standard is available to everybody.

One of the biggest problems in standards is (Microsoft Chairman) Mr (Bill) Gates. When we talk about standards and why there is no standard, we have to look at the different channels and operating systems. If you buy a Windows media PC, where Windows is pre-installed, there's Windows Media Player. Built into that player is a Windows Media DRM. And as you might know, Microsoft is of course interested in [dominating] everything.

For example, it's Mr Gates' one standard that is ruling the world's standards in the Office world--Microsoft Outlook--which is not very appreciated by the rest of the world.

The other big player in the market is Apple. They have a DRM technology which is called Fairplay. If you download the song from iTunes, and you want to use it on your Mac, or on your PC or on your iPod, you have to install this Apple player on your PC.

What about Sun Microsystems' Dream (DRM everywhere available) software, which aims to address the lack of interoperability? How does that affect you?
The Sun initiative is a nice move but will not solve the problem as the major DRM providers like Microsoft, Apple and SDC are not members of the group.

Furthermore, the initiative is still at its infancy stage, and success is not guaranteed. Carriers and cable network providers need a solution now… They cannot wait for a new

initiative to be tested and successfully implemented.

Where does SDC fit in?
Guys like us are a little bit more open, because we don't have a strategy to sell operating systems or hardware like iPods. So we are software guys, and we are focusing on the mobile phone, because we have some advantages here. Application size, for example.

The Microsoft DRM application is 6MB, and Fairplay is about 4MB to 5MB. Our DRM has 50KB--small enough to run on small processors.

In the PC world, Microsoft is leading the game. In the Apple world, of course Apple is leading the game, but it's only in the Apple world. In the mobile world, SDC is the world market leader in DRM technology. And when we talk about rich-media--we're not talking about ringtones or wallpapers; we're not interested in those, but full-length music, video clips and in the future cyberbox and movies.

Aren't the big players encroaching on your turf?
Microsoft is trying to get on the mobile phones, which is an important area for them. But what they have are highly-priced devices, not for the mass market. The problem is they need to get Windows Media Player on these devices, which means they are very expensive, very big, and requires very efficient processors for consuming. This means highly efficient, highly-priced devices. The carriers that are running the music download services are most of the time looking for a completely different thing--they don't want to rely completely on Microsoft, and they want to address the mass market.

What differentiates you from them?
SDC is the only company running the DRM and the player application on Java, and Java is an application platform which is on the PC, Mac, Linux… and on these phones. As we have such a small footprint, we are able to run our high security environment on every one of these devices.

We have a wide range of phones. (Apple CEO) Steve Jobs announced the iPod phone from Motorola--that's one phone. We have four. We also have Nokia, Samsung, LG, and Sony Ericsson phones--GSM, CDMA, just name it.

What's new is that we recognize that people have a SIM card for years, but the mobile phone changes all the time. The problem we had before was, all of the licenses from Microsoft or whichever vendor are always bound to the device, and you have to re-download the whole stuff into a new phone. Even if you don't have to pay for it, it's very inconvenient. So we have developed the SIM-bound DRM--we take out your SIM and you can carry the songs with you… if you put it in a new phone it works. The private key is installed in the SIM, so if you put the SIM into another device and try to play a song, the player would detect if there's a private key that matches with the public key in the player.

How do you attract mobile manufacturers to put in your software?
T-Mobile buys 15 million to 20 million handsets every year. It's a mandatory specification. Phones are getting more and more customized to carriers' demands. We don't have to attract the handset manufacturers.