Close but no cigar: Wharton B-School's DRM analysis

Close but no cigar: Wharton B-School's DRM analysis

Summary: If I didn't know any better and someone told me that Apple paid for this analysis of DRM by the Wharton School of the University of Pennsylvania, I'd believe it.  At first, when I read the headline -- DRM: Media companies next flop?


If I didn't know any better and someone told me that Apple paid for this analysis of DRM by the Wharton School of the University of Pennsylvania, I'd believe it.  At first, when I read the headline -- DRM: Media companies next flop? -- and read the following (across the article's midsection) , I was saying "Yes! Yes! Wharton gets it!":

The Sony incident, however, raises a host of questions. First and foremost is whether consumers are being duped when they buy content, only to find there are restrictions on transferring music to multiple devices or, even worse, that the DRM software exposes their computer to security risks....DRM locks up content that would otherwise be reused.  While it's correct to think that those who create content should get a return on investment, the trouble with (DRM) is that it doesn't work and never will because it cuts off reuse that happens naturally.

The piece also quotes Mark Cuban who said DRM is alienating consumers (he should start using the acronym CRAP instead of DRM because of how it would help get his point across).  Most of the analysis seems to speak out against CRAP and then, out of the blue, it sadly starts to praise Apple as the company that gets it right:

While Sony's miscues have sparked outrage, Wharton experts note that managing digital rights can be done correctly by balancing consumer interests with those of the entertainment industry. The best example of such an approach is Apple Computer and its iTunes store.

Now, I'm thinking this must be some sort of joke.  But this isn't April Fools Day.  The piece goes on..

Apple's software places restrictions on what a consumer can do with music, but the parameters are broad enough to keep most consumers happy. "iTunes is the first (DRM strategy) to think seriously about balancing the needs of content owners with those of consumers," says Whitehouse. "Apple has attempted to satisfy both sides of the equation." What makes iTunes work is its "mild-mannered" approach to DRM, adds Huesman. "Apple is above the board and provides a high-quality experience."

Most consumers? Sure. Most consumers gave tobacco companies a hall pass until it was discovered that they conveniently forgot to tell consumers that cigarettes were (a) cancerous and (b) manufactured to be addicitive, and (c) being purposely marketed to children.  If you think about it, CRAP (DRM) has all of the same "qualities."  At some point, most consumers will learn the truth and will be very disappointed when they do.  That point hasn't arrived yet.  Right now most consumers are sheeple when it comes to CRAP.  Just like many smokers were with cigarettes.  Anyway, here's the smoking gun:

Hunter, however, wouldn't be surprised if DRM issues within iTunes begin to surface, especially as more Apple fans wind up owning a handful of iPods and try to transfer music bought at iTunes to all other devices...Apple could lead the charge in both music and video. For example, the company could easily create an "iTunes Deluxe" that would allow files to be shared across all devices. "From a business standpoint, it's an incredible opportunity."

Agreed.  Issues with iTunes will surface.  But owning a handful of iPods?  Music that's protected by Apple's CRAP will always play on iPods.  The problem is that they won't play on anything else unless Apple says it can (and so far, besides Motorola's iTune's phone, it can't).  Had this said "as more Apple fans wind up owning a handful of non-iPods," it would have been dead on.  But these nuances in semantics are what make all the difference in the world and it has caused Wharton (a school of business) to overlook a far more important issue -- one that transcends technology -- to the business world. 

While CRAP technology (like any technology) ultimately affects the businesses that decide to use it, it's still a technology.  The piece makes no mention of the monoculture threat that looms as a result of Apple's CRAP and the monopoly that could follow (if it hasn't already).  Even worse, the piece practically promotes the idea that Apple should establish a monopoly.  The mere suggestion of an "iTunes Deluxe" is practically encouraging Apple to more freely license its CRAP to other device manufacturers to encourage interoperability.  Other than giving its DRM away which it can't do (it's the key to Apple's iPod/iTunes kingdom), what other choice would Apple have to achieve such interoperability other than to charge royalties for its CRAP. 

I agree that part of the problem with Apple's CRAP is that the company isn't licensing it in such a way that consumers have more choice as to when, where, and on what devices they can play the content they've purchased a la carte from the iTunes Music Store.  But even if Apple did license the technology, having a single company dominate such a major technology and content chokepoint is ultimately bad for consumers.  History (especially technology history) has proven time and time again that when vendors end up in control of a market, the privilege gets abused.  To the extent that (a) at 70 percent market share of legally downloaded music, Apple's iTunes Music Store is the clear market leader in online a la carte content sales, (b) outside of Moto's phone, Apple is requiring people to own its iPods or have iTunes to playback that content (and has refused to license it to companies like Sonos that have products that compete with Apple's), (c) that Apple has already changed the content playback/reproduction rules (see Apple's new DRM reneges on your purchase conditions, picks your pocket) on consumers without their consent (and most often, knowledge) and (d) Apple is changing the behavior of iTunes by using it to spy on users (again, Apple can make such changes at will without consumer involvement), that monopolistic abuse is already happening.

Topic: Apple

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  • Choosing one's battles

    The authors of the article from which you quote start from the assumprion that content is the property of its owner. That property must be protected from theft. Software is a necessary piece of that protection.

    This is a business school, after all.

    The issue is how this protection should be applied in a way that doesn't interfere with marketing. And the answer to that is to restrict only to the degree that customers do not notice the restriction, where the freedom allowed is sufficient to permit customers to enjoy their purchase.

    Quoting the article you quote:

    Apple's software places restrictions on what a consumer can do with music, but the parameters are broad enough to keep most consumers happy.

    This much seems almost self-evident.

    The most interesting issue for me is one that you don't address, I think because you're still fighting the battle over whether DRM should exist.

    That's the ability to modify DRM after initial issue.

    Remember when Apple changed the number of copies/devices?

    That means the software has parameters controlled from a distant source, not on the computer. Because I strongly believe in not having my computer changed from the outside, this turns into a real privacy issue for me.

    DRM will be part of the future of content distribution. After the fading of the (very expensive in some versions) iPod, the single standard will be Microsoft's. The content industry doesn't like Apple well enough to make its software the standard, from articles I've read.

    So the issue is, should Microsoft's DRM be able to change the parameters of how content is used after purchase?

    Also worth noting, we can assume that all electronic devices will be modified so that the flexible DRM can work.

    Now that's something to get angry about.
    Anton Philidor
    • Microsoft?

      Ya really think the content companies like Microsoft any better than
      Apple? Microsoft probably scares them even more.
    • I beleive that you are wrong about Apple

      >The content industry doesn't like Apple well enough to make its software the standard, from articles I've read.

      So, I take it that you own a Sony MP3 player. Sony does make one you know... If the media companies would standardize on something that they can control I assure you that it would be their own hardware and yet I do not see any push at all on the Sony Walkman. The media companies will deal with who ever the consumers want to deal with, so far Apple is the dominate media player. Microsoft does not have a leg up over Apple at this time, the will always be #2 or #3.
  • So where's the downside?

    Keep in mind that B-schools (Wharton no exception) are all about making the most of the assets of a [b]business[/b], not about looking out for consumers.

    Wharton is gushing about the potential of Apple's business because they're in a position to not only rape consumers [1], but the Content Cartel [2]. Any B-school would admire the prospect.

    You probably got off to a bad start by misunderstanding the criticism of Sony. That wasn't an objection to Sony's abuses, only to the bad PR that it caused. Sony wasn't [i]bad[/i], they were just [i]stupid to get caught.[/i]

    [1] The consumers pay the same regardless, the rape comes from getting less from their money.
    [2] They used to be in control of distribution and didn't split the take with anyone (marketing costs aside.) Now they're about to learn to live on Apple's crumbs.
    Yagotta B. Kidding
  • You are wrong about Apple

    When was the last time that you ran OS/X on a computer that was not manufactured by Apple? Jobs has publically stated that OS/X will not run on anything other than a Apple manufactured PC. Apple customers have always lived with this sort of control and are very happy. Where is the crisis?

    You have a choice not to purchase an iPod, exercise it if you don't like their way of doing business.
  • And you were doing so well

    Until the tinfoil hat comment about iTunes 'spying' on the consumer, when we all know that it wasn't, it was serving targetted recommendations / advertys for other tunes, without recording your iTMS id - with the recommendation based on the current tune playing, rather than your purchase history.

    I think it's really important that columnists stay on the right side of the facts. There's enough negative points to the whole iTunes monopoly without confusing the matter.

    (I think that by blowing issues like the MiniStore and the adverts linked to Google GMail, privacy advocates may be undermining people's appreciation of the really BAD stuff).