DRM part II

In the last post about DRM, I talked about why not only is it a bad idea, DRM is defective by design. The first thing to do is classify what the Music industry is competing against and then to identify what that does NOT provide to consumers. The biggest competitor to the RIAA and music companies in general is piracy via P2P networks. How does a musician or someone claiming to represent him combat piracy over P2P? First it's important to look at what a P2P network offers vs. current online music stores.

P2P networks offer several things to a prospective consumer:
-free music
-access to music that might not be sold in a given market
-a loose sense of community
-simple searching tools
-songs do not have DRM and may be copied to and played on most devices
-songs are available in both lossy and lossless formats

Compare this to the current offerings at the iTMS (which is used as an example because it is the largest and most "legitimate" of the online media sellers):
-$.99 per song
-~2 million songs (while this is a lot, there are many songs not available, and much content is regional or restricted by country)
-intermediate searching tools (you can search by a number of metadata tags)
-ease of use (you know that a song is going to be correctly labeled)


What can an online music store do to compete with free? Make non-monetary costs more visible and overall offer something that P2P can't offer. Considering that the cost of pirated music is very well obfuscated by things like the cost of your computer, an internet connection, an electricity bill, and most importantly TIME, the cost of pirating music is obfuscated but very real. Apple has demonstrated (even in its exhorbitantly high priced sales model) that people are willing to pay for good service. Even though P2P networks can give me access to millions of songs and movies, I have to invest time to find what I want, make sure it's the right thing, check the quality, etc. Even then, it is difficult to find new music, or music similar to what I like since I'd have to know an artist or song name to search for it. Apple's iTMS's success has shown that providing a clean interface to search, consistent quality, previewing ability, and a number of other *service* oriented features will draw some customers. These people are willing to pay for what is ultimately an inferior product due to the limitations of DRM. What if the commoditization of music due to digital networking technology were also accounted in this model?

Imagine if you could search a database (like iTunes) with all the same metadata-based criteria, but learn from myspace and the web 2.0 movement as well. Looking at the music your friends like, targeted recommendations (like amazon's "customers who bought this also liked..."), perhaps even algorithm based predictions (like Pandora.com) based on your past musical choices. Now imagine if you could buy any song for 1 cent per megabyte (adjusted for bandwidth and other fixed costs). Now imagine that each song is made available in many different formats (mp3, wma, aac, flac, etc.) as well as different bit rates. I believe that a legit company that does this would see billions if not trillions of downloads.

The social changes in the way that people interact with their music is the most compelling argument for such a ssales model. Music can become effectively disposable, but without the waste associated with physical goods. What happens when you download a low bitrate version of a song so it fits on your phone but you end up really liking it? Without thinking about it, you spend another 5-10 cents and get a lossless copy. Music, as a commodity is treated as such. The hard drive in your computer dies? You drop your iPod in the lake? You're not at home but really want to rock out to Marley? Just download another copy, it's so cheap that anything else isn't worth your time.

To the RIAA worried about drawing enough customers to take advantage of economies of scale? Develop tools that help your customers better find what they like. Software algorithms, relational databases, a center of paid listeners who detail which song A you need if you like song B. Initial giveaways could draw millions. Every drink at McDonald's has a code on it for 10MB of downloads, store receipts give you 1MB/dollar spent, the point is that once music is correctly reclassified as a commodity, it can be marketed in almost any market you can think of.

How's that for a new trillion dollar market?

Raul