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Pros and Cons of DRM Protection Approaches

Spending on digital rights management (DRM) software and hardware to protect entertainment, commercial software, and other information will exceed $9 billion dollars over the next five years, according to Insight Research Corp.

By the close of 2007, total worldwide spending on DRM will reach just over $1 billion, and by 2012 business spending is forecast to grow to nearly $1.9 billion, according to their latest research study.

Insight says that DRM involves the combination of software and hardware technologies that enable the content owner and distributors to assign and control rights and conditions for viewing, listening, and employing the content present in digital media and applications -- be it a song, a movie, a medical or financial record, or a software game.

DRM Market Segmentation

The study focuses on the use of DRM by wireline retail users, wireless retail users, TV and home entertainment network (HEN) users, software application retail users, as well as software application corporate users.

The report notes that as the value of digital content increases, applications of DRM will increase, though at a slower rate than the value of content based on the fact that DRM pricing is not tied to the value of the protected content.

"DRM evolved over the last two decades to serve corporations that needed a means to deal with information piracy, peer-to-peer file sharing, and various regulatory requirements. So in reality, DRM did not arise to meet the needs of end users, and in fact, it may be said to have evolved to spite the end user," says Robert Rosenberg, President of Insight.

Fair Protection for All Stakeholders

"While organizations like Creative Commons have emerged to balance the respective -- and sometimes conflicting -- rights of artists and creators, media companies, and individuals who share content, by and large the focus of the DRM industry is to protect the rights of the owner of the content -- not the end user," Rosenberg concludes.

As far as the entertainment sector is concerned, I would add that DRM is primarily being used to establish and maintain closed business models that are applied by distributors that intend to limit options -- relative to their preferred gatekeeper role within the value chain.

In contrast, open loop value chains inherently mean that independent content creators are less tied to one particular distributor, or a restrictive distribution channel model.

While it's clear that some content creators have suffered negative repercussions as a result of the digital media revolution, it's unclear to me if continued attempts to migrate the traditional "restraint of trade" approaches into the digital arena are more or less damaging to the industry than consumers actually copying and sharing content without payment.

Meaning, perhaps the cons of closed loop business models have become more apparent to savvy consumers, and as a result they are they're less inclined to be supportive of the pros.

DRM Could Become a Moot Point

Moreover, if the majority of the financial benefit from content revenue was channeled to the content creator -- rather than the numerous players in the distribution chain -- then perhaps consumers would be more supportive of DRM solutions.

The fact that some content creators have already dared to bypass the traditional distribution channels, with varying degrees of success, is likely much more troubling to those who command and control the legacy models.

As content supply directly finds content demand with increasingly greater ease, the whole notion of DRM could theoretically become a moot point.

With digital entertainment distribution costs drastically reduced -- combined with the un-bundling of content elements, and an abundance of lower-priced content available in an open marketplace -- there will likely be an equally reduced incentive for consumers to copy content without payment. The success of the iTunes/iPod model seems to validate this eventuality.

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