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Media Executives Cling to Their DRM Denial

According to a new study from Strategy Analytics, the video and music industries are unlikely to follow the Apple and EMI recent decision to abandon Digital Rights Management (DRM).

The report entitled "A Roadmap for DRM: Business Impact for Content Owners and Technology Vendors," draws on extensive interviews with senior executives in the media, entertainment and consumer electronics industries. It concludes that DRM will still play a critical role in the emergence of the digital marketplace.

But to remain valid, according to Strategy Analytics, DRM will have to sink into the background of the value chain, enabling new choices for consumers, while also opening up new revenue streams for creators and content owners.

"In the right form, DRM can help expand the size of the music and video markets," comments Martin Olausson, Director of the Strategy Analytics Digital Media Strategies service. "Ultimately, DRM is needed to harness the commercial value of the rip, mix, burn and share culture."

"It is time to shift the focus of the debate over DRM beyond the misleading polarity of corporations versus consumers," adds Andrew Currah, the report author. "Ultimately this is a commercial rather than a technological problem. In the coming years DRM will be redefined and fine-tuned -- not eradicated completely, as many have suggested."

The report identifies the key factors that will shape the evolution and transformation of DRM from today's disruptive exploratory phase of innovation to a more stable exploitative era, which will be characterized by clearer standards, commercial diversification and improved consumer choice. Strategy Analytics believes that DRM will eventually realize great riches in the digital ecosystem by enhancing the consumption of existing content, as well as by enabling entirely new business models and new uses.

Frankly, I totally disagree with the Strategy Analytics assessment. The era of exploitation has already been in existence for many years, and the cartel of a few and very powerful media companies have used various methods to manipulate artists, manage content scarcity and fix pricing. Big budget productions for both music and film projects was sustained by the fact that the vast majority of independent producers were denied access to the cartel's closed distribution channels.

In contrast, the Internet has enabled an open distribution channel for low-budget content producers to bring their product to market at a reasonable cost -- thereby bypassing the traditional gatekeepers. As a result, an ever increasing list of otherwise obscure music and film genres found an eager audience for their highly differentiated art. As the controlled scarcity of predictable popular content transformed into a free-form world of abundant indie content, the era of exploitation has run its course.

Clearly, Alain Levy, the prior chairman and CEO of EMI Music, was one of the first industry executives to move beyond denial, and acknowledge the shift of power to consumers who exercise their newfound freedom of choice. He witnessed firsthand the abrupt shift in the marketplace, and understood the implications of the apparent trend towards continued and accelerated product and market fragmentation.

While other major media industry executives prefer to use stall tactics, such as forming joint ventures in an attempt to reconstruct the cartel's controlled scarcity business model online, I believe that eventually they too will acknowledge the futility of denying consumers the right to pay for content one-time, and then enjoy that content at a place and time of their choosing -- on whatever device they are using, at that moment in time.

For the time being, I believe that Mr. Levy gave EMI a strategic advantage -- relative to the peer group. Other media executives will no doubt cling to their denial of the apparent shift, until they are better able to face this new reality and move beyond their deep-rooted fears of operating within the free-market for digital content.

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