DRM: The Weakest Link? An Analysis of Why DRM Isn’t Working

Published by: Generator Research Limited

Published: Dec. 11, 2006 - 15 Pages

Table of Contents

EXECUTIVE SUMMARY

HOW WE GOT HERE

CONTENT: RIGHTS HOLDERS

Indie Labels: Essentially anti-DRM

eMusic: DRM-free Indie Music

Major Labels: Historically pro-DRM, but increasingly open-minded

Impact on Music Retail if the Major Labels Licensed Music Without DRM

Impact on Device Brands if the Major Labels Licensed Music Without DRM

INDUSTRY

DRM Technology Vendors

Content Services: DRM Licensees

CONSUMERS

Usage Restrictions

Consumer Re-education

ANALYSIS

MARKET FAILURE?

Benchmark: Other Technology Categories

Case Study: Music DRM

FUTURE IMPLICATIONS FOR DRM

A New Paradigm

(1) Ad-supported Music Services

(2) User Identification

Abstract

• How We Got Here
• Requirements Capture: DRM
• Case Study: Indie Labels and eMusic
• Implications: DRM-free
• Value Chain Analysis
• New Paradigm: DRM vs. DMM

Some senior executives working in major record labels think that DRM has been a “disaster,” a major change of heart from a few years ago. These people are so concerned that they are examining the feasibility of licensing their music for sale without DRM. But at the same time, other label executives are sticking to their guns and continue to believe that ‘DRMed’ music is the only way forward.

Over the last few years nearly 10,000 indie labels have licensed their music to eMusic for sale without DRM. This online music store has done a fine job building its brand around DRM-free indie music and is the second largest online music store in the U.S. and Europe, currently selling over 5 million downloads per month.

It is clear that the winds of change are blowing across the DRM landscape and the pro-DRM consensus shared by the major record labels a few years ago is now showing the first signs of cracking.

This report analyses whether DRM might a broken technology, perhaps at a conceptual level, in terms of its implementation or both.

The report first provides a detailed explanation of the process used by the industry to define the requirements for DRM, which has resulted in a range of non-interoperable technologies that impose visible usage restrictions on consumers.

The report then looks at the implications for online music retailers and device brands - including Apple - if the industry migrated to a new regime where music was supplied without DRM. The report explains that this strategy might have an unexpected outcome.

Finally, the report asks whether DRM needs to be repurposed: perhaps the technology’s first application - rights management - needs to give way to its true role as the enabler of a digital media ecosystem.

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