Archive for April, 2009

Digital Rights Management (DRM) – A theory on how it got started.

Thursday, April 9th, 2009

DRM and all of the related problems to DRM really stemmed from the Compact Disk and CDs replacing the cassette and vinyl.

We all happily went out and rebought our existing music collection on CD as it was alot more convenient than LP’s or cassettes. In the process we generated a constant revenue stream as stuff was gradually re-issued. The problem is that this is now coming to an end for the record companies as they have re-released almost everything. They have certainly run out of the stuff with serious mass appeal.

So they now have to look for a new way of extracting similar revenues that they have grown used to over the last 15 years out of a back catalog which most of us already own, possibly in more than one format. The problem is that they have already made it about as convenient as it needs to be and the quality is mostly there as well.

So rather than try and go back to surviving off the revenues they get from new releases which would result in a huge drop in profits they need an alternative. Without an alternative the problems would be very far reaching. The stock market is used to constant revenue growth – if profits fall, it is far worse for a company than if they had never risen in the first place, expecially if the fall is not likely to be temporary. This is frequently what drives a company under if they are unable to downsize quickly enough.

So faced with this dilemma, the media publishing companies must find a way to keep the momentum of the CD years going, and being that they didn’t reinvest those record profits very wisely in new content production this is going to difficult. So they are choosing to try and keep the CD going by constantly selling us a new copy of stuff we already own.

If you contrast this with companies like BP (who sell oil) you see that they have invested their profits much more wisely. BP are now the world’s largest producer of solar panels and have started describing themselves as an energy company rather than an oil company.

In a single phrase, “Diversify to survive”. DRM does not stop piracy, just as gun laws don’t stop criminals from getting guns, just as airport security does not stop real terrorists.