Posts tagged as:

drm

Spore: DRM and commercial strategy

by Andrew Watson on 17 October 2008

Just because you can legally and technically lock something down doesn’t mean you should. Earlier this week I wrote about DRM in the context of RealDVD and using it as a hook to provide other restrictions. The ongoing saga over Spore‘s DRM is an example of where maxmizing restrictions on users through DRM can backfire commercially.

The short version of the Spore story is that Electronic Arts (EA) spent tons of money and used game designer hotshot Will Wright (The Sims) for a new highly-anticipated massive online game: Spore. The game shipped with DRM technology that limited it to three installs, which could cause problems for users who have hardware failures or regularly wipe and install on their machines.  There was a backlash and EA has since changed around the settings and increased the install limit (though apparently not before a class action lawsuit over the DRM).

A comment yesterday from Will Wright (via Kotaku) about the decision to use DRM in Spore got me thinking further about DRM and strategy:

It was something I probably should have tuned into more. It was a corporate decision to go with DRM on Spore.

***

I think it’s an interim solution to an interim problem. … I think we’re in this uncomfortable spot in going from what’s primarily a brick and mortar shrink-wrapped product to what eventually will become more of an online monetization model.

When DRM starts to get genuinely in the way of the user experience is when companies should strongly think about how the legal and commercial strategy fit together.

In this case, it’s a question of managing expectations on the part of consumers: trying to lock users down to specific limits versus the expectations around ownership after purchase. EA had restrictions that didn’t meet customer expectations and so their product launch was marred by some controversy.

What I think is really interesting is to compare the experience of EA and Spore with the Real DVD / DVD-CCA situation. The DVD Copy Control Association isn’t directly consumer facing – it targets manufacturers and developers around DVDs.  As a result it can act with less consumer outcry because its restrictions happen across an entire platform (DVDs) versus EA and Spore. Spore is one specific type of product out of a sea of other products and platforms (one game among many different games on different hardware with different DRM models).

It is far less noticeable from a consumer point of view when an entire media set such as DVD and DVD players all have the same restrictions (such as Regional Playback limiting use to specific geographical areas) no matter what product you buy from any manufacturer.

Both decisions to use DRM however were tied to preserving a business model in light of ongoing innovation. One was tied to a specific product (Spore) and the other tied into setting standards for an entire market (DVD-CCA).

All of the commentary above does however sets aside some of the larger issues around DRM, including whether the arms race against hackers makes it ultimately a worthwhile pursuit, as well as legal and policy issues surrounding fair use / fair dealing and DRM / TPMs that restrict these rights.

But those discussions will have to be for another post.

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Beyond IPRs: strategy around DRM

by Andrew Watson on 14 October 2008

I just finished reading the analysis by EFF‘s Fred von Lohman of the RealDVD case, Why Hollywood Hates RealDVD, and it highlights pretty well other strategies beyond using intellectual property laws directly to try to protect a position, specifically around DRM.

The case involves software that creates a back up copy of a DVD onto a hard drive for later playback. DVDs are protected by an encryption framework called CSS, or “Content Scramble System” (and not Cascading Style Sheet). This is a kind of Digital Rights Management (DRM) or Techincal Protection Measure (TPM), and circumvention of these kinds of technical restrictions is protected by laws such as the DMCA (in the US), the EU Copyright Directive, and the WIPO Copyright Treaty.

CSS has been hacked (DeCSS) and so there is no shortage of decryption/ripping software available online (for example Mac the Ripper and Handbrake) that allows for copying a DVD to a hard drive. CSS is thus hackable with ripping software freely available, but in the US under the Digital Millennium Copyright Act (DMCA) there are court cases that say this kind of circumvention of a DVD’s CSS encryption (to make a personal back up copy) is against the law.

The DVD Copy Control Association (DVD-CCA) officially controls descrambling CSS through licensing the CSS technology. DVD manufacturers (and software developers) must agree to the DVD-CCA’s terms to make DVD players – which incidentally include Regional Playback Control (RPC). RPC is the reason why your US DVDs won’t play in your UK DVD player. So if you create and distribute an unlicensed DVD decryption tool, you risk a lawsuit from the DVD-CCA and if you get a licence from DVD-CCA, you have to agree to all the terms that they impose, which include restrictions on other ways a DVD can be used (such as playing a British DVD in America).

RealDVD, a product of Real Networks, copies a DVD’s contents to your hard drive (while you keep the DVD itself) to allow for convenience of playback off your computer or other device. RealDVD is licensed by the DVD-CCA for the CSS decryption elements, so it’s a consortia member. So the set up from a wider market/legal perspective is:

  • People can freely, easily, (and illegally) download movies from places like The Pirate Bay over the internet [a big source of copying and infringement for content creators];
  • People can freely, easily, (and potentially illegally) obtain software that decodes CSS and rips DVDs to their hard drives (using programs such as Handbrake) [also a big source of copying - though not always infringing];
  • A DVD-CCA licensee (RealDVD) is making a program that allows users to copy DVDs that they own to their hard drive (format shifting) for convenience (which is likely fair use in the US).

Even though RealDVD has a licence, the DVD-CCA views the licence as requiring the physical DVD to be present on playback (thus the lawsuit and RealDVD being taken offline). Real disagrees and believes that the DVD-CCA agreement allows for their product. Fred von Lohman thus asks the question, in light of widespread piracy and infringement in other areas:

Why does Hollywood [DVD-CCA] care so much about RealDVD in the first place?

Fred’s answer (emphasis mine):

DRM systems like [CSS] used on DVDs are not principally about preventing piracy. Rather, DRM is the legal “hook” that forces technology companies to enter into license agreements before they build products that can play movies (Hollywood lawyers candidly admit this “hook IP” strategy). Those license agreements, in turn, define what the devices can and can’t do, thereby protecting Hollywood business models from disruptive innovation.

***

So that’s the real story here. It’s not about piracy. It’s about Real defecting from the DRM licensing cartel, building what consumers want now instead of negotiating endlessly for a spot in Hollywood’s next Five Year Plan for the DVD format.

So DRM weaves a web of legal protection that guides hardware manufacturers and software developers in the DVD space to sign on to a set of restrictions (the DVD-CCA licence) on how they innovate. This system is backed up through litigation against those that develop without a licence and those with a licence but try to develop “off plan”.

From a strategy standpoint, I’m wondering:

  • How well does this strategy work with if you have less emphasis and less resources on litigation? Generally the US content industry has been very litigious, which can be very resource intensive and can have negative consequences in other areas (such as PR and customer relations).
  • Related to above, how well does the litigation component – which funnels innovators and manufacturers into the consortia – work outside of the United States? The United Kingdom, for example, does not have civil statutory damages for copyright infringement, which is a big weapon in the US when threatening a copyright lawsuit.
  • If Real wins, what options do DVD-CCA have for maintaining their position?

What do you think?

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