I wrote yesterday about the new Cato Institute paper on the economics of peer-to-peer and anti-copying technology, which argues that everything will be okay in the online-music market because competition will force vendors to offer consumer-friendly products. I agree that a competitive market would have this effect. But how competitive is the market?
One of the more interesting sections of the Cato paper is about interoperability (pp. 8-9), or the ability of different DRM systems to work together. If a buy a file in one system, can I move it to another system? If two devices implement different DRM systems, can I transfer a file from one device to the other? If my DRM vendor goes out of business, do I lose access to my files?
The Cato paper says that DRM interoperability is good, and that progress is being made. I agree with the first part but I’m not so sure about the second. It’s not clear that we can rely on the DRM vendors to make their products interoperable – they have little incentive to help their customers switch to competitors’ products. Are there alternatives? Here’s the Cato paper:
Unilateral solutions may exist. In its present Harmony service, RealNetworks enables the compatibility of its RealPalyer Music Store tracks with both Apple’s iPod players and players compatible with Windows Media Audio (WMA). RealNetworks acomplished that by producing WMA files and integrating Windows Media Player on the user’s PC (both of which are permitted by Microsoft) and by reverse engineering Apple’s FairPlay DRM file format (which Apple may yet legally contest). In another potential solution, RapidSolution Software of Germany now offers software (called Tunebite) that allows users to re-record any file played on a PC by simple loopback through the PC’s audio card; songs are stored in an open format for later use. Parties differ as to whether the technology legally breaches access protection.
In other words, these products provide public benefits, but they might be illegal. One would expect, at this point, a policy discussion about why it might be wise to ensure that such products are legal. But that is not forthcoming. The authors just change the subject and talk about something else.
This flaw – extolling the virtues of competition, but failing to follow up by recommending pro-competition policies – seems to run throughout the otherwise excellent Cato paper. It makes sense to rely on market competition to blunt the potential downside of DRM. That strategy will only work if we adopt pro-competition policies, or at least reverse the anti-competition aspects of our current policy. Talking about competition is good; but having competition is much better.
