May 22, 2017

DRM by any other name: The latest from Hollywood

Sunday’s New York Times had an article, Studios’ Quest for Life After DVDs. To nobody’s surprise, consumers want to have convenient access to “their” media, wherever they happen to be, without all the annoying restrictions that come into play when you add DRM to the picture. To many people’s surprise, sales of DVDs (much less Blu-ray) are in trouble.

In the third quarter, studios’ home entertainment divisions generated about $4 billion, down 3.2 percent from a year ago, according to the Digital Entertainment Group, a trade consortium. But digital distribution contributed just $420 million, an increase of 18 percent.

Given that DVDs are really a luxury good (versus, say, food or electricity), the 3.2 percent drop seems like Hollywood is getting off easy. The growth in digital distribution is clearly getting attention, though. What’s going on here? I imagine several things. People sometimes miss their shows. Maybe the cable went out. Maybe the TiVo crashed. Maybe they’re on the road. Drop $2 at the iTunes Store and you’re good to go. That’s attractive and it’s real money.

Still, the article goes on to talk about… yet more DRM.

Standing in the way are technology hurdles — how to let consumers play a video on various devices without letting them share it with 10,000 close friends on a pirate site — and the reluctance of studios to cooperate too closely with rivals for reasons of antitrust scrutiny and sheer competitiveness.

And piracy, at least conceptually, would be less of a worry. The technology [Disney’s Keychest] rests on cloud computing, in which huge troves of data are stored on remote servers so users have access from anywhere. Movies would be streamed from the cloud and never downloaded, making them harder to pirate.

Of course, this is baloney. If it’s going to work on my iPhone while I’m sitting in an airplane, the entire video needs to be stored there in advance. Furthermore, if the video is supposed to be “high definition,” that’s a bare minimum of 5 megabits/sec. (Broadcast HD is 20 megabits/sec and Blu-ray is 48 megabits/sec.) Most home DSL or cable modem connections either will never go that fast, or certainly cannot maintain those speeds without hiccups, particularly when sharing the line with other users. To do high quality video, you either have to have a real broadcast medium (cable, over-the-air, or satellite) or you have to download in advance and store on a hard drive.

And, of course, once you’ve stored the video, it’s just not that hard to extract it. And it always will be. The challenge for Hollywood is to change the incentives of the game. Maybe sell me a flat-rate subscription. Maybe bundle it with my DSL provider. But make the experience compelling enough and cheap enough, and I’ll do it. I regularly extract video from my TiVo and copy it to my iPhone via third-party software. It’s practically painless and it happens to yield files that I could share with the world, but I don’t. Why? Because there’s real downside (I’d rather not get sued, thanks), and no particular upside.

So, dearest Hollywood executive, consider that selling your content for a reduced price, with no DRM, is not the same thing as “giving it away.” If you allow third-parties to license your content and distribute it without DRM, you can still go after the “pirates”, yet you’ll allow normal people to enjoy your work without making them suffer for it. Yes, you may have kids copying content from one to the next, just like we used to do dubbing cassette tapes, but those incremental losses can and will be offset by the incremental gains of people enjoying your work and hitting the “buy” button.


  1. It’s not just the piracy. They also want you to pay for the copy on the Tivo, and the copy on the iPod, etc. You get value out of converting formats, they want a piece of that value.

    Ask yourself, what would a robber baron capitalist do?

    • can be assumed to behave in whatever fashion maximizes their profit. I’ll argue they make more money by avoiding DRM entirely, thus keeping honest customers happy, while focusing on legal attacks to shut down bulk sharing sites, BitTorrent seeds, and so forth, thus making dishonest customers less happy.

      Of course, perhaps the best revenue maximizing strategy for the robber baron who wants it all is to go back in time and destroy general-purpose computers, the Internet, and so forth. It’s quite amusing to read old quotes where 1920’s musicians were worried that recorded music was going to destroy their income. (“Why would somebody want to pay for a live show when they’ve got a recording?”) Similarly misguided, ostensibly revenue-maximizing, policy positions can be found throughout the history of Hollywood and the music industry.

      • I think your assumption is incorrect. Historically robber barons have acted to maximize their share of profits/revenues without all that much regard to the total amount of same. Which actually makes sense economically once you abandon the notion of utility as some directly-proportional function of money. (Most economists who bother with such things model utility as proportional at most to the log of money, often not even that.) For people (like the media moguls) whose utility function also has a large admixture of celebrity and personal power, being undisputed ruler of a smaller pond is definitely more desirable than being first among equals in a large lake.

        That’s one of the reasons that new technologies have often had such disruptive effects on media-company management: in general, only by going outside the regular domain can people build up power bases sufficient to challenge ruling cliques.

      • What you describe — living with (potential) widespread piracy — is not a business that they feel that they know or like. They were happiest in a world of difficult, lossy copying, and they’d like to go back to their happy place, and that makes for an easy sales pitch for DRM snake oil salesmen.

        I think, also, that they had a lovely run selling to impulsive teenagers and recently ex-teenagers; quick to spend, easily influenced by marketing and peer pressure — but also a little careless about the niceties of the laws that “don’t hurt anyone” when broken, and not terribly worried about the penalties. There’s other customers out there, but I am guessing that they will never yield the insanely profitable “big hit”. (When was the last time you heard about Charles Ives or Steve Reich being widely pirated?)

        Hmm. If you haven’t read The Winner-Take-All Economy by Robert Frank, you should. It doesn’t hurt to think about the incentives that these guys have. There’s an argument that our less-and-less progressive tax code (over about the last 50 years) shifts the motivation more to money, and less to love of whatever the job (extrinsic vs intrinsic motivation, my spy into the business world says that MBA students mis-translate this as “Pay people less, they’ll like their job more” — without ever, ever thinking that it might apply to them, too)

        And absolutely, you should read Frank’s two books, TWTAE, and Luxury Fever. They provide some insight into human economic behavior, and critically, they (unfortunately for the Free Market Faithful) undermine two of the assumptions (rational actors, independent utility functions) needed to prove mathematically that a free market is utility-maximizing (for certain definitions of utility, of course — even your the choice of norm is a political one).

        I note that you assume independent utility functions in your reply (modest slice of giant pie) whereas the other reply-er assumes dependent utility functions. If the two phrases “keeping up with the Joneses” and “pissing contest” made no sense to us, I would agree with you, but unfortunately, we know exactly what they mean.

        • I guess I never stopped to consider that the music/movie industry barons might be less interested in absolute revenue maximization than in increasing their relative market share. That sort of utility function might even explain why music goes in such waves of similarity. The Beatles are a hit? Quick, manufacture the Monkeys! Nirvana is a hit? Go find more grunge bands from Seattle! Get me a piece of that pie!

          From that perspective, DRM snake-oil sounds very tasty. A DRM vendor promises to lock in the current world order and lock out all that disruptive new business model stuff.

  2. > I could share with the world, but I don’t. Why?
    > Because there’s real downside (I’d rather not get sued, thanks),
    > and no particular upside.

    The downside is minuscule if you weight it according to the probability of your being sued. It is also possible to take steps which could minimize your losses even if you are sued.

    Depending on what economic model you believe in, there _might_ be an upside in that the media companies will be forced to lower their prices and/or come up with a more convenient distribution model. And this is only thinking about the possible upside for you personally. There are probably a lot more people who don’t know how to transfer their media between formats or overcome DRM, and they would benefit from being able to download your file, instead.

    OTOH, there might also be a downside to sharing with the world, in that the media companies might make less money and produce less content for you to consume.

  3. what could possibly be more important than than the preservation of an endangered business model? our freedoms? pfft!

  4. Clive Robinson says:

    If we assume for the moment that DRM is only about stoping piracey then what is needed is traceability in every copy back to an original purchasor.

    Effectivly a tamper proof embeded serial number, which is stored against the purchasors details.

    The number of bits required is very very small compared to the number of bits or even frames in a 30sec advert (as little as 32bits per title is more than sufficient).

    Thus a multilevel watermarking scheme that is hidden in a title dependent manner can be made very very difficult to remove without noticably effecting the quality of the image or sound track. Arguably it can be made an artifact of frame usage.

    If this is done on each individual download then the original digital media purchasor can be traced back to the purchasor.

    It would then be upto the purchasor to show they had not been responsable for the release.

    Oh and with a little thought you will realise that if done correctly the watermark will go through all current transcoders and conversion systems and thus remain on a “re-recording” done in the visable spectrum…

    • Two problems with watermarks:

      1) What happens when botnets start stealing watermarked files and reposting them? If you’ve got 100% proof that a particular 13-year old’s copy of the latest song is the one being widely circulated, can they claim it wasn’t them who did it?

      2) They’re actually pretty easy to remove. See our paper on the SDMI challenge.