I'm doing a course on intellectual property law this semester and the question I chose is on DRM and that open letter Steve Jobs wrote earlier this year. The question is:
In an essay, “Thoughts on Music”, Steve Jobs of Apple Computers has
suggested that technological protection measures should be abolished: “Imagine a
world where every online store sells DRM-free music encoded in open licensable
formats.” Do you agree?
When I started writing I didn't know much about DRM so I've been learning a lot about the technology and consequences it has as well. The arguments I've read are pretty much new to me too so below is my first draft - it is 2500 words if you can be bothered to read it and give me some feedback, footnotes ommitted...
Steve Jobs’ open letter, Thoughts on Music, has called for abolishing Digital Rights Management (DRM) in online music stores, as imposed by holders of the music’s copyright. DRM in this context refers to any access control technology designed to limit the use of digital audio content over electronic devices such as computers and portable media players.
This paper is a response to Job’s essay and aims elaborate his argument why DRM measures developed for music sold in online stores should be removed, focusing on the legal and economic realities of international copyright law.
Consumer Interests
DRM has attracted fierce critical response from technology commentators and purchasers of online music. David Berlind , has claimed the label ‘DRM’ a misnomer, and suggests a more creative use of acronym: CRAP (Content Restriction, Annulment and Protection).
It is not difficult to see why DRM attracts opposition from music users, as it can act to restrict uses consumers ordinarily expect to have access to. One example is the lack of industry wide standards on DRM systems, decreasing consumer utility in one of two ways:
• Incompatibility of audio content between device manufacturers. E.g. between the Apple Ipod and the Microsoft Zune.
• Incompatibility of audio content as a result of software updates. E.g. the incompatibility of the Microsoft Zune player with the company’s previous DRM system PlaysForSure. Thus making Zune players compatible only with content purchased in the Zune marketplace.
Copyright Holder Interests
Jobs refers to the four largest recording labels: Universal, Warner, EMI and Sony BMG, who control over 70% of the world’s music, as the main antagonists of DRM in online music sales. It should be noted that recent developments since the online publication of Job’s letter have occurred, notably, the decision of a DRM-free licensing agreement between ITMS and EMI under the ITunes Plus catalogue . These developments will be explored further, but it is the case that a significant majority of online commercial music is controlled by the global recording industry, which has consistently resisted calls to abolish their DRM systems.
The goals of these copyright holders is simple: to protect revenue streams created from the sale of online music, which they argue would be otherwise compromised by the prevalence of online piracy and file sharing in the absence of DRM systems.
Conflicting Interests and Unintended Consequences
The goals of the consumer and copyright holders thus result in an astigmatism of goals and interests. Where the copyright holder seeks to achieve anti-piracy objectives, DRM also creates unintended adverse effects for the consumer. Indeed, Bill Gates has commented that DRM ‘causes too much pain for legitimate buyers trying to distinguish between legal and illegal uses.’
Does DRM go too far and give too much power to the copyright holder? The following section details how DRM has the effect of circumventing the development of legal fair use provisions, representing an unfair balance of power for the copyright holder to exclusively determine the limits of intelletual property law.
DRM and the Law – Breach of Fair Use Provisions
‘Fair use serves a crucial role in limiting the reach of what would otherwise be an intolerably expansive grant of rights to copyright owners.’
Legislation in the United States provides for a flexible and judicially responsive defence of fair use to copyright content, known as the four-factor test, which deliberately omits a precise definition. This ambiguity is considered an important feature to the process of defining the limits of copyright protection, particularly when consideration is given to the development of previous technologies that have allowed for potential copyright infringement.
For example, in Sony Corp. of America v. Universal City Studios, Inc, the US Supreme Court ruled that time shifting of television broadcasts for domestic purposes through the Betamax VCR constituted ‘fair use’. Fair use time shifting has subsequently become an important and entrenched exception to copyright laws for users.
Australian intellectual property law has failed to emulate the broad and judicially interpretative US model. However, it is important that the integrity of the US test be maintained since it serves to set a benchmark for international fair use standards. The substance of the US ruling has been widely accepted into Australia law, and recently codified into amendments to the Copyright Act under more narrowly defined specific subject matter provisions.
While the government described such changes as ‘common sense amendments’, it is interesting to note that many intellectual property academics at the time of the Sony trial did not believe time shifting involving an entire reproduction should consistute fair use.
The problem with DRM is that it retards the process of determining legitimate fair use activities. Because users are not only denied the legal, but actual ability to use digital audio content freely, there is no way for the judicial test of fair use to apply and adapt to new technologies such as the online distribution of music. Indeed,
Unless the public has the opportunity to experiment with new technologies, courts will not have the opportunity to test them against the fair use doctrine
DRM thus has the practical effect of allowing copyright holders, rather than the courts to determine the limits of copyright law and fair use.
However legislators have done little to address the issue, rather enacted provisions that candidly endorse the unreasoned power wielded by copyright holders through DRM. Article 11 of the World Intellectual Property Orgnisation Copyright Treaty dictates member parties ‘shall provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors…’
US compliance occurred with the enactment of the Digital Millennium Copyright Act, which prohibits the circumvention of technological measures designed to control access to works, thus giving legal backing to the effect of DRM.
Nonetheless, it is probably unnecessary for legislators to intervene through legal reform. While the interests of consumers are clearly heightened in the absence of DRM, will it also serve the interests of copyright holders?
Recording labels have vehemently argued the necessity of DRM to retard the intensification of music piracy. However the remainder of this paper discusses the irrationality of the anti-piracy argument and why DRM systems attached to online music are destined to fail, with particular focus on the economic and practical realities of the online music market.
DRM, Anti-Piracy and Assumptions of Human Behaviour
Jobs has correctly recognised that ‘DRMs haven’t worked, and may never work, to halt music piracy’, arguing that the same record labels pushing DRM also sell many more CD’s than online music, which do not carry any DRM at all.
A major reason stems from the technical restrictions of DRM technology. Jobs claims, ‘No DRM system was ever developed for the CD…these same music companies continue to sell billions of CDs a year which contain completely unprotected music’. This statement is largely accurate with a few notable exceptions such as Sony BMG’s attempt in 2005 to introduce its XCP Control Software into audio CD’s, which failed for various legal and technical restrictions.
Thus, the inability to attach effective DRM to CDs mean any protection measures to online music will be largely redundant. Copyright holders may argue that while music piracy is no where near being eliminated, DRM measures should be seen as just one part of an enforcement regime, and does play a valid role in its fight against copyright infringement.
For example, in tackling the proliferation of unauthorised illegal file sharing though P2P online networks, the Recording Industry Association of America (RIAA) has commenced legal action against prominent file sharing platforms as well as individual downloaders.
Hence, DRM cannot be seen as representing a singular solution to music piracy, rather part of a concerted effort i.e. at least some protection is better than no protection at all. Furthermore, the existence of DRM may act as a deterrent to consumers by signalling that the recording industry is taking an aggressive approach to fighting piracy.
However, this position cannot be maintained once logical assumptions about human behaviour are analysed.
Firstly, it is necessary to look at the mentality of individuals who choose to download music from online music stores such as ITMS. Such users represent a small minority of the individuals that download music online. Although there is no official aggregate count of total legal online downloads, the ITMS which has been estimated to hold a dominant 70-80% market share of legal online downloads recently surpassed its 3 billionth downloaded song.
In contrast, though measures of illegal download counts are even less accurate, there is little doubt illegal file sharing activities far outnumber those of legal music downloads. A study conducted in 2005 by the International Federation of the Phonographic Industry estimates that almost 20 billion songs were illegally downloaded in that year alone.
It is not difficult to imagine why this might be the case. An obvious reason is that illegally downloaded songs are free. Moreover, by their nature, illegally obtained music must also be DRM-free. Why then, do some consumers choose to legally obtain music online? Reasonable assumptions concerning moralistic views against copyright infringement or possibly fear of legal reprisal might be advanced, though the specific detail is not important.
Regardless of the reason, it is crucial to note that this sector of the online music consumer market actively chooses to not engage in illegal downloading. Given this, why would an ITMS customer choose to breach the ITMS user licence agreement – such as purporting to file share - even in the absence of DRM? If an individual desired to engage in copyright infringement, or at least circumvent DRM technology for the purposes of doing so, then it would much easier, simpler and virtually free to obtain their music from an illegal source free of DRM, rather than a legal online music store.
Hence DRM such as FairPlay makes the incorrect assumption that its customers are likely to engage in piracy. In this way it is a needless measure because it seeks to enforce prevention of copyright infringement against the individuals least likely to engage in such activities.
While DRM has been said to be harmful to consumer interests, to what extent has DRM detrimentally affected the interests of copyright holders?
Loss of Goodwill
Firstly, anti-piracy techniques such as DRM have led to strong opposition from consumer and free software groups.
The consumer advocacy website
www.sonyboycott.org was established for the purpose of promoting a boycott of all Sony products as a response to its corporate practices, but in particular, the 2005 XCP software control incident which sought to introduce DRM CD’s.
Another organisation identifying itself as part of the anti-DRM movement, Defective by Design, organised an international day against DRM whereby protesters campaigned to raise awareness of the consequences of DRM technology to a wider audience outside the technology enthusiast population.
Although it is impossible to accurately calculate a monetary loss to brand equity and goodwill as a result of DRM, it is clear such measures do play a role in alienating music vendors from a legitimate customer base.
Loss of Sales
DRM software involves ‘crippling’ the copyrighted content and limiting its operation to authorised uses. Hence it is the case that legally obtained music is inferior to those obtained through illegal sources.
An independent study by the University of Berkley concluded, ‘a certain contingent [of participants] valued the freedom they had with unprotected digital music files’ , indicating a significant demand for DRM-free files. This is consistent also with the increased spike in sales of song released in the DRM free Itunes Plus format.
Costs of Implementation
Finally, DRM entails direct costs to implement and operate. Potentially even greater costs are incurred when the DRM encryption system has been compromised, and copyright holders must pay DRM vendors for software updates in a never ending technology race against those Jobs describes as the:
… many smart people in the world, some with a lot of time on their hands, who love to discover such secrets and publish a way for everyone to get free (and stolen) music.
Conclusion – Trends and New Strategies
DRM is a redundant technology because it does not, and cannot stop online piracy, leaving the only consequences to stakeholders negative and harmful. Moreover, as a principle of copyright law policy, DRM should not allow copyright holders to stymie the development legitimate fair use exceptions as they have developed in the United States.
However while legislators are unwilling to address issues concerning its abuse of the fair use exception process, it is likely the market will act to eliminate its use anyway, given its deficiencies and costs to copyright holders.
Virtually all independent labels have embraced DRM-free music for many years and the trend of resisting DRM has already begun to influence the major record labels. In April 2007 EMI announced that tracks on its label would be launched in the DRM-free Itunes Plus format, sold separately as more expensive, but higher quality audio files. Just two months after its release EMI Senior Executive, Lauren Berkowitz, commented ‘The initial results of DRM-free music are good’, citing sales of Pink Floyd’s Dark Side of the Moon album which rose by 350% since released DRM-free. Other major labels have been reported as monitoring the EMI decision closely.
The advent of online file sharing and internet music retailing presents a significant paradigm shift for record companies and other copyright holders, though it is not without its historical duplicities to which lessons from the past may be learned. During the Sony case, motion picture studios feared home videotaping would destroy the viability of the movie industry. Jack Valenti, then head of the Motion Pictures Association of America testified to the Committee on the Judiciary House of Representatives:
I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone
However, the VCR, which never developed any DRM is often credited for ‘increased profits for Hollywood film studios, which garnered new domestic and international markets for their latest film hits’.
A similar phenomenon is occurring in the more recent war over online music copyright. RIAA President, Cary Sherman, claims:
There's no minimizing the impact of illegal file-sharing… it ultimately undermines the future of music itself
However empirical studies consistently reveal that, ‘downloads have an effect on sales which is statistically indistinguishable from zero.’ Indeed, many studies indicate the ability to share files freely may actually have a positive effect on legal music sales, since it allows users to learn about music they would not otherwise be exposed to .
File sharing represents an inevitable evolution to the sale and distribution of music in an age of increasing connectivity and digital possibilities. Copyright holders must look toward alternate, long term strategies, possibly involving a substantial revision of existing business models in order to survive and thrive in the new music market, though it is clear the shortsighted response of closed format, DRM protections are not the answer.
