Media Heresy - DRM destroys value

People find the familiar comfortable. They want things to be like they were. So when technology did away with scarcity of recordings by making perfect copying easy, they wanted to change things back, to make these digits behave like physical goods.

This is where the dream of DRM comes from - making digital goods scarce, and enforcing payment.

Now using machines to enforce laws is bad. They have no capacity for mercy, latitude or leeway.

And all DRM is readily circumvented as, eventually, it has to turn into patterns of light and sound for people to see and hear, and at this point cameras and microphones can record it. So for the determined adversary, it will be broken.

What this means is that DRM can never thwart the real enemy, it can only annoy the legitimate customers, and they will thus Pay less for the product, or not buy it at all.

There is a very odd reward curve here - the paying customers are getting less value than the non-paying circumventers. DRM is all stick and no carrot.

It is for this reason that DRM destroys value, and business models based on DRM always fail.

The putative counter example at the moment is the iTunes Music store, but as Apple ships a circumvention device with the application, by allowing you to burn the songs to CD, the case is unproven to put it mildly. Remember, the $7M that Apple has grossed from the iTMS is small change to them; they make many times that from selling iPods.

If the labels succeed in making iTMS Windows stricter it will sell fewer songs.

This week I have been reading Hernando de Soto's The Mystery of Capital in which he explains how US property law changed to recognise what was really happening on the ground, rather than what the large landowners wished for. This set off the accumulation of capital that made the US the wealthiest country in the world.

Last week I read The Perfect Store about how Pierre Omidyar created a market for goods online, that was built on mutual trust, and it grew to become eBay, the most profitable of all online businesses.

The time is ripe to do the same for online media, and create a marketplace that reflects people's desires and trust.