The DC Bar Association had the excellent idea of pulling together a panel to go over DRM technology for lawyers, the first in a series of three DRM panels they are doing. So I went and sat meekly in the audience, and very nearly went mad... once again we see a grossly over-simplified paradigm of DRM--it is supposed to be "content versus consumers," a dichotomy so utterly false that again my mental reaction was that of the cats and the sliding door.

The presentation that nearly drove me around the bend was Adam Goldberg's. His thesis was that with DRM, consumers pay more but do not realize any benefits; indeed, their technology does less.

One difficulty is, as AG himself noted, without DRM the content in question might not reach the market at all. The full import of this point was, I feel, lost on him. It really is pretty important to consumers that, bottom line, markets for content exist. Really. That is pretty central. An economist might describe the consumer interest in DRM a "constitutional interest," that is, their interest in having a general rule for the group as a whole, whereas their more immediate interest in grabbing whatever they can get their hands on free and clear is the "action interest," their interest in a particular short-term case. In considering policy, the constitution interest is vastly more important.

A second difficulty is this. When considering the bargain that consumers get with DRM, AG deemed it less... than what? Here it gets tricky... what are we comparing it too? Less than the exact same content without DRM? But that is a fundamentally different transaction with a quite different supply and demand curve and quite likely a different price as well. If one is comparing it to a content bundle that a consumer would have purchased in the 1970s, well, the technology is vastly different as well. Either way, the consumer is certainly getting more in other senses--with music, the ability to buy, say, individual tunes instead of bundles, or with DVD, the ability to buy or rent entire television series without the ads.

And a third difficulty... DRM certainly adds costs, in the sense of accounting costs. Development costs, implementation costs, other costs. But it may reduce other types of costs--the cost of casual pilfering (if not determined piracy), the cost of enforcing through the legal process. All in all, it will not necessarily add up to a higher price for consumers at all.

1) Price is fundamentally not a reflection of costs, but of supply and demand.

2) Further, as a general rule, costs are not fixed. So if a producer chooses expensive DRM and prices his DVD's (say) at $100.00 each, like a moron, ignoring supply and demand, well, he's going to be faced with drastically reduced demand. And his response will be to seek to lower his costs. And he will likely succeed, since there is absolutely no reason that the cost of DRM, whatever it is, is fixed.

3) Since without DRM there is quite likely to be no market at all, and with DRM potentially quite a large market for all kinds of content, on the whole, consumers are just as likely to find prices falling, not rising. Particularly if the DRM allows the unbundling of things that have always been bundled (songs, say, or movie clips). By comparison, what would the price to consumers be if the content ceased to be sold at all?

On the whole, it makes as little sense to view DRM as something for which consumers pay but receive no benefit, as it does to view a lease as something for which renters pay but receive no benefit. Yes, it does impose constraints, but without it, nada. Ultimately, the only true cost is opportunity cost.

posted by Solveig Singleton @ 9:17 AM | DRM & Watermarks, etc.

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