Freshness vs. Convenience vs. Value
When watching movies, I have several options. I can
- Go to the movie theater
- Wait for the movie to be available on video or DVD and rent it
- Wait for the movie to be available on video or DVD and buy it
- Wait for a movie to show up on pay-per-view and rent it
- Wait for the movie to be available online legally and download it
- Wait for the movie to show up on free TV and watch it or record it then
- Download it illegally
Those are basically all the options I have. Let’s examine what the drivers behind a particular choice my be:
- Freshness: I want access to the latest movie as soon as it’s viewable
- Convenience: I want to watch the movie where and when I decide
- Value: I want to pay a fair price for the entertainment value I get out of that movie
If we start mapping each of those against the currently available options, patterns emerge: In order to get freshness, I have to sacrifice convenience (since I have to go to the movie theater and watch the movie at a set time) and pay a value premium (since I have to pay the price of a movie ticket, which also gives me access to a larger screen, better sound, and a shared experience). In order to get convenience (download, rent, or buy), I have to give up freshness (as movies are released in theater first and available in other media later) and pay a little extra (price of rental or purchase) than I would if I waited for the movie to be free on television. Last but not least, if I want to watch the movie for free legally, I have to give up freshness (since movies are released to TV stations at the tail end of the release cycle), deal with less convenience (I either have to record the movie or watch it on the station’s time and date and, if I want the completely free option, I have to agree to watching some ads in the middle of the movie) . If I’m willing to break the law, I have to give up convenience (have to hunt down the movie on a peer to peer network, then make sure the download works properly, then check that no virus has been embedded. To add to the problem, the quality of “fresh” movies available over those free networks is generally bad, with sound and image generally being of low quality.
DRM can be good
Now imagine a system where I could get all three. A system that I would call “FairShare.” In a FairShare system, I get access to everything for the right price and with maximum convenience. If a new movie is released, I can pay a premium to have it immediately available in my house on the same day as it is available in the theater but here’s the catch: I have to pay for that extra convenience. So I may have to pay more for that movie than if I went out to see it in the theater but I get the convenience to play it at home on my own clock. How much would I pay for that convenience? Well, it depends. Part of the pricing here is the value equation: do I want to watch it alone at home or am I having a party with friends. Is this a movie I really want to see now or can it wait a week, a month, or longer. Can I haggle over the price?
That last part is important. Looking at the Ebay economy, we can now figure that there are certain price points for just about anything and that those price points, when left to the customer to decide, are generally within a standard deviation of the actual price of an item. What if there were marketplaces for movie download rights? Let’s take a highly anticipated release (the next Star Wars, for example). Some people would probably be willing to pay a high premium in order to see it at home with their friends? Just looking at the US box office returns for Episode 2, Attack of the Clones one clearly sees the importance of freshness: The movie made $110 million in its first week (bolstered by a first weekend take of $80 million), $90 million in its second week, and $31 million in its third week. That means people would have been willing to pay a premium to see the movie in week one and two but less of one in week 3.
Once the price has been set, it then only become a question of proper DRM licenses being available. For example, I use a service called Movielink. It’s got a collection of movies that can be downloaded for anywhere between 99 cents and 5 dollars. In that price range, the movies are about the cost of a video. However, I don’t have to worry about returning them and, while choice is currently limited, it’s pretty convenient. Granted, I’m not the regular user in that I already have a computer connected to my big screen television, but the convenience is worth the price.
I think I could technically make a copy of a movie I download and give it to a friend. What would happen when they run it? Well, the same thing that happened to me recently. I wanted to rewatch one of the movies I rented and had watched previously. When I went to start it, a screen popped up, asking me if I wanted to re-enable rights for 24 hours at a substantial discount (99 cents vs. the $4.99 I had previously pay for the rental). Had I rented that movie in the video store instead and wanted to go through the same experience, I would have paid for the price of a rental twice. Once I started using the service, I noticed it also altered my buying pattern. When I rented a movie I liked, I might buy it on DVD if I wanted to play it more than once. The cost of a DVD generally is between 10 and 20 dollars. However, when I started downloaded, the replay for 99 cents feature started to make the cost of buying a DVD look expensive by comparison. While I do replay movies I bought, I don’t replay them often enough to warrant a 20 dollar price point (that would be equivalent to replaying a moving I downloaded 15 times.)
What happens here is that the product is priced properly and even competitively, compared to other alternatives. In a FairShare model, those prices would vary and all movies, either still in theater or released decades ago, would be available at prices that would fluctuate based on demand. For example, movies from 1890 may not be very popular but I’m sure there are hundreds if not thousands of people around the world who might want to watch those. At a couple of dollars a piece (or local currency equivalent), that’s thousands of dollars left on the table. Multiply that by hundreds of thousands and you’re talking about potentially billions of dollars left on the table by business and potentially tens of thousands of gems that are currently unavailable to the public.
Shopping for legal music
Of course, all this works because I am dealing with a single device and a single model. However, DRM becomes evil when it is limiting and tries to tell me what to do and where I should do it (hence reducing my convenience). For this, I will bring up another example. I recently heard a music album that sounded good. Now, in the post napster, free-music-for-all, world we live in, I could have easily downloaded it from a P2P network and kept it at that. For my own enlightenment, I decided to actually look for the album (not a single track but the whole album) on one of the P2P networks, confirming a suspicion I had: Popular tracks do show up on those networks but less popular tracks from an album do not. As a result, it is impossible to get a good feeling for an artist’s work beyond the hits.
My curiosity satisfied, I decided I would go and try to buy the album from a downloadable service. Before I go any further, let me explain what I expect from tracks purchased online: I own several computers running several operating systems (OSX, several versions of Microsoft Windows, and Linux, primarily); I also own a Treo, which I use as my portable MP3 player. Why that device in particular? Because it combines my GSM phone, PDA, and MP3 player all in one and can hook up to the different operating systems I mentioned above. It’s the ultimate in choice and portability as I do not want to carry multiple single-use dedicated devices.
First stop was the iTunes music store, which frequent TNL.net readers will recognize as the target of many posts. Well, turns out that it might be a bit of an issue. Apple doesn’t seem very interested in selling music to play on non-iPod devices and as far as transferring a song to Linux, well… I guess I’ll have to wait for the Linux version of iTunes which should come out just around the same time as blizzards blowing through Hades.
Next stop, Real. After all, they made a big stink a while back about fighting Apple and protecting openness. They’ll help me, right? Looked like the Treo would work but I was annoyed to learn that you had to use the RealPlayer to play the tracks. Where was the freedom of choice in that? Why would I be forced to install their player in order to play the tracks? What if they went under and their player were no longer compatible with my operating system? In one felt swoop, they eliminated a whole bunch of stores to visit: basically, the ones that force me into using the Real player in order to play music I bought legally.
Warily, I approached, the remaining giant in the space: Microsoft. The good news was that they had a program called “Plays for Sure”. Finally, someone willing to go with a real guarantee that my music will play anywhere! The tag line, right there on the homepage said it all:
Choose your music. Choose your device. Know it’s going to work.
That sounded really great: finally my music, my Treo, my different operating systems would all work harmoniously… except for the fact that PlaysForSure is another marketing name for Windows Media Player. Basically, it’s the same deal as Real: if you use their player, and their player works on the device you want to use, it’s OK. Otherwise, you’re on your own.
I gave up on the online download sites and bought the CD, which I then ripped to MP3 tracks myself.
DRM can be evil
What happened in that case was a case of what I would consider evil DRM, where the consumer is treated as a criminal by default. Because it is assumed that I will abuse my right, the system forces me to work within a walled garden. I can either get my content from Apple on Apple devices, from Microsoft (and partners) on Microsoft powered devices, or from Real (and partners) on devices that run the RealPlayer. This is not choice, it’s entrapment. If I were to follow the same logic to the extreme, I would have to have a different television in order to watch different TV channels. In other words, the case of music downloads shows that DRM can be mis-directed. Why? Simply because of companies trying to maintain certain monopolies and force the users to do their bidding.
Looking at the two scenarios above, you might start noticing some interesting trends. First of all, DRM is situational. A single DRM strategy does not fit all offerings. Why is that?
I would venture that the reason is one of expectation. The expectation that I have of a music track are different that the expectation that I have of a movie or TV show and it is largely related to the interaction with each media type. In the case of a music track, I want something that will be portable and can move relatively quickly from one device to another; this is largely due to the fact that music is consumed on the run, and more often than not, it is consumed while doing some other activity. Movie or TV watching, however, is something that requires more involvement; it’s hard to read a book, drive, or run while watching a movie or TV show! As a result, mobility is not as essential and the need for a movie to run on multiple device is not as high. if it runs on my TV, maybe on a laptop too and can be transferred to a secondary TV, it’s OK. The universe of devices on which it needs to run is smaller and generally more tied into the net anyway, which makes the DRM interaction more seamless.
What I am trying to highlight is that while proponents and opponents of DRM solutions both see the world in black and white, they may want to start a dialogue and realize that there’s a lot of gray areas out there.