Fragmentation vs. Standardization in the Market for DRM Solutions: Case Study of the Online Media Market

Interoperability, Competition Policy and Antitrust and Standards

Article Snapshot

Author(s)

Laura Gee and Lubomira Ivanova

Source

Working paper, July 2006

Summary

An examination of why different digital rights management technologies for preventing piracy do not all work together.

Policy Relevance

Several business reasons explain why a standard technology for stopping pirates may not work. First, the cost to consumers of switching to different systems is low. Second, firms follow different business models in which DRM systems fit. Competition between systems benefits consumers and protects fair use.

Main Points

  • Digital rights management (DRM) uses technology to combat piracy. Only media players configured to unlock the content can play it. Some content might not play on some players, annoying consumers.
 
  • Some predicted that content providers could use low prices and share a DRM format so that piracy would not be worth the effort. This prediction did not come about.

  • Several factors explain why DRM has not become standardized:
    • Companies follow different business models.  Using proprietary DRM solutions gives companies more control of their products. For example, competing media players want to keep both content providers and consumers on their own system, leading each to support its own format.
    • Consumers cost of switching DRM formats is low, and the cost of DRM overall is low, so there is little pressure from consumers to lower costs through standards.
 
  • Competition among DRM systems has lead to each allowing consumers more fair uses.

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