The Digital Entertainment Content Ecosystem (DECE) is a new effort to introduce an interoperable DRM standard for video content. Many of the standard’s specifics are still being worked out but we know enough already to be confident of one thing: DECE will fail.
Why? Because the consumer is now in control. And all DRM solutions simply make a digital media purchase less attractive. DRM files are inherently restrictive. Consumers want easy access and an affordable price. The DECE proposal offers clear benefits to the industry, but does it promise consumers a better experience than what is available today with DRM-free files?
Consumers now have and expect flexibility. They want to watch an episode on their iPhone or in their car, on their computer or at home. They want to enjoy a program when, where and how they want. DRM renders media files inferior to an easily found alternative: free illegal copies. This is the essential challenge facing the Film and TV industry today.
The pressures are real enough: the increase of consumer entertainment options, declining viewership numbers and stagnant DVD sales. Is online distribution the solution or another threat? The music industry’s response to that question is instructive.
The music industry’s experience over the last 10 years illustrates what happens when a newly empowered consumer meets business practices that refuse to engage with new realities. It tried DRM interoperability standards– notably PlaysForSure, and the Secure Digital Music Initiative (SDMI) — all of which have failed. It tried legal means, creating a new villain in the minds of a generation but having little effect upon pirate activity. It insisted on a DRM solution with the first viable distribution partner (Apple), creating a single dominant digital retailer and a closed ecosystem under Apple’s control.
In the past year the music industry has shifted. The move to licensed sales of DRM-free MP3s has increased distribution and is growing the digital music market. It’s also a tacit recognition that piracy will not be stopped through technological or legal means. The good news is: they can compete with it by offering a product equal to or better than the pirated goods.
The Film and TV industry has vowed not to commit the same mistakes as their music industry brethren, yet DECE is precisely the same tactic which wasted precious years during the music industry’s SMDI fiasco.
The Film and TV industry seems most comfortable with a streaming, ad-supported, model as shown by the recent IMDB distribution deals and support for Hulu, YouTube, and the streaming activities on their own sites. But the embrace of online streaming is at odds with the industry’s fear of DRM-free electronic sell-through. Streaming is not ‘safer’; recording streaming video content is no more difficult than recording a broadcast program to a VCR and millions of consumers are already “stream-ripping” from Hulu and YouTube instead of purchasing downloadable files.
The other issue with putting all your eggs in the streaming basket is that streaming does not address a customer’s needs for portability. How many portable DVD players and video iPods do you see on planes these days? None of these portable video devices are enabled by streaming solutions. Only wide-spread, interoperable EST (electronic sell-though) addresses this consumer segment.
DRM-free EST gives consumers what they are looking for: convenience. It allows a customer to purchase video programming online with the same certainty they get when buying a DVD: it will play on all my video players. DRM’d content forces the customer to consult a matrix of compatibility questions: Will this file play on my device? Will it play on the new device I buy next year? In most cases, the answer is no. EST also opens up another revenue stream. It may compliment, or compete with, streaming. Either way it’s a win for the industry and consumers.
This is the lesson that the Film and TV industry needs to absorb: to win the fight against illegal files you must give consumers a product that performs as well as the illegal alternative, price it fairly and increase convenience through expanded distribution.
The challenge is to shift focus from our historical ability to set expectations and begin catering to the expectations of a newly empowered consumer. The music industry has acted on consumer demand for DRM-free entertainment, albeit years later than necessary. The opportunity is here for the Film and TV industry, all we have to do is sell the people what they actually want to buy.
David Pakman is a partner at Venrock and the former CEO of eMusic.
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